Newspaper article The Evening Standard (London, England)

Now Sainsbury Can Stick to Being a Supermarket

Newspaper article The Evening Standard (London, England)

Now Sainsbury Can Stick to Being a Supermarket

Article excerpt

Byline: NEIL COLLINS

AMONG the pile of losers from the J Sainsbury debacle, there is oneobvious winner: the business itself. It might be irritating to have threeoversized egos on the share register, but when it comes to the prosaic businessof selling groceries, Sainsbury is clearly going to be a more competitive forcefor not being chopped into opco and propco, or saddled with more debt than itsbaked beans sales can bear.

The credit crunch has done for such fancy schemes, just as surely as the fringebank crisis did for decent businesses whose assets had been stripped out andsold. It would hardly have mattered if one family had replaced another asowners, but the prospect of Sainsbury as a debt-wracked shella sort of BAA with wobblier trolliesmust have had Tesco gasping at yet another unexpected turn of events in itsfavour.

All the other supermarkets are effectively in thrall to Tesco's pricing policy,but there's no doubt Sainsbury is a better business than it was before Justin

King took over as chief executive. Just as the revival started to show in thefigures, there would have been a whole new structure at the top, probablystarting with King's departure. As Richard Baker demonstrated at Boots, whenyou've run a FTSE company, it takes more than an even bigger pay offer topersuade you to work for new owners.

As for the plan to split the properties away from the trading business, thismakes about as much sense as splitting track from trains did for Britain'srailways. The battle for the grocery pound is fierce and relentless, and theinevitable loss of flexibility from creating two businesses just hands rivals acompetitive advantage. It's hard enough competing with Tesco as it is, withoutsuch additional complexity.

Running pubs may not be quite so challenging, but similar considerations applyto the proposal to split Mitchells & Butler's real estate from the business ofselling beer. …

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