Growth Rates That Count

No matter the rate of growth in a market, the key growth measures to watch are those of the various Price Points. Here is an example.

The U.K., as the U.S., is in a recession. As a result of tougher times, customers are trading down their purchases in retail stores, including grocery stores. A beneficiary of this trade-down in the U.K. is the supermarket chain, J. Sainsbury PLC. Sainsbury is the U.K.’s third largest food retailer. It picked up customers from some of its more upscale grocery competitors.

Sainsbury has three lines, or Price Points, in its market. These Price Points grew at significantly different rates than the company grew during 2008. The company’s “Basics” brand is the smallest of its three Price Point labels. It is also the least expensive. This brand reported a 40% rise in sales in the third quarter from a year earlier, as customers traded down to less expensive groceries. The company’s higher Price Point brand “Taste the Difference” saw a decline in sales during the same period. The company’s sales for stores open for at least a year grew 4.5% in 2008. But the growth rates at the two Price Points were very different from the company overage.

In any market, whether growing or declining, a company should know the growth rates, not just of the industry as a whole, but of the Price Points in the industry. The real growth or decline story comes at the Price Points. And it is at the Price Points, rather than at the overall market, where the company focuses its decisions.

Posted 1/26/08