Jan. 30 (Bloomberg) -- Mike Coupe has been instrumental in making life difficult for Britain’s supermarket leader Tesco Plc. In his new position as chief executive officer of J Sainsbury Plc, he may have the tables turned on him.
Coupe, 53, was yesterday named as Justin King’s successor as the Sainsbury CEO bows out after a decade at the helm. The two men joined within months of each other in 2004 and together engineered a revival that has closed the gap on Tesco.
After two years in the doldrums, the industry leader is fighting back. By placing a greater emphasis on quality and reducing prices, Tesco will try to beat Sainsbury at its own game this year, according to Bryan Roberts, an analyst at Kantar Retail in London. Sainsbury also has to contend with the relentless expansion of discounters such as Aldi and Lidl.
“The main challenge for Coupe is that Sainsbury is firmly in the crossfire of a recovering Tesco,” Roberts said. “Tesco will throw money and effort at it this year. The big worry for everyone in the market is Tesco’s scale and the depth of Tesco’s deep pockets is really intimidating.”
The market leader has already spent more than 1 billion pounds ($1.7 billion) revamping stores, training staff and putting upscale Harris & Hoole coffee stores and the Giraffe chain of family restaurants into its larger hypermarkets.
Now, analysts such as Dave McCarthy at HSBC, would like to see Tesco boost its investment in prices to defend its weakening market share. With a U.K. operating margin of 5.2 percent, compared with Sainsbury’s 3.5 percent, Cheshunt, England-based Tesco has more room to maneuver than its smaller rival.
“The next few years look like being tough for the sector as Tesco looks to be girding itself to fight back,” said John Kershaw, an analyst at Exane BNP Paribas in London. “Justin knew that, and after a successful decade at the helm, likely thought it opportune to hand over the reins now.”
Sainsbury cut its full-year sales outlook this month and Coupe said yesterday that the market is the toughest he’s known.
The shares fell 2.3 percent to 348.5 pence at the close of trading in London.
King, 52, will sign off after July’s annual general meeting, Sainsbury said yesterday, ending more than a year of speculation over his future.
The CEO said on a conference call that he’s not spoken with anyone about another job and has a clause preventing him from joining a competitor for 12 months after he leaves. He also damped speculation that he may be interested in running the Formula 1 motor racing series. A spokesman for Formula 1 owner CVC Capital Partners Ltd. declined to comment.
“This was not an easy decision for me to make, and in truth it will never feel like the right time to leave a company like Sainsbury’s,” King said in a statement.
Coupe, the commercial director, had been said to be King’s most likely successor since at least 2012.
“Mike is a very seasoned executive and while he may not have Justin’s charisma, he has helped sow the seeds of Sainsbury’s success,” said David Gray, an analyst at Planet Retail in London. “The strategy is likely to stay in place, it will be tweaked to head off the challenges.”
King has presided over 36 consecutive quarters of growth in same-store sales at Sainsbury, helped by a focus on fresh food and food provenance -- which stood the retailer in good stead during last year’s horsemeat scandal -- and the addition of lines including the premium Taste the Difference range.
Still, growth is weakening, with the 0.2 percent increase in the most recent quarter being the slowest in nine years. All Britain’s main grocers are losing market share as customers turn to Aldi and Lidl and the upscale Waitrose chain.
King’s departure “will be an understandable disappointment to Sainsbury shareholders,” Clive Black, an analyst at Shore Capital, in Liverpool, England, said in a note. Still, the appointment of Coupe “represents continuity,” he said.
Coupe has been group commercial director since 2010, overseeing trading, marketing, information technology and online operations. He previously worked at both Tesco and Wal-Mart Stores Inc.’s Asda chain.
Said by colleagues to have a fanatical obsession for detail, Coupe describes himself as a “keen, but average guitarist.” He also enjoys photography and has cycled from London to Paris twice for charity.
In his new role as CEO, Tesco’s revival efforts may be one of the main drains on his spare time.
“If Tesco can push the right buttons on quality and service then Sainsbury arguably has the most to lose,” said Kantar’s Roberts.
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