Taste the difference This pandemic could be the making of the big four supermarkets
A combination of good fortune and adept manoeuvring have allowed the major supermarkets to thrive in the coronavirus crisis ‘There has been an online grocery revolution during lockdown’
It may seem in bad taste to talk about the winners from the crisis when the death toll is still rising, and thousands of people are being laid off every day, but it is an uncomfortable fact that some companies will emerge stronger from this. The big supermarkets are obvious contenders, having come tantalisingly close to bolstering both their reputations and business models after being thrust on to the Covid-19 front line.
Sadly, a spate of old-fashioned boardroom greed threatens to damage much of the goodwill that had been built up by ensuring the nation didn’t starve and people could still go to the lavatory in a dignified manner.
Still, thanks to a combination of good fortune and adept manoeuvring, the grocers have sailed through lockdown on the trading front, posting bumper sales and beefing up operations both in store and online to keep up with demand.
After steadily surrendering market share over the last decade, the Big Four supermarkets are finally fighting back. Sainsbury’s says it has been winning back customers, not only from Aldi and Lidl, but also chief rivals Tesco, Asda and Morrisons. Sales have jumped 8.5pc over the last four months. Grocery sales were up 10.5pc and non-food jumped 7.2pc.
So much for the claims of former boss Mike Coupe, who insisted that a mega-merger with Asda was the only way to compete with the spectacular growth of the discount kings. Tesco has taken the fight right to Aldi with its price match initiative and is also winning back customers on a scale not seen for a decade.
There has been an online grocery revolution during lockdown. The established names have always been woefully reticent about digital investment, grumbling that it is impossible to make money with deliveries. But the crisis has forced their hand. Internet orders at Sainsbury’s surged from 370,000 a week in March to 650,000 June. Half of all those customers are new ones.
It is a similar story at Tesco. The much-derided store-picking model of the established players has gone from supposed Achilles’ heel to a major strength as they have been able to quickly ramp up capacity.
Ironically, digital pioneer Ocado has been held back by a reliance on giant warehouses manned by expensive robots, leading to long waits for slots. Founder Tim Steiner has remained steadfast in his belief that there would always be demand for online groceries. Now, his problem is fulfilling it.
Even Argos has spluttered back to life, a sure sign that we are living in unique times. The takeover of the chain, with its non-food offering and logistics capabilities, was meant to be transformative for Sainsbury’s but it has been a disappointing flop. Yet, sales leapt nearly 11pc during the quarter. At this rate, the dividend could make a quick return.
It may be a stretch to say the pandemic could be the making of the supermarkets. The boom may even prove to be short lived but for the first time in years there is plenty for them to cheer. And at the very least it’s a helpful distraction from all those uncomfortable bonus rows.
Food to go has gone
From hero to zero, coronavirus has turned reputations upside down in a heartbeat, and no more so than at SSP, the terrible corporate name behind such esteemed airport and train station eateries as Upper Crust and Ritazza.
A £300m fundraising at the end of March was supposed to steady the ship but it hasn’t stopped SSP from announcing 5,000 job cuts, more than half its 9,000-strong workforce.
The “food to go” market has evaporated. The real question is will it return? The high street will experience something of a resurgence but airports and train stations are likely to remain at a fraction of their capacity for the foreseeable future. The major airlines are predicting a downturn lasting anywhere between three and five years.
WH Smith is the obvious other big casualty but even the likes of Pret a Manger and Greggs must be worried, having targeted travel hotspots too. The major supermarkets on the other hand will be rubbing their hands with glee at an opportunity to sell more takeaway food to the masses.
The smart move would be to quickly build as many hot counters in express and convenience stores as possible. Sandwiches and salads could even become a loss leader like milk and bread to woo customers. Maybe the daily shop could trigger the revival of the weekly shop. Not at Lidl or Aldi though. No one goes there for a sandwich.
V-shaped or pear-shaped?
Has some of the Prime Minister’s ebullience rubbed off on Andy Haldane? The Bank of England’s chief economist has been talking up the prospects of V-shaped economic recovery.
But how does that square with the thousands of lay-offs taking place every day and the gloomiest jobs outlook for 30 years? Answer: it doesn’t.