Sainsbury’s – Best Before?

‘The difference between winning and losing is simply not quitting’, said Walt Disney.

The enduring CEO of Sainsbury’s, Mike Coupe, might have echoed that sentiment this week as he unveiled an all-new strategy for the grocer, only five months after the collapse of his planned takeover bid for rival Asda.

Coupe was the main architect of the proposed acquisition, an attempt to give Sainsbury’s the clout to challenge a resurgent Tesco and the discounters Aldi and Lidl. But the plan was shot down by the Competition and Markets Authority (CMA) in May — leaving the company nursing a £46m pound bill and punctured share price.  The supermarket chain is now seeking to bounce back, reducing costs by £500m over five years from closing some Argos stores, shuttering its mortgage book and cutting pension contributions.

Response? Traditionally, the corporate bull who fails to consummate a transformational marriage is considered a spent force, diminished in the eyes of investors and condemned to an early exit.  This week’s departure of Adam Neumann from WeWork marks a case in point.

So how has Mike Coupe seemingly defied gravity to fashion an alternative future for Sainsbury’s while picking up a bumper pay rise in the process? Clearly, shareholder and board support have been critical.  In July, Coupe was re-elected by a convincing 99.5 per cent of shareholders, complemented by the full-throated endorsement of the company’s chairman, Martin Scicluna, who said Coupe had his “one hundred per cent” support and confirmed he would not be “shopping around for a new chief executive.” Another explanation may lie in Coupe’s technocratic and understated style.  His bookish demeanour contrasts with his more ebullient predecessor Justin King.

Often fuelled by a PR machine that conflates personality with strategy, M&A becomes inextricably linked to the vaulting ambition and vanity of leadership.  In Sainsbury’s tilt at Asda, however, and before that Home Retail Group, deals seemed to owe more to Coupe’s background as a physicist than to hubris.

Impact? Despite his staying power, questions remain over Coupe’s future.  The strategy set out at this week’s Capital Markets Day was long on cost savings, short on growth. It appeared to contradict assurances given to the CMA last year that there were “structural limits to how far we can adapt our costs without adversely impacting the customer experience”.

Without the tailwind of an Asda deal to fill Sainsbury’s sails, Coupe’s challenge is to avoid sharing all the cost savings with consumers, and instead to invest behind a different future that looks fresh and appetising.

Even the most enduring of products go off eventually. Coupe may finally be approaching his “best before” date.

Nigel Fairbrass

Nigel Fairbrass