Operating Review

• 1
• 2
• 3
• 4
• 5
• 6
• 7
• 8
• 9
• 10
• 11
• 12
• 13
• 14

Strong supplier relationships – sourcing with integrity

We enjoy strong and balanced relationships with suppliers and share the same aim to deliver innovative, high-quality products at fair prices for our customers. In November 2006 we announced an industry first with the launch of a new payment management system that makes it easier and quicker for suppliers to access account information and gain early payments. The system is in the early stages of a trial and will be rolled out during the current financial year. Suppliers can view their trading account online, including invoices, debit notes, remittance advices and payment dates. This gives them much better visibility of their expected cash flow. Early cash settlements can also be made if suppliers opt to sell their invoices, via the new system, to a third party financial institution.

In May 2006 we launched our ‘Supply something new’ programme where managers meet new suppliers in the search for high quality and innovative, locally produced food for customers to enjoy. Eight events have been held to date resulting in the appointment of over 20 new suppliers. This year we also appointed 12 regional managers who are responsible for developing our regional sourcing programme and supporting and expanding the 3,000 regional products we already sell.

In October 2006 we introduced the Sainsbury’s Dairy Development Group, working with around 400 dairy farmers to supply all 420 million litres of conventional milk bought by our customers each year. We believe the market is best served by initiatives that connect farmers directly to consumers. For example, our Farm promise milk, launched in April 2006, gives farmers a fair premium and makes a contractual commitment to support farmers converting to organic milk production. Through this and other initiatives we will pay a £10 million premium directly to farmers each year.

We are extending this approach into other areas of agriculture. We set up a Lamb Partnership in Livestock scheme in September 2006, for example, and are in the process of developing a similar approach with pork suppliers. In January 2007 we launched ‘Farm Connections’, a scheme that provides 700 Taste the difference beef farmers with computers, software and training. This means they can compete in the market and be better informed of industry matters and production costs. So far over 500 farmers have signed up.

We have built up innovative sustainability plans supported by the Marine Conservation Society, and we were the first retailer to sell Marine Stewardship Council (“MSC”) cod from a sustainable source. This was just one of many industry firsts we have achieved in fish. We sell the largest range of MSC products and none of the fish we sell is ‘red-rated’ (based on a colour rating system). We are also working to achieve a green rating for all the fish sold in our stores. We started selling 100 per cent line caught cod and haddock this year and we are the largest retailer to do this. As one of the UK ’s leading fishmongers, taking the lead on such important issues has an enormous effect on the fish being eaten in the UK.