Sainsbury's boss Justin King: The enemy of success is complacency

The MT Interview: Justin King is crowned Britain's Most Admired Leader, after Sainsbury's 35th consecutive quarter of growth.

by Matthew Gwyther
Last Updated: 03 Dec 2013


Justin King is having a good day. He has just announced Sainsbury's 35th consecutive quarter of growth, with profits up 9.1% to £400m and, most importantly, the supermarket has got back its position as the UK's second largest after Asda fell to third. This is especially satisfying for King, as he spent seven years there in the 1990s running hypermarkets. So his smile is even broader than usual.

It's nearly 10 years since he took over as Sainsbury's boss and the company's prospects look brighter. When he arrived, £3bn was being splashed out on an IT system that couldn't even get Pampers, Prosecco and Pringles onto the shelves. As a supplier, he has said, citing his own experience, negotiations with Sainsbury's were 'a deeply odious experience'.

His turnaround plan to make Sainsbury's 'great again' has come a long way, aided by some inspired leadership and a major stumble from the once invincible Tesco. He has come through the worst recession ever, made even more awkward in 2007 when bid rumours swirled first from CVC and then from the Qataris and the not-to-be-messed-with Robert Tchenguiz. And he is surviving in the tough middle ground while the discounters at one end and Waitrose at the other grow apace.

Having begun the day before the sun was up, King has done the Today programme, the telly, the analysts and the City hacks. He won't get home to Bloomsbury till late as they want him on Newsnight to discuss the Christmas ad.

Now the victorious leader has returned to the Holborn HQ to address several hundred of his adoring troops in the huge glass foyer. King is British grocery's answer to Russell Crowe's Maximus Decimus Meridius. Minus the furs and the violence.

In his shirtsleeves, with his ever-present orange 'Justin' badge on his chest and no notes, he measures it perfectly. Praise, vindication and encouragement but with an earnest reminder that, with Christmas coming, there is still everything to play for. Fluent without appearing trite, he is a master of the brief, a comms director's dream.

He's got charisma and would make a great politician. Surrounded by aides, he is striding about approving statements on help for the victims of the Philippines typhoon then having his ear bent by a union rep who collars him in a corner.

While the old adversary Tesco - uglier but still vastly more profitable - is a wounded beast, King is grabbing all the headlines. There's not only his organisation's steadily improving performance but the culture of his company. Sainsbury's has been skilfully angled for a sceptical 21st century.

He has carried off an enlightened blend of meticulous brand positioning. Leave Heston Blumenthal, his liquid nitrogen and blowtorch to the food wonks at Waitrose: the blokey, classless Jamie Oliver shifted far more stuff. Sainsbury's widely lauded sponsorship of the Paralympics caught the Zeitgeist of the summer of 2012 perfectly.

And there's more. While most FTSE bosses cursed under their breath when the paltry contributions to HM Treasury by Amazon, Google and Starbucks were exposed, King came out and condemned those online and foreign businesses and their fleet-footed accounting. Never mind the law, he noted, never mind fiscal duty to shareholders; what about the morality? And Brits who don't want to pay for the costly NHS alone liked this argument.

And, to top it off, here is MT arriving at Sainsbury's HQ to tell him that he's the UK's Most Admired Leader for 2013. This is sweet, as Sir Terry Leahy ran off with the award on numerous occasions during the noughties.

King reminds us that he first appeared on MT's cover back in the early 1990s as a 30-year-old contender with a sample case filled with Haagen Dazs. Now 52, King is a classic, classless Mars-trained meritocrat from Middle England - Solihull, in fact. His dad was a civil servant-turned-petrochemicals salesman; his mum, a housewife, shopped at Sainsbury's. He's the eldest of four boys. Always a 'gobby young shite', as he has recalled.

Was it during his ice-cream period that he got the bum's rush from the 'odious' Sainsbury's buyers? Another smile. 'We'd been the dominant force in retailing for 20 years. The enemy of success is complacency. Sainsbury's believed everybody needed it more than it needed everybody. A retail business represents its customers in the supply base.'

So he doesn't duck the issue of the notoriously difficult - some would say bullying - relationships that big retailers have with their suppliers. 'It's tough. We represent customers; we do things in their name and the perception of the power balance between retailers and farmers isn't always good. But take our Dairy Development Group. It contains 330 dairy farmers and the deal we now have with them is to pay them on the cost of their production.

So we negotiate on their behalf collectively to get good energy prices. We take the risk because we're not buying in the open market, which might well be cheaper.' And don't get him onto his embrace of the anaerobic digestion of what cows leave behind ...

Dairy farmers may be one thing; Coke is another. 'We negotiate very hard with them. Coca-Cola doesn't need help standing up for itself. It's our customers that need help and we're the people to do it.'

He has done well to win the MT accolade and the admiration of his peers across the board - the Most Admired Leader is a free, unprompted vote. Grocers were not broadly trusted even before the tawdry scandal involving horsemeat, which exposed the unsavoury nature of some supply chains. Sainsbury's was not dragged into the mire.

But did he have sleepless nights worrying that they would be? 'Yes, of course we did. We knew we'd done all we could to make sure it didn't happen to us. But you can never be sure you haven't been the victim of a crime. We were confident it wouldn't turn up as a source. But there was the possibility of contamination.'

These days, apparently, Sainsbury's technicians go one step further, using radioisotopes in water to identify where the cow was drinking from before it met its end in an abbatoir.


So, what about Tesco? Had he seen the old enemy's fall from grace coming? 'As a competitor, you get a pretty clear sense of how your rivals run their business. For a number of years we'd be told: "Yes, you're doing well with your top line but you still don't convert enough into profit."

We knew we were converting into profit what we deserved in terms of what we were doing for our customers. Tesco has said itself that it was running the business too hot. That's code for taking money from customers that you no longer deserve.'

This is an interesting observation. The way he brings morality into so many answers is relatively novel. Did he mean that Tesco's levels of margin are unsustainable in the hugely competitive overshopped world of UK grocery and that nobody should expect Sainsbury's ever to achieve them?

'No. Margin - profit - is what customers will willingly let you have for the job you are doing for them. Profit is a good thing. And in the current world it's not clear that the UK believes successful business is a good thing. Taxes from businesses pay for most of the services we all enjoy.' This doesn't really answer the question, but never mind.

He uses the word 'values' many times. And, whether you doubt his sincerity or not, this approach seems to pay dividends. 'Since 2008, customers have not abandoned values in a single minded pursuit of price,' he notes. 'The tighter your budget, the more careful you are, but values remain significant.'

Customers are complex and have become more so. Nowhere is this more evident than in the area of online home delivery and convenience stores. The boys at Ocado are jolly rude about Sainsbury's, muttering about pension fund liabilities, vast costly real estate and tiny margins. And the Daily Telegraph waspishly pointed out last year when considering Sainsbury's results that bricks-and-mortar grocery involves massive cost and effort for alarmingly little return: 'So £467m of additional sales has generated £10m of extra profit.'

Sainsbury's is not building massive outlets as it used to, not that it went in for many 125,000sq ft premises, anyway. It has just taken a £92m impairment, reflecting 15 to 20 sites out of about 70 to 80 schemes that it decided were no longer economically viable to develop.

Yet King says things are not as simple as the online disciples would have us believe and, ever hungry for market share, points out that more than 20% of UK customers are not within 15 minutes of a Sainsbury's store. He talks of fighting 'one store at a time' and reminds us that he will open 60 stores over the next five years.

So we're not all going to be shopping via tablets for home delivery any time soon? 'Online is more than a decade old. But the truth remains that 96p in every pound is spent by real customers in real shops doing their own shopping. Ocado has spent a fortune but hasn't made any money. You'll have to ask them why. Either there will always be something very powerful about doing your own shopping or we have yet to unlock the magic new idea.'

He's right. British customers have never had it so good. Look at the grim offerings elsewhere in Europe and you realise that with everything from Aldi through to Waitrose home delivery and a farmers' market to choose from, we are well served. And if a cut-throat market means the odd mouthful of horsemeat ...

After nearly 10 years of King in the hot seat, what's next for him? It's not easy to see what the next major goal in his current role might be. Overhauling Tesco just isn't possible - or maybe even in King's reckoning, desirable.

Tesco's UK market share is still over 30% - more than twice that of Sainsbury's - and profits are three times the size. The bitter trench warfare goes on day-in, day-out and Sainsbury's may be launching a legal suit against the Cheshunt behemoth over the Price Promise promotion, but the Goliath will not be slain just yet.

Rumours that King was soon to be off started earlier this year and he hasn't done much to quash them. 'Yes, I'm closer to the end than I am to the start of my Sainsbury's career, and I had my first conversation about succession five years back. That is good practice.'

So what about the rumours that he covets the top job at Formula 1? Despite trading in his Maserati for a large Lexus hybrid, he is a motorsport nut. 'There is no vacancy,' he replies with a grin. But Bernie Ecclestone is 83 and in all sorts of legal difficulties. His cheesed-off employers at CVC describe Ecclestone as 'very powerful and difficult to manage'.

'Look, I have a personal interest in motorsport,' says King. 'My son is the British Formula 3 champion and I'm off to Macao this weekend to support him from the paddock ...

Sainsbury's is a values-driven business to which I'm completely aligned. I'm in no way insincere and do my job better as a result.' One can think of few businesses less 'values-driven' than Formula 1.

If he does leave, the firm will have a problem. He will be a near-impossible act to follow. Even hard-nosed analysts in the City acknowledge the value of what one of them terms the 'roof-down convertible' King experience. He's a real talent and, as he says himself, is 'relatively young with plenty left in the tank. If I woke up one day and wasn't enjoying, it I would stop.'

And off he sprints, the West Midlands Roman general, into the huge underground Holborn auditorium to address yet more eager troops from all over the UK.

KING IN A MINUTE

1961

Born 17 May. Tudor Grange School, Solihull College. Degree in business administration from Bath University

1983

Trainee at Mars

1989

Sales and marketing director, Pepsi Egypt

1990

UK MD, Haagen Dazs

1993

MD, hypermarkets, Asda

2000

Executive director, food, M&S

2004 

CEO, Sainsbury's

THREE CHALLENGES FACING KING

  • Maintaining the number two slot among UK grocers
  • Increasing that margin and getting the share price up to the £6 mark that was bid in 2007
  • Managing his exit and succession

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