Government Affairs Insight

Supermarket Sweep

Erica Zimmer, Head of Public Affairs at Sainsbury’s, discusses the OFT referral, food and health, Jamie Oliver’s halo-effect and fighting for market share with Public Affairs News Editor Jolyon Kimble.

I began by asking Erica Zimmer to outline her role for supermarket giant Sainsbury’s. She said she operated with a small team of six, with support from Fishburn Hedges for PA and CSR in England and Wales, and different agencies in Scotland and Northern Ireland. “My team and I cover relations with government, relations with ngos, corporate responsibility and community affairs, so it’s quite a wide brief for only six people,” she says. However, the team punches above its weight and is central to the commercial operations of the firm. “Maybe you could say that’s outside our job description,” she tells me. “But it’s important to me that we’re helping to drive the agenda.”

The PA team mainly handles supermarkets and the convenience stores, but that constitutes the bulk of the firm’s operations. Sainsbury’s Bank has its own corporate affairs people. Unlike Tesco Sainsbury’s is UK-based, having sold the US chain Shaw’s last May.

So what are the firm’s goals at the moment? “Our main focus is the ‘Making Sainsbury’s Great hAgain’ recovery programme, which was put in place following a complete review of our business,” she says. The firm’s competitive challenges are well documented – over the last 10 years the company has gone from being industry leader to being third behind Tesco and Asda. Zimmer says the firm’s fortunes are beginning to turn around. “We’re gaining market share and we’re neck and neck with Asda now,” she says. “I don’t know why the slip happened because it was before my time, maybe we took our eye off the customer, but we’ve got a new CEO, Justin King, and he’s absolutely I ask her if it’s an inevitability that the referral to the Competition Commission will be made. “They say they’re ‘minded to refer’, and I think it’s unlikely they’ll get a lot of people arguing that they shouldn’t” brilliant. We’ve also got a new board and now we’re focussing on what the customer wants. Like for like sales are up by 5.3 per cent so that’s very encouraging.”

The new campaign to win back customer trust seems to be working. “I think we’re doing well on that. Partly it’s making sure our customers know our products are well-sourced and that they will be able to find them on the shelf. The ‘Jamie’ effect helps too. I’m sure it’s also a reason that some people in government want to talk to us, because of Jamie’s ‘halo’, so we benefit from that.” She uses the example of the current avian flu scare to illustrate what the firm sees as a turnaround. “It’s amazing but during the bird flu scare our sales of chicken have gone up, and I’m not sure that’s true for all big retailers. I think that’s indicative of the trust that customers are feeling towards us.”

So what are the major political issues the supermarket chain faces? Unsurprisingly for such a vast business and such a big employer the challenges are legion. “I used to be Private Secretary to Patricia Hewitt when she was at the DTI and I thought government was complicated, but the supermarket business is incredibly complex,” Zimmer says. “There are so many issues that impact on us. Everything. Farming, energy, planning, transport, pretty much anything you can think of. That means we have to focus our resources where they make the most difference and where they help drive sales.”

One of the key areas for the firm is food and health following the government’s prioritisation of the issue. Zimmer is confident the team is engaging well with the decision-makers. “There’s been a white paper on public health and various initiatives are coming out of the Food Standards Agency and that’s a real issue for us, one that we’ve been working very positively with government on. To the extent that they’re now coming to us asking if we’ll work with them.” Zimmer has a lot of day-to-day engagement with government departments, parliamentarians and ngos, and with Brussels. “Brussels is particularly important because while the FSA can issue lots of recommendations, for example on food labels, it’s Brussels that makes the law,” she says. “So we’re in regular touch with the institutions. We don’t have an office there so I travel out there regularly.”

In March the news broke that the Office of Fair Trading was “minded to refer” the grocery retail sector to the Competition Commission. It was a bombshell that got massive press coverage. Did Sainsbury’s anticipate that? “To be honest, no.” Zimmer says that 90 per cent of the 70 page report eulogised about how competitive the market is and how the consumer has benefited, and then it discussed referring the supermarkets to the Competition Commission. “Somebody landing from outer space would find it pretty confusing,” she adds. I ask whether the move was spurred by claims of racketeering amongst the cartels, but it seems the main issue is the fall-out from a complaint by the Association of Convenience Stores. They objected when the OFT didn’t refer the purchase of a chain of convenience stores by one of the ‘Big Four’ to the Competition Commission. “The issue that’s been causing all the noise in media and Parliament is the impact on the high street and the independent stores,” she says. However, she claims that this is happening at the same time as MPs are asking Sainsbury’s to come and set up stores in high streets in their constituencies to drive growth and attract other businesses. For every person that complains she believes that there’s probably 10 other people who appreciate what the firm is doing for the consumer.

 I ask her if it’s an inevitability that the referral to the Competition Commission will be made. “They say they’re ‘minded to refer’, and I think it’s unlikely they’ll get a lot of people arguing that they shouldn’t,” she says. “We will deal with that because we have to, but we’ll carry on as usual because I don’t believe we should be distracted from the good things we’re doing. One of my challenges will be to make sure we keep the ‘show on the road’ whilst making sure that we deal with the inquiry.

That will mean a more punishing workload. How will the team cope? “We’ll just have to manage the process, and we’ll be setting up a special team to deal with that. We’ll probably have to add to the budget that’s already been agreed for this year.”

Has the firm planned for a nightmare scenario when the Competition Commission reports? “The worst case scenario would be restrictions on trading that meant we couldn’t operate very easily. Absolutely worst would be price controls, but I don’t think this government is going down that route,” she says. “It’s difficult to know what they might come up with, apart from condemning ‘land banks’, which is the practice of buying land to block the developments of other supermarkets.” Planning is obviously a massive issue for the chain, but the PA team leaves most of that work to a special planning division because it’s so technical.

“Do you work with any of the other Big Four on anything?” I ask. “We’re members of the British Retail Consortium, but obviously there are limits to how far one can work with competitors,” she says. I ask Zimmer if she believes that the OFT decision shows that Lord Sainsbury’s ministerial post hasn’t won Sainsbury’s any favours. Zimmer says she doesn’t imagine the peer was a factor in the OFT’s decision-making “one way or the other”.

Having a company icon in Whitehall hasn’t saved the firm from an inquiry, but perhaps good public affairs will limit the impact of its findings.