Sainsbury's looks to China for growth

Sainsbury's is looking at plans to open stores in China that could see it go head to head with Tesco in the fastest-growing grocery market in the world.

A move into China would mark Sainsbury's first overseas foray since it sold its ill-starred US business, Shaw's, in 2004.

Sainsbury's is understood to have sent a team of executives to China to assess whether the supermarket group should open a chain of stores in Beijing and elsewhere in the country.

Tesco has already drawn up plans to open 80 giant 37,000 sq metre Lifestyle malls in China.

Sainsbury's said the project was more a feasibility study at this stage. A spokesman said no firm decision had been taken about China, but he added: "We are looking at all the options."

Sainsbury's announced in June that Darren Shapland, its group development director, would study the possibility of overseas expansion as part of his role.

If the supermarket opens stores in China, it will also face competition from French rival Carrefour and Wal-mart. Both groups have spent nearly a decade building Chinese operations.

Sainsbury's posted an easing in sales in its last interim update in June, with like-for-like sales excluding petrol slipping by 1.1% in the 12 weeks to 12 June. The supermarket has identified non-food sales and smaller convenience-style stores as key areas of growth. It remains on track to open 135,000 sq metres of new space during the current financial year as competition for shoppers intensifies.

Elsewhere in the sector, Waitrose has announced plans to take on rival Tesco by matching its prices on 1,000 branded products. The supermarket said the move, which starts tomorrow, follows strong growth in its own-branded goods, which were launched in March 2009 and now make up 17% of sales.

Waitrose said products in the price-match range included food staples such as Heinz baked beans and household basics such as Persil. Analysts said Waitrose's margins would have to take a hit to roll out the plans.

Price match items will be monitored twice a week to ensure they are kept in line with the commitment to match prices at Tesco, Waitrose added.

The move comes at a competitive time in the food retail sector, with products such as bread and milk being discounted despite rising commodity prices.

Tesco, Asda, Sainsbury's and Morrisons cut the price of a sliced white loaf last month to about 30p from 47p, despite wheat being up to 60% more expensive than three months ago.

Waitrose posted group sales of 4.5bn in the year to the end of January, a 25% increase over the past two years. The company said some of the improvement was due to the signing of chefs Delia Smith and Heston Blumenthal to promote the supermarket on TV and with recipe cards. The promotion attracted 370,000 new customers in the first eight weeks.

Online grocery sales climbed 54% and are likely to grow faster next year when Waitrose competes with home delivery specialist Ocado inside the M25.