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Sainsbury's Finds Middle Ground

Sometimes it seems that all we ever hear about British food retailing is Tesco, Tesco, Tesco.

But there are some other successful players over there, and the chief executive officer of one of them, Sainsbury's, described at the CIES World Food Summit in New York this morning how that company achieved a turnaround by focusing both on low prices and on innovative products that appeal to higher-end shoppers.

"We ran an ad for entry level own-brand products one week, and the next we ran an ad for our 100% cage-free eggs," said Justin King, Sainsbury's CEO.

Although he said the chain has had a reputation for high prices, the key is to get customers in the store and then have them see for themselves that they can find good deals.

He attributed the company's recent turnaround, launched in 2004 with the internal slogan "Making Sainsbury's Great Again," to Sainsbury's effective use of private label and an effort to stay true to the chain's 140-year heritage.

Sainsbury's, which operates 502 traditional supermarkets and 290 c-stores in the U.K., puts a modern twist on its legacy of innovation by striving to incorporate social sustainability and "green" themes into its offerings.

Some examples cited include:

* Switching its own-brand-tea, called Red Label, to Fair Trade, using the same supplier it has worked with for the past 103 years. King described it as "the biggest Fair Trade switch in the world."

* Switching to 100% cage-free eggs. "It's true that we British care a lot more about animals than we do about people," he quipped.

* Switching to 100% Fair Trade bananas, which involved transferring the entire crop produced by the Windward Islands to Fair Trade, and earning King a bear hug from local officials when he visited.

Those initiatives are balanced with aggressive price promotions, such as "Feed Your Family for a Fiver," promoting meal deals, and "Switch and Save," touting private labels.

Although it seeks to appeal to a different consumer in the U.K., Sainsbury's offers some lessons for U.S. retailers. Innovation and quality can co-exist quite nicely with affordable offerings when the right consumer hot buttons are pushed.