The supermarket boss insists that he only wants to overtake Asda – but the Grand Prix rumours won’t go away
As the horsemeat scandal reached its peak in February, the bosses of Britain’s biggest supermarkets and suppliers were summoned to Whitehall to explain themselves.
Packed into a Defra meeting room on a Saturday morning, the shopkeepers were given an almighty dressing down and ordered to take responsibility for one of the biggest food adulteration revelations of recent years.
Among them was Justin King, at 51, and after nearly a decade at the helm of Sainsbury’s, regarded as the elder statesman of the grocery business. He was, he says, determined not to take the criticism lying down. He accused government officials of failing to understand the industry, and even threatened to call on the prime minister to demand a ceasefire.
Three months on, with horsemeat found in beefburgers, bolognese sauces, lasagnes and corned beef – but not in any Sainsbury’s products – King still recalls the behaviour of those running the country with exasperation.
He said: “That moment was when politics and business were at their most tense, because politicians felt they had to be saying something. The reason no one was saying anything was because we were doing the responsible, trustworthy thing, which is understanding the issue before we shouted about it, while the dynamic of politics is the opposite.
“In business, we understand it and then we talk about it, while in politics they talk about it and at some later date work out whether their understanding fits with what they said about it some weeks before.”
It was perhaps surprising that King wanted to take such an active role in tackling the scandal on behalf of the industry, given that his own supermarket group had come through unscathed while bitter rivals Tesco and Asda were caught out.
But the new old man of retail, having worked for PepsiCo, Marks & Spencer and Asda before his nine years at Sainsbury’s, says he has seen far worse and that the public is not quite as worried about horsemeat as might be expected.
“We’ve had foot and mouth, bird flu and BSE, all of which were examples where the supply chain was challenged, so this is nothing new. It’s all about trust and acting in a trustworthy way.
“People are pretty realistic. If you Google horsemeat, [a lot of the hits] are horsemeat jokes. So there was an immediate juxtaposition in the consumers’ minds that it was serious but they got a lot of enjoyment from it, too.”
However, King is keen to stress that businesses must stop feeling sorry for themselves and realise that the customers are victims too.
“I don’t think it is fair enough for retailers affected to say they were victims. I had a very simple view – which is that I’m on the same side of the table as the customer.
“The second you say you’re a victim in this situation, even when you are, you put yourself on the wrong side of the table. The real victims are the consumers, who have paid their hard-earned cash.”
This week, the City will see that Sainsbury’s has been largely unaffected by the scandal. Full-year results released on Wednesday will show sales up 4.6% to around £25.6bn, with underlying pre-tax profits expected to be up 5% to £748m.
The focus may now have moved away from horsemeat, but City investors will be keen to learn more about King’s future. He has been touted as the next boss of Formula One, when Bernie Ecclestone hands over the keys to the world’s most glamorous sporting franchise.
Last weekend that speculation reached a new pitch after the supermarket confirmed that headhunters Egon Zehnder had been retained to advise on King’s successor. Sources inside the company suggest the process could take a year and that the process is merely a matter of good management.
King refuses to quash rumours that he is interested in the F1 job – he only ever says that he is “not aware of a vacancy”. He is a huge racing fan and has helped his son Jordan to become one of the most promising drivers of his generation.
But if the call from Ecclestone, F1′s diminutive owner, fails to come, a career in politics might appeal.
King is a former board member of the London Organising Committee of the Olympic and Paralympic Games, and was a member of David Cameron’s business advisory group – before they fell out over King’s objections to government plans to allow new staff to surrender employment rights in exchange for shares.
However, poor pay in the public sector could prove a sticking point for the businessman, who earned £3m last year – 20 times more than the PM.
On the subject of King’s future, analysts at Barclays wrote: “No CEO remains forever, and at some point Justin King will prove the press predictions correct and move on. However, he may be keen to be in charge when Sainsbury’s regains its number two market-share position from Asda – his former employer.”
That could happen later this year, after a remarkable 33 consecutive quarters of growth.
According to industry data from Kantar Worldpanel, Sainsbury’s is outperforming its rivals as the only big four supermarket to be increasing its market share. The grocer now accounts for nearly 17% of all the money spent on groceries in the UK, a slight rise on last year, at a time when Morrisons, Asda and Tesco all lost customers.
Sainbury’s successful Paralympics sponsorship, leading position in convenience stores and growing online presence have also helped, while Tesco’s decision to open no more megastores, and write off £800m on land it had bought for new developments but will now never use, may also give King cause to crow.
He was always angry about Tesco’s land-grab. “If you’re acquiring a site just a mile from an existing site, are you doing it because you think it’s valuable to trade, or because it stops a competitor?”
And his vitriol for the number one supermarket doesn’t stop there. He is equally scathing about Tesco’s new price promotion, which promises shoppers that Tesco’s prices for own-label and branded goods are cheapest. Having complained directly to Tesco and failed to reach a compromise, Sainsbury’s has now appealed to the Advertising Standards Authority. “We have exhausted everything we could with them [Tesco], so were left with no choice but to go to the ASA,” he says.
“You can’t have advertising saying that where your chicken comes from is important, while at the same time still sourcing your chicken from Thailand and Brazil, and then doing a price comparison with Sainsbury’s chicken, which is sourced from the UK. That is inherently unfair.”
Tesco said: “We use an independent agency to check prices of branded and own-label products at other retailers – online daily for Asda and Sainsbury’s, and, since they don’t have an online grocery service, twice a week at Morrisons stores. The basis for our comparisons is made clear on the price promise website.”
This may not be enough to soothe King’s feelings, but perhaps he will soon be directing his passions elsewhere. Less horsemeat, more horsepower?
Posted by sysadmin | Posted on 05-05-2013
Category : Business
Tags: andy burnham, committee, gps, minister, news, politics, public services policy, role, the observer, trust, trustees, uk news
Earl Howe’s position on advisory committee under threat as doctors claim he ‘mis-sold’ health reforms
A health minister is facing the humiliation of being ousted from a prestigious role within the Royal College of Physicians over claims that he falsely reassured doctors who feared the coalition would privatise of the NHS.
Earl Howe’s position on an advisory committee is being reviewed following a complaint. Six influential members of the professional body that represents doctors wrote to its president, Sir Richard Thompson, claiming that the minister was “not a fit person to fulfil this important role”. Thompson has launched an investigation by the College’s trustees into Howe’s probity.
The senior doctors claim that Howe, a former banker, falsely advised them that reforms under the health and social care bill would not force doctors to use market mechanisms to choose where patients will be treated.
According to the doctors, the regulations will mean that clinical commissioning groups – the bodies to be set up by GPs to organise patients’ care – will have to put services out to tender if there is more than one provider capable of offering particular treatments. This means NHS hospitals and services will have to compete with private health firms for business.
Andy Burnham, the shadow health secretary, said there had been a breakdown in trust between health professionals and government, adding: “This whole issue has become a crisis of trust for the department of health. There would be a straight forward breach of trust given that statements ministers have given have not been honoured.
“The medical profession feels the government has mis-sold its NHS reforms. It was sold on the principle that doctors would be in control but in fact it will be the market that will decide.”
A spokeswoman confirmed that Thompson, and “in the interest of probity”, had “referred the issue to the board of trustees and would report back in June”.
She said the Friends of the RCP, the committee on which Howe serves, is an informal advisory group, including past presidents and officers, and figures from finance, industry, and other charities, that plays no role in the governance or management of the RCP but offers advice in areas such as effective fundraising.
The coalition denies the regulations will force doctors to put services out to tender, believing it will give GPs the ability to select a variety of providers and will improve standards.
Posted by sysadmin | Posted on 28-04-2013
Category : Business
Tags: card, companies, consumer, facebook, features, google, mobile phones, network, scan, service, the observer, weve
Britain’s big three mobile networks have united on a project to make debit cards of our smartphones. And they’re even planning to outsmart Google
There is a scene in the 2002 film Minority Report where Tom Cruise walks into a clothes store and a computer scans his eyes. “Hello Mr Yakamoto, welcome back to the Gap,” chirrups a sales assistant in hologram form. “How’d those assorted tank tops work out for you?”
Brands from Nokia to Bulgari collaborated in the Steven Spielberg film to paint a picture of what a shopping trip might look like in 2054. But we may not have to wait that long – science fiction could become reality later this year.
In the real world, though, individual shoppers will be identified not by iris scans, but by the portable devices in our pockets. The UK’s three largest mobile phone networks, EE, Vodafone and O2, have joined forces to turn smartphones into virtual wallets that know who we are, where we are and what we buy.
“Imagine: you are walking past Topshop and an alert pops up on your phone offering you a discount in store today,” says David Sear. The new chief executive of Weve, the company set up by the networks to manage the mobile wallet project, is giving his first interview.
You’d then walk into the store, pick out a purchase, scan the barcode, and pay by tapping your phone on an Oyster-card-style reader, rather than at the till.
“It is a bit of joy,” claims Sear. Bargain lovers would agree; others might find it intrusive. To those standing in line to pay, it could seem downright rude.
The idea is not a new one, but despite the efforts of companies ranging from Google to Barclays it has yet to gain traction with consumers. Google Wallet, launched in the US in 2011, has not made it to these shores. But Weve says 15 million mobile phone customers have already opted in to its service.
At the moment, those users receive nothing more than text messages alerting them to offers. But within months, Weve says it will have opened its database, allowing companies that buy advertising slots on web pages access to data ranging from users’ physical location to the websites they visit on their phones.
Before the end of the year, Sear hopes to have created an app capable of holding dozens of virtual loyalty cards, and to have recruited its first brand. Payment mechanisms will follow.
“My background is in disruption,” says Sear, who has made his career with payments firms that challenged the big banks. An early venture used data to help retailers spot cheques that would bounce. At online transactions firm WorldPay he helped shoppers in one country buy goods in their own currency from sellers abroad.
“I succeeded with the cheque business because we enabled people to do things at the point of sale which they couldn’t do before,” says Sear. “I have 17 loyalty cards sitting in my sock drawer because I can’t be bothered to carry them all around. I think there’s a real opportunity to create one place where you might hold competing loyalty mechanisms.”
But why should an unwieldy coalition of mobile phone firms, more used to competing than collaborating, succeed where a digital native like Google has so far come unstuck?
“People in the loyalty industry know what Google wants: their data. One of the large US supermarket chief executives said the thing he didn’t want to do was give Google his data. Whatever we do, it has to be a coalition of the willing.”
Weve claims it will share details of every purchase with the relevant loyalty card issuer. The system will also ask mobile phone customers to opt in, rather than acting like Facebook and Google and assuming users will accept advertising in exchange for a free service.
For the networks behind Weve, this is one of the advantages of having paying customers. Facebook has to presume we want advertising because it has few other sources of revenue, but mobile phone companies can afford to be a little less pushy.
“We want consumers to have bought into the value of the service,” says Sear.
He is particularly critical of Facebook Home, a new app from the social network that takes over a smartphone’s home screen to display ads alongside news and photographs from friends. “I personally do not want to see ads popping up on my phone when the screen is locked. In Facebook’s case I don’t think they are really asking for permission; it’s just part of the deal you sign up to on that system.”
Weve will not be a consumer brand. The networks will sign up customers themselves, using a dashboard of information-sharing options. Details shared could range from the first part of a postcode to age, gender, location, web browsing history and likes or dislikes. Some will be compulsory, some optional, and the requirements will vary by network. Google has a similar dashboard, but few users are aware of its existence.
“The consumer is more powerful in this stage of our digital revolution than I think they have ever been, and they will decide whether or not something is appropriate,” says Sear.
Security is another factor. When Weve is ready to link a customer’s debit card to their phone so that they can make payments, those details will be held on the Sim card. Should the phone be lost or stolen, the data can be remotely deleted by the operator.
Memory wiping was a favourite theme of Philip K Dick, on whose writing Minority Report was based. The film was made not long after the 9/11 terrorist attacks on the World Trade Centre, and Spielberg remarked at the time: “People are willing to give away a lot of their freedoms in order to feel safe. But the question is, where do you draw the line? How much freedom are you willing to give up?”
This applies increasingly to the trade-off between free services and private information. Those signing up for Weve’s service will at least be offered the choice.
Posted by sysadmin | Posted on 28-04-2013
Category : Business
Tags: access, appointment, complaints, consumer affairs, engineer, january, letters, line, money, ofcom, show, the observer, told, waiting
Frustration over endless waits for Openreach to instal phone lines is made worse by being unable to complain directly
Letters about the unreliability and inscrutability of Openreach, the division of BT which, in theory, provides access to the national phone network, has unleashed a torrent of woe from readers stranded, often for months, without phones. The complaints have a common thread: Openreach is unanswerable to the customers it lets down because grievances must be channelled through their own service provider, some of whom seem equally unable to communicate with the company they rely on to install new lines.
MN of London
has been waiting since November for his Sky telephone and broadband to be installed: “Appointments have been made, and each time the engineer failed to show. In desperation, I cancelled my contract with Sky and placed a new order with BT in February. I’m still waiting and was recently asked by an amused BT operative what life is like without a phone line.”
Primus customer VC of Althorne, Essex,
lost her line in January and is still awaiting reconnection. “We feel powerless before these faceless organisations,” she says. Londoner LN-C has also been waiting since January for a new line. Engineers have either turned up with the wrong parts or qualifications, arrived unannounced and were unable to gain access or did not come at all. “We have wasted more than 40 hours waiting for BT to show up, or telephoning them to complain. BT’s delays are also costing me thousands of pounds in lost productive working hours as we are unable to conduct our business effectively without the internet,” she writes. “One of the telephone lines awaiting installation is for our Dualcom alarm system, which is necessary to comply with our insurance requirements.”
SC of Colwyn Bay, Conwy
ordered a new line through Sky in January and was told she would have to wait seven weeks. Snow meant the engineer was a no-show and she was told the next available appointment was in May: “We have been told that you can’t contact Openreach, you have to go through our provider – Sky – but then all Sky will say is ‘sorry’ this is the first available appointment.”
SC of London
complained to his provider Zen of a slow broadband connection in December. “Zen has been fighting hard to get Openreach to resolve the issue… Openreach has no telephone number or email address for end user complaints and insists we must go through our ISPs. It seems absurd that Openreach has been set up as a monopoly supplier of the communications infrastructure without there being any way for the end user to complain to them directly about their services, or for there to be an external body to which we can seek redress.”
Telecoms regulator Ofcom tells me it doesn’t publish complaints about Openreach as the number is so small. Of course it is. Because of Ofcom rules, Openreach gets to skulk behind the service providers who have to deal with customer complaints on its behalf. However, even Ofcom has realised that Openreach’s performance has “deteriorated” since the summer and it is reviewing the wholesale access market – ie Openreach’s monopoly on installations agreed with Ofcom in 2006 – to enable service providers to access BT’s national network. It is planning to introduce new rules such as payouts for customers who suffer delays.
Meanwhile, Openreach blames last year’s wet weather for a backlog of delays, including SC of Conwy’s five-month wait (her appointment was brought forward a month thanks to press office muscle) and says it has appointed 1,000 new engineers and carried out 1.7m visits in the last quarter. It blames MN’s saga on the fact that both Sky and BT coincidentally committed an “administrative error” when processing the order. His line has now been installed.
VC is the victim of a faulty telephone pole, which requires input from the electricity company and the council to remedy. The council also had to be invoked in LN-C’s case because it had concreted over relevant manhole covers and she now has a working line. SC of London apparently suffered delays because of the technical complexity of the problem which necessitated several visits.
Although customers’ contracts are with their own service provider rather than Openreach, it’s worth complaining to Ofcom if Openreach irks you. While unable to intervene on an individual basis, it will add it to the growing tally. For mediation when you reach deadlock, turn to the telecommunications ombudsman,
Posted by admin | Posted on 28-04-2013
Category : Business
Tags: borrowers, broker, fee, fix, halifax, interest, locking, mortgage rates, number, property, remortgaging, term, the observer, year
The number of five-year fixes has increased 73% in the past year as two-year deals lose popularity with mortgage borrowers
Would you fix your mortgage for five years, seven or even 10? A few years ago the vast majority of people would have said no, opting instead for a cheaper, shorter-term two-year deal. But the tide has turned and increasing numbers of borrowers want the certainty of a longer-term commitment, say brokers – and lenders are offering more, and better, deals.
Tomorrow HSBC is launching the lowest ever five-year fixed rate at 2.49% for those with a 40% deposit or the equivalent equity (be warned; the fee is a whopping £2,000).
This is the first time a five-year fix has dropped below 2.5% – but it’s not just HSBC getting in on the act. In the last year, the number of five-year fixed-rate deals has increased by 73%, says data provider Moneyfacts. By comparison, the traditionally popular two-year fixes have only increased by 33%.
Sylvia Waycot, editor at moneyfacts.co.uk said: “Five-year fixed-rate mortgages have traditionally been a bit too expensive to be the first choice for most of us. However, thanks to lenders enjoying cheap loans from the government this is changing.”
The government announced last week that it is extending its Funding for Lending scheme, which has been widely credited with bringing mortgage rates down for borrowers.
Experts believe rates on all mortgage terms could become more competitive in the year ahead. So, with all these cheap deals around, should you look to fix at all and if so, for how long?
Consider the base rate
Borrowers deciding whether to fix will undoubtedly want to take into account the widespread speculation that interest rates are unlikely to rise any time soon. “Our view is that we won’t see a rise in the 0.5% base rate until 2016,” says Rob Harbron, economist from the Centre for Economics and Business Research (CEBR). “Expectations for continued low rates are a result of our outlook for the economy – weak growth conditions are expected to remain the ‘new normal’ for the next few years.”
Economist Ian Kernohan from Royal London Asset Management adds that as the UK is still in post-crisis recovery mode, this means disappointing growth and low interest rates for at least a few years. “We have pencilled in the first rate rise for late 2015 at the very earliest,” he says.
Martin Ellis, housing economist at the Halifax, adds that as interest rates look set to remain at the same level for the rest of the year, this offers a compelling reason for some borrowers to stay on tracker rates.
“However, a fix provides absolute certainty about the cost of monthly repayments,” he says.
Robin Barter, 44, and his wife, Tracey, 46, are among those who have just remortgaged on to a five-year fix for the first time. The couple live in a four-bedroom house in Oxfordshire with their three children: Scott, nine, Luke, seven, and Hugh, four.
Prior to remortgaging, the Barters had held tracker mortgages with Halifax for 14 years but have now switched to NatWest. “Initially, I thought we’d go for another tracker, as I’m familiar with this kind of deal,” says Robin, an account director. “But when we contacted broker London & Country, they came back with the same conclusion that I was starting to reach, that in the current economic climate we’d be better on a fix.
“Given that the base rate is only going to go up at some point, we decided to go for a five-year fix with NatWest.”
This was priced at 2.99% and came with a £995 fee; the deal also offered both free valuation and legal work. “Locking into a low five-year fix now gives us peace of mind that our payments are protected for longer,” says Robin.
“It also means we won’t have to pay fees to remortgage again in a few years, as we would with a shorter deal.”
Beware sky-high fees
For some borrowers, choosing a rock-bottom mortgage rate may be a false economy, according to Andrew Montlake from broker Coreco.
“Having to remortgage and pay high arrangement fees every two years may not be the best way to go,” he says.
“For example, while borrowers may like the sound of HSBC’s two-year fix at 1.89%, at up to 60% loan-to-value (LTV), the fee of £1,999 adds roughly 0.5% to the rate spread over the two years. As a result, Norwich & Peterborough’s fix with a slightly higher rate of 1.99% at up to 60% LTV and a fee of £995 could be a better option over two years.” The key is to factor in the product fee as well as the headline rate. “This will determine whether you are better off paying a higher fee and taking the very lowest rate, or opting for a slightly higher rate with a lower arrangement fee,” says Montlake.
Is two years long enough?
With little expectation of the base rate climbing in the near term, brokers say borrowers are increasingly turning to deals that protect their payments for longer than two years.
After the new HSBC five-year fix, the lowest on rate alone is Yorkshire building society at 2.59% at 60% LTV. Again, this comes with a £1,475 fee. Norwich & Peterborough building society has a five-year fix at 2.74% at 60% LTV with a much lower fee of
