An Over View Of Sainsburys Supermarket Marketing Essay

A ace market is the ‘One-Stop-provider ‘ of about all the twenty-four hours to twenty-four hours basic necessities of any regular consumer in the given market industry. These necessities include the nutrient points, drinks, toilet articless, family material etc. Hence all you need to run your houses daily. These supermarkets have now farther developed themselves by supplying vesture ‘s, shoes etc.

One of the taking names in the UK supermarket industry is Sainsbury ‘s. J. Sainsbury plcA is the parent company ofA Sainsbury ‘s Supermarkets Ltd, A normally known asA Sainsbury’sA ( besides SainsburyA andA JS ) ; this is the 3rd largest concatenation of ace shops in the United Kingdom with a market portion of 16.3 % . The groups Head Office is located at Holborn in Central London.

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1.2. Operationss:

Founded in 1869 by John James Sainsbury along with his married woman Mary Ann in London and so bit by bit grew to go the largest food market retail merchant by 1922.

The company has a concatenation of shops with 537 supermarkets and 335 convenience shops, hence a sum of 872 shops in England, Scotland, Wales and Ireland, including Hypermarkets ( ace big stores- Sainsbury ‘s stores- chief asset ) , Sainsbury ‘s Central and Sainsbury ‘s local ( supermarket and local convenient shops format – chief mission ) . The company has been eyeing the chance of spread outing its concern outside the UK. Particularly the hyper potency in Asia ( particularly South East Asia and China ) . By analysing Tesco ‘s immense success in the market outside UK, Sainsbury ‘s venture might non be far off.

The Sainsburys household has 15 % portions of J Sainsbury plc ( as of May 2008 ) The major household stockholder is Lord Sainsbury of Turville keeping 5.83 % and Lord Sainsbury of Preston Candover who holds about 3 % of the company ‘s portions.

It is listed on theA London Stock ExchangeA and is a component of theA FTSE 100 Index

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In this study we have analyzed Sainsbury ‘s on the footing of its fiscal public presentation through

Analyzing its last 2 old ages financials

Making necessary observations

Comparing its fiscal public presentation with the market leader Tesco

Commenting on the strengths and failings as interpreted through their figures / ratios etc.

Calculating the WACC for Sainsbury ‘s

Keeping in position the over concentrated industry of supermarkets, it was needed that Sainsbury ‘s should venture into ‘something new ‘ to increase its net income borders and gives the company ‘s portfolio some diverseness.

A new undertaking proposing that Sainsbury ‘s should open its “ Sainsbury ‘s Travels and Tours ” has been discussed and a formal study which analyzes the thought and calculates the undertakings NPV has been approved by the board and given a spell in front.

A format for quarterly study has been suggested for concern updates of the new undertaking every one-fourth.

Market Position.

The Sainsbury ‘s is the UK ‘s oldest major nutrient retail merchant with their first shop opened in 1869. It strives to maintain up with its sure heritage of quality with best services. The direction has a uninterrupted attack towards work with duty. They attempt to supply fresh nutrient and innovate with regard to clients ‘ demands. It serves over 18.5 million clients every hebdomad. The big shops offer over 30000 merchandises along with complementary Non-Food merchandises e.g. the TU vesture scope which has over 1 million minutess every hebdomad. Along with other services, an Internet based shopping service has besides been made available, maintaining in tendency with the changing demands o the clients, to about 90 % of UK families.

In 1995, A TescoA overtook Sainsbury ‘s to go the market leader, andA AsdaA became the 2nd largest in 2003, bumping Sainsbury ‘s into 3rd topographic point.

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2. Sainsbury – Fiscal Structure and Performance:

Sainsbury ‘s is the 3rd largest UK ace market with Tesco and Asda as its closest rival ‘s keeping places as No. 1 and No. 2 severally. Presently Sainsbury ‘s is runing in 872 shops across UK with 150,000 employees

Sainsbury ‘s closes its fiscal twelvemonth in the 3rd hebdomad of March every twelvemonth. The tools used are the Income Statement, Balance Sheet, Cash flow statement with the Notes to the Financial Statements.

The fiscal analysis of any company helps find the fiscal standing of the company and helps in doing determinations and program future scheme and undertakings on its footing

2010 ( m )

2009 ( m )

2008 ( m )

Income Statement

Gross saless




Pre Tax Net income




Net Income




Balance Sheet

Good will








Cash & A ; Equivalent




Entire Current Assets




Entire Borrowings




Cash Flow



Net Cash Generated



Returns from Disposals



Dividends Paid



Cash by terminal of twelvemonth



The fiscal figures show a sensible addition in gross revenues. The gross net income showed a diminution from 2007 to 2008 but is once more on increasing tendency in 2009.

Balance sheet shows growing in good will and portions and lessening in the adoptions. This might hold been due to increase in the involvement rates.

Cash flows show a important addition in hard currency in manus which shows the company is stably liquid to manage its operations swimmingly. Besides the addition is due to sale of its shops.

2.1. Comparison with Market Leader – Tesco:

2.1.1. Ratio Analysis:

Ratio analysis of any company provides really of import information sing the company ‘s fiscal standing, fiscal strengths /weaknesses. They are calculated to compare a company ‘s advancement against other challengers of the industry every bit good as its old public presentation. The ratios step

The profitableness of the concern

The Performance

The quality of company ‘s public presentation

A company ‘s ability to run into the short term duties

A company ‘s debt load

Value of concern / Investing




Current Ratio

0.64: 1

0.54: 1

0.62: 1

Quick /Acid Test

0.36: 1

0.26: 1

0.32: 1

Debt to Total Assetss




Debt to Equity




Long Term Debt / Total Liabilities




Gearing ( Debt / Invested capital )




Pre Tax Interest Cover

6.772 times

3.987 times

4.522 times

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2.1.2. Management:

Tesco is the market leader in UK supermarket industry keeping about 31 % of the market. The 1st Tesco shop was opened in 1929, in Edgware, Middlesex, UK. Since so it has bit by bit grown in to being the largest supermarket concatenation in the UK with about 2200 shops in UK with over 285,000 employees. Since the mid 90 ‘s S, Tesco has been puting in new markets overseas, happening new chances for growing and agencies of bring forthing long term returns for stockholders. The group operates in 13 markets outside the UK, in Europe, Asia and North America, and besides announced their entry into the Indian market last twelvemonth, where they are be aftering to set up hard currency & A ; carry concern.

2.1.3. Fiscal strength:

Both Sainsbury and Tesco have strong balance sheets, equipped with touchable existent estate assets. This collateral allows them to borrow at lower rates and bring forth hard currency through sale-and-leaseback strategies if required.


Sainsbury ( March 2010 )

Tesco ( Feb 2010 )

Current Ratio

0.64: 1

0.74: 1

Quick /Acid Test

0.36: 1

0.51: 1

Debt to Total Assetss



Debt to Equity



Long Term Debt / Total Liabilities



Gearing ( Debt / Invested capital



Pre Tax Interest Cover

6.772 times

5.63 times

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Both the company ‘s are runing in a concentrated market.

Sainsbury ‘s about 90 % of gross is consumed in COGS go forthing from 5 % to 6.5 % in stead of gross net income border and even the other disbursals are undistinguished relatively still the company is left with 1.5 % to 1.9 % of net net income.

For Tesco, the state of affairs is non really different from Sainsbury ‘s. Here the gross net income border is 7 % which is a small better from Sainsbury ‘s.

The current ratios and Quick ratios of both the company ‘s are below 1 which is non a healthy tendency. In order to obtain any finance the company should hold a stable solvency index.

The debt ratio indicates that how much of the house ‘s assets are being financed by the debt. Both the company ‘s show a stable debt ratio of 20 % to 30 % .

The debt to equity ratio measures the hazard involved in puting in the peculiar company. Sainsbury ‘s shows an acceptable debt to equity ratio of about 50 % but Tesco comparably has a immense debt to equity ratio of 91 which might be because of its full throttle enlargement in international markets.

Most moneymans analyze the company balance sheet before doing an investing determination. The premier motivation to look into if the company ‘s Capital GearingA is right. Capital Gearing is the relationship between Equity and Debt. It is ever considered good for a company to hold a sensible Equity base to a concern, as insurance against unexpected losingss. This is to minimise the hazard every bit much as possible. If a company has a Gearing of no more than 50 % – 67 % of their Gross Assets from Debt, depending on the hazard associated with the concern, it is considered acceptable. The higher the geartrain, the more vulnerable the company is to the impact of increased involvement rates.

Tesco and Sainsbury both show a sound geartrain and though Sainsbury is more fitter to be invested upon, Tesco every bit good is good within the “ Good Gearing Grounds ”

The involvement coverage of both company ‘s show a really healthy standing to run into their involvement payments deadlines.

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From above comparing it is clear that retail industry is extremely saturated and it is about impossible for the companies to gain ace net incomes. Effective cost control techniques need to be applied and monitored on regular footing to better profitableness. Sainsbury ‘s have improved turnover at a rate of 5.5 % a twelvemonth. Net incomes have grown even faster ; increasing by 6.7 % . Tesco has a small border based on gaining somewhat higher net incomes and demoing rapid growing. Both the companies need to better upon their debt structuring, particularly Tesco and therefore bit by bit better their liquidness ratios.

2.1.4. Growth possible:

So far, Sainsbury ‘s has merely concentrated on its concern in the UK while Tesco has increased it ‘s operations in 14 states. But we should non reason that Sainsbury is missing in growing opportunities.A Sainsbury ‘s has two procurance offices in China but once more no 1 is certain as to when Sainsbury ‘s will be able to accomplish increased growing and improved net income border without international enlargement.

Sainsbury has performed good by adding advanced non-food merchandises and banking services, but competition is tough and increasing in these countries, excessively

Tesco, on the other manus, may hold more growing chances in come oning Asiatic market and elsewhere, but it ‘s besides a much bigger entity than Sainsbury. For illustration, during last one twelvemonth Tesco had ?56.9 billion in turnover as compared to ?19.9 billion for Sainsbury.

Sainsbury ‘s has been concentrating on UK shop enlargement instead than abroad growing. It has increased the entire figure of shops from 583 in 2004 to 872 today. Today, Sainsbury ‘s demand to stress on its domestic growing and increase its shop efficiencies, which is non an easy undertaking, but it is more accomplishable than pull offing and commanding a group of international locations with diverse gustatory sensations and demands.

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3. Weighted Average Cost of Capital:



2,357 ( Long term debt )

18.64m ( portions ) * 345 ( portion monetary value ) = 6,431

3.1. Equity:

No. of portions outstanding: 1,864 ( m )

Current market monetary value per portion: 345

Market Value of equity: 1,864 * 345 = 6431

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We calculate the cost of equity through Dividend Growth Model

Which is Ke = [ Do ( 1 + g ) / ( MV-Ex Div ) ] g


Ke = cost of equity

Make = Dividend given = 14.20 ( pence )

MV = Market value = 345 ( pence )

Ex. Div = Ex Dividend = 10.20 ( pence )

g = growing rate = 7.6 %

Cost of equity: [ 14.20 ( 1+0.076 ) / ( 345 – 10.2 ) ] 0.076

Ke = 12.11 %

3.2. Debt:

Book value of Debt: 2,135

1,074 @ 4.98 %

861 @ 2.36 %

171 @ 4.25 %

251 @ 4.3 %

Kd = 3.90 %

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3.3. WACC:



V * K



3.90 %




12.11 %





Sum VK / Sum V = 87071 / 8788 = 9.91 %

4. Undertaking:

4.1. Opening up of Sainsbury ‘s Travel and Tours:

Sainsbury has ever aimed to be the consumer ‘s first pick for nutrient, presenting quality merchandises with great service at a competitory cost. The company is endeavoring to accomplish the aim of taking borders with diverse market and presenting strong net incomes every twelvemonth.

The values of Sainsbury ‘s are defined in their web site as

“ The values of the Sainsbury ‘s trade name – passion for healthy, safe, fresh and tasty nutrient, our focal point on presenting great merchandises at just monetary values, a history of invention and leading and a strong respect for the societal, ethical and environmental effects of our operation – have continued to stand the trial of clip.

Five rules are at the nucleus of Sainsbury ‘s concern:

The best for nutrient and wellness

Sourcing with unity

Respect for our environment

Making a positive difference to our community

A great topographic point to work.

These rules provide distinction from our major rivals and define and direct all our activities. ”

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Keeping the tradition of the best services, the direction has decided to venture into the of all time turning market of Travel and Tourism industry with opening up of Sainsbury ‘s Travels and Tours.

The thought of opening up a Travel Services concern subdivision of Sainsbury ‘s is based on the intelligence of Sainsbury ‘s opening up its “ Travel Clinics ” in mid 2008. The clinics were established in mercantile establishments ab initio offering free audience with nurses offering different injections and wellness merchandises with advise for people going to states necessitating inoculations and immunisation from infections like grippe, malaria etc. These merchandises were offered at significantly cheaper monetary values than in any specializer clinics.

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The Sainsbury ‘s Travels and Tours will supply the company to stand out and accomplish its strategic ends on the footing

The supermarket industry has become reasonably saturated in the UK and at present Sainsbury ‘s is eyeing to spread out itself in the International market but it will be a piece before it really does.

The Travel industry is a turning market and has a immense potency of growing.

The new merchandise will profit the company earn immense profitableness borders which are going hard to accomplish I the supermarket industry.

The Sainsbury ‘s has a immense loyal client base which will be utilized for publicities and selling intent.

The undertaking has a high chance of success given a opportunity of a fresh new ‘product ‘ offered by a supermarket concatenation.

The company will utilize its bing immense client base for the travel services selling and publicity.

The bing ‘nectar trueness card ‘ database will assist the direction to plan the merchandise, offerings, travel and circuit bundles as per the penchants.

4.1.1. Undertaking Description and Key Elementss:

The undertaking will hold a Head Office ( With the bing HQ of Sainsbury ‘s at Holborn Circus, London ) have ab initio entire 3-4 suites allocated.

The HQ office will hold 7 employees.

Initially merely limited shops and selected metropoliss will be setup with the “ Sainsbury ‘s Travels and Tour Desk ” with one individual behind the counter.

The Six major metropoliss ( with regard to country / population ) i.e. London, Birmingham, Manchester, Glasgow, Belfast and Cardiff covering the whole of UK will be set up ab initio for kick off of the Travel and Tour Services.

10 shops in London and 5 shops in the staying metropoliss will be setup for supplying the services.

Each of these metropoliss will hold a squad of 2 people, 1 within the shop premises ( as mentioned above ) and the other for monitoring and describing intent.

The figure of employees will bit by bit be increased as per demands with the undertaking evolvement.

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4.1.2. Initial Investing Cost:

Initial Investing


Cost of IATA Membership ( hypertext transfer protocol: // )

33,500 GPB

Entire Staff 27 – Computers

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650 * 27 = 17,550 GBP

( including VAT and Delivery )


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2,800 GBP

( including VAT and Delivery )


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940 GBP

( including VAT and Delivery )

Entire Initial Cost

54,790 GBP

4.1.3. Other Costss:

Type of cost

Cost Sum


Salary for 1st twelvemonth


Inc. of 7.5 % each twelvemonth

Booklets / Stationary / Equipment


Inc. of 10 % each twelvemonth

Selling Budget


Inc. of 15 % every twelvemonth

4.1.4. Premises:

We assume that Sainsbury will ab initio aim the “ high Spenders ” from its client database and aim them for the publicities and selling stuffs ( cusps etc. )

Initially the vacation bundles and Tourss will be offered for 5 large vacation finishs including Egypt, Turkey, Tunisia, Barbados and Spain.

The bundles the computations are based include a general trade for 4 people for 7 yearss.

The vacation bundles for these finishs cost as follows ( based on vacation bundles offered by Expedia.


Monetary value for Customer ( norm ) – hypertext transfer protocol: //

Actual Cost ( with Sainsbury ‘s net income border @ 24 ( Price – 24 % ) hypertext transfer protocol: //

United arab republic

1150 ( GBP ) [ 286.5 GBP per individual ]

874 GBP


728 ( GBP ) [ 182 GBP Per Person ]

553 GBP


1200 GBP [ 300 GBP per individual ]

912 GBP


3120 GBP [ 780 GBP per individual ]

2371 GBP


1000 GBP [ 250 GBP per individual ]

760 GBP

We assume that Sainsbury will win on selling on 110 of these above reference bundles for each state. Annual Revenues will be 718900 GBP

We assume that one-year grosss will increase by 12 % ( 2 % more than the mean growing in Sainsbury ‘s grosss which is 9.4 % given the growing potency in the industry )

Operating cost will include the wages of the employees, twenty-four hours to twenty-four hours concern running disbursals etc. since we are sharing the premises of bing Sainsbury ‘s shops and HQ so there will be no excess operating cost except the wages.

As per the National Statistics Online, the Consumer Price Index ( CPI ) is at 3.2 % and the Retail Price Index ( RPI ) is at 5.0 % . hypertext transfer protocol: // id=19. The turning rising prices rates have a direct negative consequence on the client ‘s ability to pass on leisure and vacations. Although consumers have bit by bit developed this sense of be aftering in front and salvaging for their Vacations.

Effective Tax rate of 28 % is applied. hypertext transfer protocol: //

4.2. Designation of Risk and Uncertainty:

In any new undertaking, one is ne’er certain about 100 % consequences. If the undertaking is based on Risk so we might anticipate slightly certain consequences based on old informations. The hard currency flows based on Hazard might be forecasted and the associated possibilities are besides known but in instance of uncertainness the result is unknown and therefore the related chances are besides unknown. A survey conducted with a few directors showed that they think hazard is manageable if you have right information, sufficient cognition about the undertaking, and if the individual is experienced in the peculiar field. Most of them stressed on the importance of options, roll uping more information and look intoing different facets of the job, along with being actively involved to cut down the risk.. ( IAENG International Journal of Computer Science, 32:4, IJCS_32_4_12 )

It is the effort to pull off both the known-unknowns and unknown-unknowns. Preparation for and pull offing the hazard is the consequence of what is diffident and unknown-decision risk.A

4.2.1. Affects of Risk and Uncertainty on proposed undertaking:

Let ‘s see the undermentioned facets while doing determination based on riskA for the Sainsbury ‘s Travels and Tours

What can travel Wrong?

The Sainsbury ‘s already has an established immense no. of loyal clients who would be happy to hold an option o a different sort of service offered from their trust worthy service supplier. The outlook for a stable turnover is based on the fact that it is an established name offering a new merchandise on the footing of its good will.

How likely it is to go on?

The expected growing can be effected by increasing rising prices rates.

The Travel Industry faced a immense blow after 9-11 incident.

What are the effects?

Any unanticipated incident like this ( God forbid ) will hold long permanent effects on the company ‘s growing, profitableness and future enlargements and programs.

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5. Calculation of NPV:

NPV is a technique where hard currency influxs which are expected in comming old ages are discounted back to their present value. This is calculated by through a price reduction rate equal to the involvement that was to be received on the amounts, in instance the influxs had been saved, or the involvement that has to be borne by the house on the adoptions. In instance of more so one undertaking assessment, the house should take the 1 that produces the highest NPV.

5.1. Sainsbury ‘s Travels and Tours Expected Cash Flows ( for 3 old ages ) :

Year 0

Year 1

Year 2

Year 3

Entire Gross




Wages / Wagess Cost




Selling Expense




Stationary / equipment disbursal




Cash flow before Tax




Tax applied




Cash flow after Tax




Cap Ex.

( 54790 )

Inc. Cash Flows

( 54790 )




5.2. NPV Calculation:

Through price reduction factor over 10 % for 3 old ages







( 54790 )






The undertaking has a positive NPV which is a healthy mark for the undertaking. It can be proceeded with. The undertaking is traveling to be good for the company and add to the stockholders value. A positive NPV means that the undertaking is worthwhile because the cost of binding up the house ‘s capital is compensated for by the hard currency influxs that consequence.

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6. Quarterly Report Format:

As per the demand of the board every one-fourth a study has to be sent for updated public presentation and advancement information. The study has to function the intent of giving a complete up to day of the month informations to be analyzed by the board. A company analysis gives a complete public presentation and fiscal image of the company. The study should include all the informations necessary to rapidly compare it with the major rivals.

6.1. Reporting Layouts:

The study will be in Excel sheet format.

The Information provided will be in different excel sheets in the same papers each covering a preceding one-fourth to give convenient comparings

Title of the study: Sainsbury ‘s Travels and Tours

Addressed to:

Date: from -/-/- to -/-/- :

Date of entry:

Submitted by:

6.1.1. Vacation Packages Engagements:

S. No.


No. of Peoples

Start Date

End Date

Booking office / mercantile establishment


United arab republic







Notes: .

6.1.2. Gross saless Sum:

S. No.

Cost per individual

No. of Peoples

Entire Package










Notes: .

6.1.3. Fiscal Figures:

Sr. No.

Quarterly figures

Comparison ( Inc. Dec. from last Qtr. )


Gross saless


Operating Net income

Notes: .

6.1.4. Comparison of Actual and Forecasted public presentation:

The computation of the “ Sainsbury ‘s Travels and Tours ‘ undertaking NPV has been made by traveling through the three old ages forecasted figures of the company which show that it is come oning towards a high acting entity with sensible growing in net income. Although with the growing of the company finally it will necessitate to utilize more resources in term of offices, employees, equipment, selling budget etc. but the current public presentation clearly suggests that it will really strongly bear all the alterations and maintain on demoing a steady growing.

7. Decision:

Sainsbury ‘s is one of the cardinal participants of the bing supermarket industry in UK. This study gives an overview of its public presentation during the last twosome of old ages, covering with the fiscal figures we have tried to analyse the fiscal standing and strength and the comparing with the chief market leader Tesco gives a just thought of both the company ‘s attack towards concern.

Although Sainsbury ‘s has non yet ventured into the International market but the measure might non b that far off maintaining in head the immense success TESCO has had in the international market.

Sainsbury ‘s has a immense loyal client base. The suggested new service merchandise through

‘Sainsbury ‘s Travel and Tours ‘ will supply these clients to use yet another trustworthy service by their trusted name.

The turning Travel and Tours market will decidedly hold a positive consequence on the Sainsbury ‘s portfolio by increasing its net incomes and therefore beef uping its concern.