Sainsbury's aims at growth through Nectar
UK food retailer J Sainsbury Plc has cited the forthcoming Nectar loyalty programme as a likely source of financial growth for the second half of this year's trading, following a strong finish to its first quarter in 2002.
Although the surrender of the Air Miles contract made an estimated 1% difference to the firm's growth during the quarter, Sainsbury's is confident that its involvement with Nectar (see June 5, 2002) will bring new growth in the second half of this year.
In his speech at the Sainsbury's 2002 AGM, group chief executive Sir Peter Davis said, "We have reported like-for-like sales growth in the first quarter for the UK and US businesses of 3.1% (excluding petrol and Easter adjusted) and 0.5% (also Easter adjusted) respectively. During this quarter, despite facing a number of challenges, the group has performed satisfactorily and I remain confident that real progress is being made."
Growth through Nectar "In the UK, growth in the market has definitely slowed and inflation has been lower. In the first quarter statement last year we reported an improved step change in sales performance, which has meant that the comparatives are harder this year. In addition, we have experienced a short term impact from our decision to terminate the Air Miles contract, which we estimate affected our like-for-like growth in the quarter by around 1%. Nevertheless, we finished the quarter more strongly than we started it."
Speaking of the firm's involvement in the Nectar coalition loyalty programme, to be launched later this year, Sir Peter continued, "We remain confident that the launch of the enhanced Nectar loyalty card this autumn will prove attractive to customers. Taking this into account, and the phasing of our 'reinvigorate' programme, we expect to achieve a stronger second half performance."
The Nectar programme Chaired by Air Miles founder Keith Mills, Loyalty Management UK will launch and operate Nectar, which brings together Sainsbury's, Barclaycard, BP, and Debenhams to form what is expected to be the UK's largest customer loyalty programme. Targeting more than 12 million UK consumers who are currently members of programmes operated by the four retailers, Nectar hopes to acquire more than 50% of all UK households following its launch in autumn.
Consumers can collect points from over 1,800 outlets, and from all their Barclaycard purchases, redeeming them for a number of rewards including flights, holidays, meals, consumer goods and cinema tickets.
And retailers will feel the relief of reduced administrative costs (which are often between 5% and 20% of the total cost of a stand-alone programme). In addition, each founding sponsor will have sector exclusivity within the programme.
Loyalty Management UK has recently secured £25 million in equity financing for the programme from private equity firm Warburg Pincus. (see July 3, 2002)