75-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.
In January 2022, Sainsbury’s was the 2nd ranked grocery retailer in the UK with a market share of 15.6%. Tesco led the market with 27.9% of the market. The UK grocery industry is led by the “big four” of Tesco, Sainsbury, Asda and Morrison. Together, these 4 companies control almost 2/3 of the UK grocery market. However, online retailers are taking on growing importance in the UK market, especially since the onset of Covid. Grocery discounters are also growing at the expense of the big 4. Tesco’s store growth has focused on smaller stores over the last few years. Similarly, Sainsbury’s store growth has emphasized convenience stores while holding supermarket store numbers steady. So, both of these chains have emphasized higher price points in their store growth rates. Asda and Morrison are not increasing their number of stores.
The big 4 pursue somewhat different pricing and Price Point strategies in 2022 as reflected in their average cost of a shopping basket. Tesco’s average cost was 28.4 British pounds. Asda was lower at 27.07 British pounds. Sainsbury’s was notably higher at 30.05 British pounds, as was Morrison’s at 30.75 British pounds.
HOW CAN THESE BLOGS HELP ME?
If you face a competitive marketplace, read these blogs. We wrote them to help you make better decisions on segments, products, prices and costs based on the experience of companies in over 85 competitive industries. Much of the world suffered a severe recession from 2008 to 2011. During that time, we wrote more than 270 blogs using publicly available information and our Strategystreet system to project what would happen in various companies and industries who were living in those hostile environments. In 2022, we updated each of these blogs to describe what later took place. You can use these updated blogs to see how the Strategystreet system works and how it can lead you to better decisions.