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Sainsbury’s New CEO to Hold Course in Scrap With Discounters

J Sainsbury Plc (SBRY)’s new Chief Executive Officer Mike Coupe said the grocer will stick to its focus on fresh produce and upscale food in a fight with discounters, which have been gaining market share in the U.K.

“It’s a story of continuity,” Coupe, who succeeded Justin King as CEO today, said after the company’s annual shareholder meeting. “The reason people shop with us is they get a better quality product underpinned by values of the business. We have also improved our price competitiveness.”

The U.K. grocery market is polarizing, with discounters Aldi and Lidl and upscale Waitrose recording the fastest growth. Under Coupe, Sainsbury will target both ends of the spectrum: focusing on fresh produce and premium own-brand food and also entering the budget store market by bringing Netto back to Britain.

“The Netto deal just gives us more options,” Coupe said. “It’s a growing part of the market that we believe will continue to develop.”

The grocer said June 20 it had joined forces with Netto’s Danish parent company Dansk Supermarked to open 15 stores by the end of 2015.

Coupe’s predecessor, King, had a nine-year record of unbroken sales growth that ended two quarters ago after discounters prompted the likes of Tesco Plc (TSCO), Asda and Wm Morrison Supermarkets Plc (MRW) to cut prices.

Sainsbury shares have dropped 18 percent in the past 12 months, while Tesco declined 19 percent.

Growing Again?

King said June 11 he expects same-store sales to return to growth this year. Sainsbury’s market share was 16.7 percent in the 12 weeks to June 22, with sales increasing 3 percent, outperforming the market which expanded 2.8 percent in that period, researcher Kantar Worldpanel said July 1.

At today’s meeting, King received a standing ovation and Sainsbury President John Davan Sainsbury praised him for turning the business around.

He declined to comment on his future plans, except to say that a non-compete clause prevents him from working for a Sainsbury competitor for a year and he will honor that, when a shareholder asked him if he could help improve business at Marks & Spencer Group Plc.

For now, King is off to Brazil for the soccer World Cup final where he hopes Germany will play Argentina on July 13. Argentina meets Netherlands in the tournament’s second semi-final today after Germany yesterday eliminated host nation Brazil.

To contact the reporters on this story: Gabi Thesing in London at gthesing@bloomberg.net; Alexa Liautaud in London at aliautaud@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net Thomas Mulier, Paul Jarvis

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