Close-Up: Live Issue - Can advertising rescue Sainsbury's?

Empty shelves, falling profits - what is the supermarket's best course of action, Claire Billings asks.

Just over a decade ago, Sainsbury's was the nation's favourite supermarket chain. It occupied a space in the routine of middle England, backed by a successful positioning based on quality and variety.

However, since 1994, when Tesco first caught up with it, Sainsbury's market share has remained flat at 12.1 per cent. In the same period, Tesco and Asda almost doubled their share to 22.9 per cent and 11.9 per cent respectively, according to figures from Verdict Research.

Last week, in his speech to the City, Sainsbury's new chief executive, Justin King, highlighted just how badly Sainsbury's is performing. King forecast that full-year profits will be £270 million, a figure dwarfed by Tesco's predicted £2 billion. Sainsbury's has seen its value drop from almost £7 billion in 2002 to £4.2 billion now. So reports last weekend that the corporate financier and former treasurer of the Conservative Party, George Magan, is poised to launch a takeover of the ailing supermarket chain are perhaps unsurprising.

So how did Sainsbury's, a brand that benefits from goodwill from so many people, get it so wrong, and are its problems ones that can be addressed by a new advertising and marketing approach?

Sainsbury's woes have been attributed to complacency and not listening to its customers. It has been accused of having empty spaces on shelves, stocking too many product ranges and then, with its problems at home mounting, launching an ill-fated attempt to emulate Tesco's success abroad.

While Tesco took the safer route into emerging markets such as Asia, Sainsbury's foray overseas has all but ended with the sale of its US stores, Shaw's Supermarkets, in April for £275 million. But taking its eye off its core offering of good-quality groceries allowed Tesco and Asda to creep into the middle market. They improved their ranges and expanded, while keeping prices down as value became more important to shoppers.

According to some, Sainsbury's advertising, by Abbott Mead Vickers BBDO, has done little to enhance its status in some areas. It has been using Jamie Oliver as its spokesman since 2000 and while he has proved popular with housewives in the South-East, he has apparently alienated shoppers in the North who don't identify with him.

"Oliver is wildly less popular up north," one agency chief says. "They think he's a bit of a prat."

The latest ads, part of the Christmas campaign, feature Oliver with products such as smoked salmon. The campaign, which broke this month, has been lambasted in the press for ignoring the traditional Christmas values associated with fare such as turkey and stuffing. Oliver is contracted as the face of Sainsbury's until July 2005, but speculation about the future of AMV's 19-year relationship is rife.

However, King is clear that advertising and marketing are not at the heart of Sainsbury's problems. "The main reason for our recent troubles is not our positioning in the market, it's our execution," he said last week. He now plans to cull 1,000 head-office jobs, 70 from marketing, to fund 3,000 more staff in stores. The cuts are part of King's strategy to increase sales by £2.5 billion in three years by cutting suppliers and reducing the number of products in store.

Here, four experts give their opinions on King's strategy and the role that advertising should play in the recovery programme.

GOT A VIEW? E-mail us at campaign@haynet.com

ANALYST - Gavin Rothwell, senior analyst, Verdict Research

"Sainsbury's does need to continue advertising, but it needs to make more noise about its price cuts, while maintaining the premium quality associated with the brand. With that in mind, Jamie Oliver is quite a good fit.

"Getting the basics right is a good strategy. While food will remain its core priority, long term it will need to develop its non-food range,as this is where it can achieve greater margins. However, it will have to make sure its offering is relevant to its customer base.

"Its other problem is it has lost a lot of ground to Tesco and Asda. The strategy is right, but it is going to face a lot of competition. Its success will depend on how well it is implemented."

SUPPLIER - Gemma Gibb, commercial manager, Innocent Drinks

"The whole simplification of its offering is a good strategy. The changes that affect us are to the supply chain, which will help improve the availability of products - Sainsbury's is putting more people on the shop floor, which will help to ensure that the shelves are filled. This hasn't always been the case. Improving this will help us, other suppliers and, ultimately, Sainsbury's.

"Once Sainsbury's has sorted out its operational issues, then more Jamie Oliver advertising with the strong, quality message would be a good way to drive more shoppers into stores."

AGENCY CREATIVE - Charles Inge, creative partner, Clemmow Hornby Inge (and former creative director at Tesco's agency, Lowe)

"There is a modern expectation of service that Tesco has achieved. Sainsbury's needs to get its service right and get products back on shelves - that's more important than marketing at this stage.

"If the product is right, people will return to the stores but, if Sainsbury's is going to survive, it has got to know what it stands for.

"The supermarket is primarily known for food and if it can't get that right, then it's ridiculous to keep expanding into other areas.

"If Sainsbury's can make sure it's a solid business, that's what it's got to do first and then it will be better equipped for whatever comes."

COMMENTATOR - Joanna Blythman, author of Shopped: The Shocking Power of British Supermarkets

"This is a good opportunity for Sainsbury's to place itself back in the quality-food territory. It needs to say: 'We are going to be a high-quality store. Price isn't going to be the thing we're obsessed with - instead, we're going to take a lead and appeal to consumers who want more local, organic, diverse and seasonal products.' I think any supermarket that says it has more organic chickens, has more local food and takes small suppliers seriously could score points.

There is a growing number of people concerned about these issues but who are not small-shop shoppers. Its advertising is not really an issue right now; its main problem is it has not got a clear enough message."