Sainsbury's brings in McKinsey to draft new £500 million saving plan

22 August 2017 Consultancy.uk

Sainsbury’s is due to announce more than 1,000 job cuts at head office as part of an efficiency drive designed to save £500 million. The exact number of roles axed is expected to be revealed in September 2017, with the supermarket giant currently employing 3,000 back-office staff across the UK.

The UK’s second-largest supermarket chain has drafted in management consulting firm McKinsey & Company, in order to draw up a headcount reduction plan amid ailing sales figures. Sainsbury’s sales fell back into decline after it posted a 0.8% decrease in like-for-like sales for the first quarter of 2017, having inched into 0.1% at the end of last year’s Q4 – the first time the store’s figures had increased in over two years. Market analysts have suggested sales were hit by the abolition of the store's "buy one get one free" offers, along with its brand-match guarantee. While Sainsbury's replaced those promotions with overall lower prices, a damning report by the competition regulator said multi-buy deals across the industry routinely mislead customers, further impacting on the reputation and sales figures of top stores.

The big four supermarket chains of Tesco, Sainsbury’s, ASDA and Morrisons have been embroiled in an increasingly fierce price war as German discounters Aldi and Lidl – who are also investing heavily in the US – expand across the UK, with Aldi becoming the fifth largest chain in the country, while Lidl is projected by Kantar Research to be on course to reach the top seven by the end of 2017. As a result, each of the biggest supermarket chains have announced job cuts in recent years as they seek to compete with the fast-growing discounters.

Sainsbury's brings in McKinsey to draft new £500 million saving plan

In March, Sainsbury’s declared it was to cut 400 jobs in stores, while another 4,000 workers would be facing changes to their working hours, including the scrappage of night shifts in 140 stores, as the grocer looked to run its customer-facing operations more cost-effectively. The chain will reach the end of a three-year plan to save £500 million in March 2018 but with chief competitors Tesco rapidly scaling back staffing costs, cutting 1,400 jobs in June, Mike Coupe, Sainsbury’s chief executive, has said the company will then embark on a new programme in order to save the same amount again. Advisors from McKinsey will assist the supermarket in drawing up the plan.

Under the leadership of Coupe, Sainsbury’s has sought to broaden its appeal with last year’s £1.4 billion purchase of Argos, which was targeted at diversifying the brand’s offering beyond the increasingly competitive grocery market, while presenting access to Argos’s fast delivery network. The company is also analysing the books of convenience chain Nisa, which it has been eyeing a £130 million deal for, in order to grow sales inorganically in the grocery sector, but any subsequent deal will also heavily be subsidised by the proposed £500 million in savings McKinsey may help to find.

Sainsbury’s currently employs 3,000 back-office staff spread across a number of sites including Holborn in central London, while  and a human resources support centre in Manchester. It also has an IT team based in Walsgrave, Coventry and a banking division in Edinburgh, however the specifics of any jobs lost are not currently available. In a release following the news of McKinsey’s hire, Sainsbury’s said “We do not comment on speculation and would always make any announcement around jobs to our colleagues first.”

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