In the grocery trade, it is the best of times and the worst of times. Nowhere is that better reflected than in the differing fortunes of Sainsbury's and Waitrose, the two stores which have traditionally fed Britain's middle classes. Sainsbury's finds itself languishing on the shelf alongside the dented tins past their sell-by date, while Waitrose is preening itself in the shop window.
Fifteen years ago Sainsbury's was top dog. It had the biggest market share and a loyal customer base. It had the best-positioned stores. It had the buying clout. It made the biggest profits. It also had the advantage of a stock-market quotation, enabling it to raise huge sums for more superstores. It even had the good fortune to have a friendly family with a dominant shareholding and therefore had no need to worry about pesky predators.
Waitrose, on the other hand, was an also-ran. It was small and barely registered with the big suppliers. It had neglected its infrastructure for years. Worst of all, Waitrose had no easy access to capital. It was part of the John Lewis Partnership, a worker co-operative. There were no outside shareholders to tap and only modest profits to be reinvested.
Today, Sainsbury's trails both Tesco and Wal-Mart-owned Asda. And William Morrison, which has just gobbled up Safeway, is now snapping at its heels. Sainsbury's has just had to admit that its underlying sales are falling - and that its profits will soon be, too. The confession came hot on the heels of an almighty boardroom balls-up. Sainsbury's was forced to annul the planned appointment of Sir Ian Prosser as deputy chairman (and eventual chairman) after a ferocious City revolt.
Waitrose, meanwhile, is prospering as never before. Its underlying sales are powering ahead. It has just announced the annual staff bonus (the equivalent of the dividend), which this year is 12 per cent of salary. That means an extra £1,200-£1,400 for thousands of checkout operators. And it is celebrating a coup - snaffling a portfolio of supermarkets from under the nose of Sainsbury's.
Waitrose refuses to say how much it paid for the stores, which William Morrison has been forced to sell by the competition authorities as a condition of the Safeway deal. But it cannot have got much change from £200m. For any worker co-op, that is serious money.
John Lewis had one bit of luck. It had just offloaded its store-card business in a move that buffed up its balance sheet. But it is also now of a size where it is taken seriously anyway in the capital markets. It relies on bonds - easily tradeable securitised debts - to finance itself, and has about £450m outstanding.
Sainsbury's, meanwhile, remains mired. Shareholder hopes are resting on the untested shoulders of Justin King, a former food whizz-kid with Marks & Spencer. He began work on 29 March, succeeding Sir Peter Davis, who has controversially stepped up from chief executive to the post of chairman. Davis's costly three-year capital modernisation plan has yet to pay off. King is expected to push Plan B: cutting prices.
It's all very unfortunate for Lord Sainsbury, the science minister, who is still by far the biggest shareholder in the company. A man more interested in politics and philanthropy than beans and price points, he never looked happy when he was in charge in the early 1990s - a period that coincided with the start of the group's decline.
Sadly, he appears to have done no better by taking a back seat. He owns his stake through a "blind trust" (though, as I have argued before in these pages, it's not blind). But that disconnect between owner and management has perhaps meant that the executives have not been under as much pressure as in a normal publicly listed company.
Lord Sainsbury and his relatives, who still control 38 per cent of the business, look like ineffectual absentee landlords - their hedgerows neglected and their gillies out of control. They may find consolation in the £260m of special dividend cheques about to land on their doormat. (Sainsbury's - in a desperate move to placate the City - has flogged its North American assets and is returning some of the proceeds to its shareholders.) I wonder how things would have panned out if some long-dead Sainsbury had copied the pioneering John Spedan Lewis and handed the business to his workforce instead of keeping it in the family?
PS: If you want a piquant irony, look no further than Canary Wharf, the citadel of shareholder-style capitalism. Thousands of investment bankers, brokers and dealers, many of whom probably think of a worker co-op as a bunch of idealistic, inefficient sandal-wearers, queue up to buy their Burgundy and parmigiano reggiano at the best supermarket for miles - a particularly swanky Waitrose.
Patrick Hosking is deputy City editor of the London Evening Standard
