Venerable UK firm looks much like its new venture


October 04, 1994|By Carl Schoettler | Carl Schoettler,London Bureau of The Sun Bloomberg Business News contributed to this article.

LONDON -- Walking through the big, clean, brightly lit Sainsbury's here on Cromwell Road could make native Baltimoreans think they're in their local Giant supermarket.

But the similarity between the two companies goes further. Both have a history of significant family control. Both have looked for growth through expansion. And both have dominated their respective markets by keen attention to marketing and upscale goods.

In fact, the wide range of products found on Sainsbury's attractively displayed shelves don't look much different from the Giant at the Rotunda.

Lots of trendy, upscale, gourmet products are packaged for moneyed shoppers who don't like to slice their own celery or season their own filet mignon. And most Sainsbury's have an impressive selection of wines that often are touted by London's wine mavens.

And like Giant, J. Sainsbury PLC, which is celebrating its 125th anniversary this year, has an impressive history.

John James Sainsbury opened his first modest shop selling milk, butter, eggs and cheese on Drury Lane in Covent Garden in 1869. Two shops quickly followed and Mr. Sainsbury launched a spacious, ornate branch in Croydon, a London suburb, in 1882.

The Croydon branch store was a great success, and Mr. Sainsbury rapidly opened new branches throughout London.

Today, with 350 supermarkets, Sainsbury's, which yesterday said it would buy half of the voting stock of Giant Food Inc., claims to be Britain's leading food retailer with an 11.4 percent share of the market. In fiscal 1994, the company earned the equivalent of $220 million on sales of $16.5 billion.

Recently, faced with a United Kingdom market in which profit growth has been pinched by a continuing price war, Sainsbury and Britain's other food retailers have looked to new stores for growth. And with little room for quick growth in Britain, Sainsbury has looked to the U.S. through its Shaw's Supermarkets Inc. chain in New England.

"We consider the North American markets as one of the main markets for growth," Chairman David Sainsbury, whose great-great- grandfather founded the company, said yesterday.

Sainsbury purchased a stake in Shaw's in 1983 and, by 1987, controlled 100 percent of the chain, which then operated 60 stores.

To improve Shaw's profitability, Sainsbury has been increasing the number of high-margin, private label products and tightened operating costs to improve margins. The company has also added new stores. As last year's earnings proved, that policy has been successful. In the year ended March 12, Shaw's lifted its pretax profit by about 6.7 percent, boosted by the development of new stores and private label products. Since Shaw's operates 87 stores in Western Massachusetts, New Hampshire, Rhode Island and Maine, analysts had expected a complementary chain would likewise have to be in the Northeast.

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