Sainsburys is paid £100m to take control of Nectar by its Canadian owner

Sainsbury’s has taken over control of Nectar from its Canadian owner Aimia.

Over the last few years Nectar has lost partner after partner, with Homebase and British Gas the latest to exit.  If Sainsbury’s had walked away then Nectar would, literally, be worthless.  I think it was clear to everyone that the business could not keep going in its current state with Sainsbury’s providing almost all the customers but not owning the business.

Sainsbury’s seems to have negotiated a very good deal for itself, but then again it was in a very strong position:

Sainsbury’s is paying £60m to Aimia for Nectar

…. but Aimia is paying £105m to Sainsbury’s to account for the number of unredeemed Nectar points in circulation

…. plus a further £55m to Sainsbury’s as a ‘net working capital adjustment’

Depending on how you treat the working capital adjustment, Sainsbury’s has therefore been paid either £45m or £100m to take control of Nectar.

What does this mean?

Sainsbury’s obviously has to cover the cost of future Nectar redemptions, but if points are spent instore it is really just handing money to itself.

The £105m Aimia paid for unredeemed Nectar points is meant to cover outstanding redemptions but Sainsbury’s might try to minimise how much it has to spend.  One way of doing this is to change the redemption rate, encourage redemptions for Sainsbury products with high profit margins or kick out other redemption partners to increase in-store use.

But ….

If you have a stash of Nectar points, don’t worry about spending them quickly. They are totally safe for now and hopefully Sainsbury’s will not make the same mistake Tesco made a few weeks ago when they introduced changes without a notice period.

What should the industry learn from this?

Loyalty schemes with revenue based redemptions do not work.

We’ve mentioned this here on Shopper Points many times, but Tesco’s Clubcard is simply more fun than Nectar.

It starts with in-store spending (and we never encourage this). 1 Clubcard point is worth 1p, 1 Nectar point is worth 0.5p.

With Tesco Clubcard you have a huge selection of redemption partners where you can get more for your points. Even with the upcoming changes from 4 x face value to 3 x face value, you can still get £15 worth of Uber credit for 500 Clubcard points. The best thing you can do with your Nectar points is redeem them for a Gourmet Society membership and get 2p value per point.

The other issue is that almost all Nectar offers are targeted. Very few are open to all. This is frustrating!

And lastly Nectar points are simply a form of cashback that involves effort to redeem. Let’s be honest. If  Sainsbury’s was offering 100 bonus Nectar points with a certain product, we would just get annoyed because it would be easier to just knock off 50p upfront then having to swipe your card to then spend the 50p next time.

What’s next?

Let’s hope that Sainsbury’s is willing to be adventurous and bring in more exciting redemption and earning options!

If you want to know more about the sale, the details are in this press release.

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Do you earn Clubcard or Nectar points from your credit card?.  If not, you're missing out. We review the best options in this article.

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Comments

  1. I’ve always regarded Nectar as total rubbish for a so called ‘loyalty’ scheme. I usually end up with enough for a bottle of Gin each Christmas.

  2. My Nectar card gave me £65 towards my Christmas shopping this year so I am happy with it, I shop in Sainsburys, Aldi and Asda and therefore have no other way to gain loyalty points for my weekly shop and I don’t want Tesco home delivery. My point is Nectar works for me 🙂

  3. Where are the best places to spend nectar points, to get the most out of them?

  4. Edward Noel says:

    “Sainsbury’s seems to negotiated a very good for itself” – it’s a game of guess the missing words.

    • Oops the missing words are ‘have’ and ‘deal’. I think I changed the sentence at a later point and then didn’t check it properly

  5. NectarNoMore says:

    The article on HfP prompted me to look at the back of my Sainsbury’s till receipt for the first time in years (actually, I rarely shop there).

    There were a few thousand points, which was nice.

    I then had a trawl through the various redemption offers but frankly couldn’t find anything very exciting…

    …so I cashed the majority of them in for £30 of my shopping and considered it a score draw.

    Have now taken the Nectar tag off my key ring as I don’t remember the last time I swiped it 🙁

  6. Gourmet Society are no longer part of Nectar since December 2017

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