Sainsbury’s has taken considerable umbrage at the decision by the ASA to ignore its complaints surrounding Tesco’s Price Promise. Indeed, it feels so sore it has commenced a process of judicial review to seek to redress what it believes to be unfair inconsistencies in the Price Promise, in particular qualitative differences between the make-up of its products and Tesco’s.
Sainsbury’s no doubt believes there is a virtue and maybe a commercial opportunity in extolling its qualitative strengths through this case and we should add that it is coming off the back of sustained out-performance against Tesco for some years now.
“The review potentially exposes price vulnerabilities”
However, we harbour concerns that Sainsbury’s may be moving itself into more vulnerable territory and in trying to extol quality, it may highlight price weakness.
If Sainsbury’s goes on to win the case, there are likely to be tweaks to Tesco’s Price Promise or maybe a return to the status quo. We deem such an outcome to be a moderately unimportant event at an industry level. However, through the review process and thereafter, we are concerned from Sainsbury’s perspective that Tesco and others may more overtly talk about price, and here Sainsbury’s is vulnerable because it is in the main more expensive than its mainstream competitors.
Additionally, Brand Match has limitations as it only relates to proprietary brands, not fresh food and private label. This is something we believe many customers not so interested in the minutiae of price comparisons and matching may not totally realise - it’s also a fact that may be particularly highlighted through this review process.
Accordingly, if the review does not deliver what Sainsbury’s hopes, then the risk-reward equation may be less compelling for the business as it potentially exposes broad price vulnerabilities to the market.
Such an outcome, while not unhelpful to Tesco, could unnecessarily damage Sainsbury’s brand equity when it is riding at a deservedly high level. Depending upon the vagaries of the courts, is risky at the best of times. When the risk-reward is not especially clear, the wisdom of such activity may be brought into question.
Dr Clive Black is head of research at Shore Capital Stockbrokers
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