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Opinion • July 18 2004


Sainsbury and Air Malta

Throughout the years that I resided in Britain the name ‘Sainsbury’ was widely acknowledged as being synonymous with top quality for its food products, mostly under its own label, all reasonably priced and within the reach of the lower middle class. Undoubtedly, best value for money.
When entertaining friends to dinner at home one could hardly do any better than shop that very same day at one of Sainbury’s several retail outlets scattered around Britain’s largest cities and suburbia. Make sure, however, not to leave it late in the afternoon because the chances were that a number of items would already, by then, have been sold out.
I learned a lot of the company’s marketing strategy and techniques during a full week that I was there assigned in part fulfillment of my practical training requirements. The management laid on a full schedule for me, comprising briefings and discussions with high executives in the mornings and ‘working’ in five different outlets in the afternoons. At the end I could have written a dissertation, but a short report sufficed, eventually to be discussed at a mock Board meeting with my fellow course students.
Besides the impeccable cleanliness of the distribution depots which the public never had access to, Sainsbury’s strict policy was that not one single item of perishable food was to be left overnight in any of the shops’ refrigerators or returned to depots. Track was kept every two hours on the velocity of individual items’ sales which at times required replenishing and, at other times, lifting off from one store and transported (in refrigerated vans, of course) to another nearby shop running short of it. No wonder the monitoring logistics managers at the depots ranked higher in the Sainbury’s hierarchy than usually encountered in similar businesses.
Staff had the privilege of buying all unsold goods for the day at prices which could almost have been regarded as give-away. A few minutes before closing time, the retail manager would ‘consult’ with his staff regarding who would buy what and for how much, even if not necessarily for their own consumption at home. Ultimately, however, it was the manager who made the final decision, although, in effect, prices and quantities were fixed by the staff themselves in splendid agreement with each other. An auction of sorts.
Needless to say, absolutely nothing was ever left unsold. And, in the process, employee absenteeism and turnover were kept at the lowest level in the trade. When I told my landlady about this, she somehow contrived to have a neighbour’s daughter manage to be employed at a Sainsbury’s in South London. From then onwards I was able, occasionally, to benefit from cheap gammon, chicken, various salads, cheese, unsalted butter, crispy lettuce….umm..the lot. How welcoming to an impecunious student, otherwise nourished on bland, but cheap, canteen food.
You are probably guessing that I am about to draw comparisons with the food served on Air Malta planes. Wrong. Wish I did, though, considering that one lesson our national airline never bothered to learn was that, for being always the most expensive in fare rates for scheduled flights touching Malta, the least passengers expected from it was attractive fare (I like the pun!), the likes of other European airlines. Once, I asked the catering contractor why such poor showing considering it was a subsidiary of a renowned hotel group. The answer was simple - Air Malta gets what it pays for! Stinginess, probably. Even when profits were being registered.
What fascinated me most about Sainsbury as a commercial entity was the way it pioneered the frequent and timely publication of financial results, even when it was not obliged to. For whole decades, the company remained private, owned by members of the Sainsbury family. Lord Sainsbury, its chairman in the sixties, was one of very few business leaders on the left of the British political divide. When Labour was returned to power in 1964 he became one of the foremost boffins which the government regularly consulted in its endeavours to shed its past image of nationalisation-mania and transform it into an industry-friendly party. That’s where productive jobs would be created.

Lord Sainsbury paid us a visit at the School on one occasion. The toughest question fielded at him was why such a large business empire did not turn public and have its shares quoted on one of Britain’s stock exchanges, permitting the public at large to participate in its success. Lord Sainsbury’s reply was rather ambivalent
In brief: as a family-owned enterprise they were not that much concerned with their market share or even the acceleration in dividends-payout, as that might militate against retaining the loyalty of customers, hitherto steadily increasing both in numbers and in purchasing power. “One day it might be forced on us.” That is precisely what eventually occurred in the course of the following decade. Today, it is nigh impossible to make a truthful comparison with what it was four decades ago and more.
He continued: “We do, however, act as if we are already a public company: unlike many, we publish six-monthly financial results, enabling the general public to assess how our customers rate us and contribute to our improving results all round.” Today the company is a PLC and the third largest supermarket chain in the UK. Its improving profitability is, however, far from being assumed, as the introductory quotation on top unmistakably proves. Its reports are published quarterly and often in advance by way of a ‘warning’ so that no hint of any insider information could be suspected.
Interesting. But where does Air Malta feature into all this?
Well, being government-owned, it is in fact owned by you, me and everyone in Malta. We are not only stakeholders qua travellers, employees or sub-contractors, but indirect shareholders via our past taxes which set it up in the seventies and which keep it from collapsing today. And yet, it had to be a ‘most dramatic’ press conference held by its chairman and its CEO to enlighten us on the many ‘gory details’ contained in its unpublished annual report and financial statements for its last year ending, hold your breath, a year ago. And absolutely nothing for this current year about to end in a fortnight’s time, except that it hasn’t been any better, core business wise, than the previous year being now reviewed.
Can anything be more contrasting with Sainsbury’s, whose chairman, incidentally, agreed last week to resign in the wake of the reduced profitability over two successive quarters and continued contraction in market share?
It had to be a sort of political ‘force majeure’ for Air Malta finally to divulge, inter alia, that its loss for last year ending July 2003 climbed to Lm 26 million, of which nearly nine million related to its core business of transporting passengers and cargo - more than double that sustained during the preceding year. In fact it has been five years since Air Malta managed to break even in its core business.

Worse: over Lm 21 million lost during one year alone related to the disastrous purchase of the AVRO jets which were meant to turn Malta into a hub (a fantasy of someone thinking big as he looked at himself in a magnifying glass) and the subsequent, and even more disastrous, sequel of the AzzurraAir joint venture in Italy.
Any offer of resignation from anyone? Not on your nelly! Any target set for the new tandem of Chairman-CEO? We have only been enlightened on the challenges to be faced and how they are intended to be addressed, with an indication that in four years’ time from now the best we could hope for would be a mere (sic) million liri loss for that year. A stabilising annual subsidy that would not offend EC rules?
Will the public-shareholders have to wait for another four years before realising whether their airline is staying on course to achieve the projected target? Or will it, Sainsbury-like, hand out to us quarterly advance warnings if, but hopefully not, adverse deviations from the track occur? Your guess is no worse than mine.

 

 

 

 

 





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