J Sainsbury

Procurement policy
Sainsbury's Property Company use the design-and-build method of procurement, with the ECC form of contract. Main contractors, which are appointed directly by the company, are responsible for all second-tier suppliers, including design consultants. This creates a single point of contact and gives contractors greater control together with the opportunity to influence design and minimise costs.

In early 2001, Sainsbury's Property Company went out to competitive tender, as above, for three store formats (new-build, extensions and refurbishments) with a view to creating a stretching set of rates against which all jobs would be negotiated. Successful contractors were then asked to enter into a framework agreement and to work in strategic alliances for each format.

Current and future projects
J Sainsbury continued on its recovery path over 2001/02. Twenty-five new stores, including 15 Locals, were opened in the year. Meanwhile, 27 stores were extended, and 90 refurbished. With this investment, the group added about 60,000 m² to its store portfolio, which at the start of 2002 comprised 463 supermarkets. Interestingly, the group is rapidly expanding the size of its stores, with the number of stores with in excess of 4000 m² rising from 86 to 121 in 2001/02. The largest size category remains 2500-4000 m² (184 stores). In line with the above openings, capital investment rose to £1.156bn from £956m in the previous year. Although the group does have overseas interests, these account for a minority of sales and capital investment. In 2001/02 investment in new stores was £221m, and in existing stores £530m. The remainder of capital investment was taken up with the supply chain (£171m) and other (£101m).

Sainsbury has undertaken seven extensions and 29 refurbishments in the six months to September 2002. With the latest extensions Sainsbury has 85 stores in excess of 4500 m². It also completed the opening of its 45th Local store. Capital expenditure in the six months to September 2002 totalled £595m. Of this, UK expenditure was £541m, which included: £143m in new stores; £221m on existing stores, and £131m on the supply chain. Given the recent level of capital expenditure, the total for 2002/03 is expected to at least equal that for the previous year.

Essential information
Sainsbury recently announced that it is planning an aggressive push into the sale of non-food products in an attempt to match growth rates of its rivals, Tesco and Asda. Sainsbury has experienced strong growth in its food sales of recent, whereas non-food sales growth has been slow. The push into non-food sales is likely to involve the expansion of more stores to accommodate new formats. The above announcement will be accompanied by continued cost reductions and improvements in the supply chain.