Sainsbury & Asda Bet on UK Consumers
Luxury Foods
Two of the UK’s biggest supermarkets, Sainsbury and Asda expect consumers to defy the economic downturn and spend Christmas money on more expensive treats this Christmas.
Some expect this to be the last ‘luxury’ Christmas before the reality of public sector job cuts, a VAT increase and tax rises begin to set in.
Sainsbury Chief Executive Officer Justin King said; “Christmas is a time where people trade up on food.”
Asda and Sainsbury are betting that British consumers will feast this Christmas in preparation for belt-tightening to come, with some obtaining loans for Christmas to help them through /bad-credit-christmas-loans.html
Leading independent retail analysis firm, Verdict Research, forecasts this Christmas period to be the best for UK retailers since 2007, with Christmas food and grocery spending expected to climb 3.5% to £33.1billion.
This figure is a whopping 39% of all the Christmas money which is thought will be spent this festive season according to a Bloomberg Businessweek report.
“We’ve seen people quite clearly manage their weekly spend so they can preserve things that are important to them,” said Mr King.
UK families are not expected to bin any part of the traditional Christmas dinner this year in favour of cheaper alternatives, some opting for Christmas loans to bridge any gaps in their wallet.
A majority are still expected to feast on a Christmas turkey, stuffing, Christmas pudding with brandy butter, mince pies and luxury Christmas crackers. You can do this on a budget of £2.63p per head, see our other press release “Christmas Dinner Fit For a Bad Credit King At Only £2.63?”
In anticipation of a Christmas holiday shopping spree by consumers with Christmas money to spend, both Asda and Sainsbury have bulked up their premium private label offerings.
“The U.K. consumer is always prepared to splash out at Christmas and the own-brands are typically higher gross margin so it’s a clever strategy,” said Sam Hart, retail analyst at private brokerage firm Charles Stanley.
Sainsbury is doubling its highest-priced ‘Taste the Difference’ range, which typically accounts for around 5% of its products.
300 additional items are to be added, including a tub of mince pie ice cream for £3, 40 grams of specialist ham - Jamon Iberico Bellota for £4.75 and a roast pork belly meal for £9.
To accompany Christmas pudding or canapés for those entertaining over Christmas, Sainsbury is also selling Taste the Difference Prosecco Conegliano for £9.99.
“Prosecco is the new cava,” stated Sainsbury Trading Director Mike Coupe, referring to the popular Spanish stand-in for Champagne.
During the build up to Christmas, Asda is adding to its luxurious “Extra Special” range by selling 140 more products.
Almost three-quarters of the purple and cream branded range has been updated or changed to attract holiday shoppers.
Items such as sherry trifle gateaux, trout and horseradish terrine starters and mini steak-and-ale pies are all expected to be big hits with Christmas shoppers looking to add some luxury to their Christmas dinner menu.
Asda is also offering Christmas puddings aged for six months for £10.98.
“Sales do tend to grow threefold at Christmas,” said Jo Johnson, brand manager for the ‘Extra Special’ product.
“Generally we try and keep customers with us when they trade up at Christmas so it’s getting them to trust us to be a credible retailer on premium food as well as price.”
Some retailers are warning that predictions are too optimistic, with many UK families in further bad credit problems than retailers believe.
WM Morrison’s Chief Executive Officer, Dalton Philips, stated that he believed the forthcoming Christmas period would be a “tough” festive season.
“People say the British are going go to have a great Christmas irrespective” of the economic backdrop, Philips said, “I’m not so sure.”
Marks & Spencer Chief Executive Officer, Marc Bolland, confirmed that he is “cautious, but optimistic” about the holiday season, with 12,000 orders for Christmas dinners already placed and 1,000 new food products to be sold in store.
“We expect the trading conditions ahead to become more challenging as consumers’ disposable incomes come under pressure from increased VAT rates and the impact of public spending cuts,” the company said.
Shares of Sainsbury fell slightly after the company reported first-half earnings that missed analyst estimates and said it expects “challenging” conditions during the Christmas period.
Their stock has risen 16 percent this year, compared to a 3.3 percent decline at Tesco.
Each company, however, is agreed that there are tough times ahead for everyone.
Prime Minister David Cameron’s formula for wiping out a record budget deficit by 2015 is set to hit pockets starting on 4th January 2011.
The VAT, which is levied on all prepared foods, including holiday goodies such as ice cream, salted nuts and gingerbread men decorated with chocolate, will rise to 20% from 17.5%.
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