City fears Sainsbury board split: Falling sales put heat on deputy chairman

SIGNS of a serious rift have appeared in the J Sainsbury boardroom. Tom Vyner, the deputy chairman and number two to David Sainsbury, is looking increasingly isolated over a pricing strategy that is regarded as a flop in the City.

Senior executives in Britain's biggest and most profitable supermarket group are hotly debating how to improve the 'Essential for the Essentials' price-cutting campaign.

One food retailing analyst said: 'Privately, most of the senior management view Essentials as a failure. The only person not to view it as a failure is Tom Vyner. That's what's worrying.'

That impression was echoed by other analysts, and by a source close to senior executives who said: 'There is certainly a view in senior management that Vyner didn't get it right, and then didn't recognise he hadn't got it right.'

Morale at the top of Sainsbury is low, as the company seeks to axe 650 jobs from its London head office and area offices. Black-humoured wags have dubbed the Genesis project to reduce headcount 'Exodus' as they await redundancy letters.

Shareholders, whose investments have plunged in value by a third in the past year, fear the management has been distracted from the business of running the shop. The shares fell 25p to 363p last week.

One analyst said: 'There are some very sore nerves in the company. Sainsbury isn't accustomed to failing.'

Mr Vyner, who is in overall charge of buying, merchandising and marketing, was the chief architect of the Essentials campaign, launched last November to counter growing competition from rivals. Prices were cut on about 300 staple own-label items.

However, in mid-January the company conceded that its underlying sales had fallen by 1 per cent and its gross margin had shrunk by 0.4 per cent. By contrast, Tesco's sales were rising by 4 per cent.

Sainsbury said the decline was partly due to a very strong performance in the prior year and asked sceptics to give the campaign more time.

Some Sainsbury executives are concerned that the campaign has not been focused sufficiently on winning customers from rival shops. Another in- house criticism is that the advertising was half-hearted, failing to stress the discounts on offer.

There is growing pressure for a more aggressive marketing campaign. This could come as early as this week, as Sainsbury launches its offensive for Easter - one of the busiest weeks of the year.

Despite the internal doubts, Sainsbury is showing a united front. In a letter to the magazine Marketing Week, Ivor Hunt, the new marketing director, defended the campaign: 'Scanning technology in all our stores enables us to gauge very accurately the impact of any new initiative, and it is quite clear from our analysis that the Essentials programme is succeeding. There is no question of our dropping it.'

Mr Vyner is joint managing director with David Quarmby. Both have been well regarded in the City - Mr Vyner as the instinctive trader, Mr Quarmby as the more cerebral planner.

Mr Sainsbury, who became chairman and chief executive in November 1992, allows a greater variety of views in the boardroom than his autocratic predecessor and cousin, Lord Sainsbury. But the democratic style has led to more open dissent.

Sainsbury declined to comment.

(Photograph omitted)