J Sainsbury has paid £60m to Canada’s Aimia to buy the Nectar loyalty scheme that replaced the British grocer’s own reward card 15 years ago, underlining the strategic importance that big brands now place on data-rich subsidiaries they once saw as lucrative spin-offs.
Launched in 2002, Nectar combined the loyalty card schemes of four UK high street giants into a single vehicle formed by Sir Keith Mills, the entrepreneur who had earlier founded Air Miles.
But both the Canadian airline and the British retailer have since thought better of deals that involve ceding so much customer data to an outside company.
Air Canada announced last year that it would bring its travel rewards scheme back in-house from 2020, stripping Aimia of the loyalty programme that had been the company’s genesis.
On Thursday, Sainsbury’s said it was taking back Nectar to support its “strategy of knowing its customers better than anyone else”.
Britain’s second-biggest supermarket chain is still absorbing Argos, the furniture-to-electricals chain it bought in 2016 as part of its plan to move beyond big-box grocery stores.
Sainsbury’s is opening hundreds of Argos concessions inside its big stores, often shutting down nearby standalone locations to save on rent.
Amount Aimia is paying to cover liabilities related to outstanding Nectar points
Ahead of the transaction Sainsbury’s used data from Nectar, in which Argos was also a participant, to estimate how many customers the two groups had in common.
The retailer also uses data on consumers’ shopping behaviour to inform underwriting decisions in its insurance business, after discovering that people who buy reusable carrier bags are less likely to be involved in a car crash.
But Aimia said that the supermarket’s increasing range of products had made it harder for Nectar to operate independently of the retailer that issues the most points and provides the most rewards.
“The evolution of the Sainsbury’s group has led to more limited prospects for Nectar to add new non-competitive partners of scale,” the Canadian group said in a statement.
Sainsbury’s said the transaction would be immediately earnings accretive and would contribute cash, since Aimia is paying £105m to cover liabilities related to outstanding Nectar points.