The Lowdown: The chief of Oliver's army goes into battle

An uninformed observer might be forgiven for thinking that Jamie Oliver runs J Sainsbury. His face is plastered over lots of the goods in Britain's second-largest supermarket chain and he features in all its TV advertising. Sainsbury's even claims he was responsible for a fifth of the company's sales last year ­ £153m in straight profit.

In fact, the man in the hot seat is Sir Peter Davis, who could not be more unlike the scooter-riding "mockney" chef. Sir Peter is twice Oliver's age, probably twice his size and talks with a cut-glass accent, courtesy of his public-school education at Shrewsbury.

While Oliver appeared to be a soft touch when setting up a charity restaurant in the TV series Jamie's Kitchen, Sir Peter is a far tougher character. A former employee remembers seeing him reduce a junior staffer to tears with one of his tirades. "He has a quick mind and he's frustrated that other people don't get it, and he doesn't hide that well," says the ex-employee.

Sir Peter does not shy away from his hard-man image. "My wife thinks I'm soft, but that may be when I get home," he told The Independent on Sunday in an interview conducted after he pitched Sainsbury's into the £3bn battle for Safeway, the UK's fourth- biggest supermarket group. But he now faces a challenge that dwarfs Oliver's task to turn 15 unemployed youngsters into top chefs.

The Yorkshire-based Wm Morrison was the first of the supermarkets to go shopping for Safeway. It made an audacious bid to take over its larger rival with an all-share offer now valued at around £2.5bn. Fear of a big group of stores being handed to an up-and-coming rival then prompted not only Sainsbury's but the industry's number three Asda, owned by the US giant Wal-Mart, to come out fighting. Asda won't yet name a price but Sainsbury's has put £3bn on the table, although this may change once it has had a good look at the Safeway books. And by the end of the week a fourth bidder had emerged, the private equity giant Kohlberg Kravis Roberts.

The tricky bit for Sir Peter is that the regulators have already shown a distaste for the big chains, such as Sainsbury's and Tesco, and may not be too keen on seeing the number two operator increase its power.

In 2000 the Competition Commission launched an investigation to see if the supermarkets were squeezing farmers and food manufacturers on prices and not passing the benefits on to the consumer. It found little evidence of profiteering, although a code of conduct to regulate supermarkets' behaviour was welcomed. Now the Office of Fair Trading must decide whether it will refer the three Safeway bids to the Commission. The fears of the suppliers will be taken into account (see the article below).

However, another equally pressing problem for Sir Peter is that his company's sales growth is slowing, along with that of his rivals, amid tough competition in the industry.

Over Christmas, Sainsbury's reported a 4 per cent increase in sales, although when petrol prices are taken out of the equation and the figures adjusted to be a strict comparison with the year before, the rise is only 1 per cent. Even including fuel, Sainsbury's showed the worst performance of any of the supermarket big four, with the ironic exception of Safeway. Asda's sales rose 8 per cent.

Despite a major refurbishment of Sainsbury's stores, the introduction of the Nectar loyalty scheme, and (of course) Jamie Oliver, Kien Tan, an analyst at Crédit Lyonnais, says: "There is no question that Sainsbury's performance over Christmas was poor."

But Sir Peter defends the performance, pointing out that the company is in the middle of its restructuring programme, which involves disruption to its computers, customer desks and back- office systems. "We are also determined to deliver better profits and margins," he says. "We are trying to do three things: increase sales, increase profits and complete the restructuring."

The performance is also compared to a very strong Christmas in 2001. "We increased our sales [compared to] our best- ever sales the year before," he adds.

Although sales growth has not been spectacular, Sir Peter has efficiently cut costs, and last year's underlying profit was up 14 per cent to £627m.

However, slowing house prices and a jittery economy could be persuading shoppers to go for the cheap option. "As consumer confidence begins to wane, consumers want more value for their money rather than the Sainsbury's offer of quality," says Chris Gower, a retail analyst at Lehman Brothers. "Sainsbury's needs to start to invest more in price, and move further away from the position that it is at the higher end in terms of price, in order to compete with the likes of Tesco and Asda."

Sir Peter points out that its upmarket ranges have been performing well, contradicting the view that consumers are put off by the higher prices. "Things like Taste the Difference [a premium range] had a record performance," he says.

The concerns sound familiar to those expressed in the late 1990s, when the company lost sales and profits and pundits declared it had gone too upmarket and driven away mainstream customers.

When Sir Peter was brought in as chief executive in 2000 to stem the decline, he was returning to a company he had left 14 years before when he was deputy chief and had been passed over for the top job. "I've been in the game a long time, although I went off to play in publishing and insurance for a while," he says. "I've always wanted to run a large company." Long spells as chief executive of the publishing giant Reed Elsevier (where he was kicked out after masterminding an Anglo-Dutch merger) and the insurer Prudential (where he famously fired the head of the group's largest division and backed the launch of online bank Egg) kept him busy until he was brought back to Sainsbury's.

Sir Peter's background was in marketing, a skill for which he still earns applause. Former colleagues say he loves to rebrand and revamp. He is also known for liking a change of scene. At the Pru he moved the headquarters, and at Sainsbury's the company decamped to a site in the City at the peak of the property cycle in late 2000, with spectacular plans to build large towers at its old Stamford Street site in south London and move back in, although these were dropped after 11 September.

He is also intensely political. He declared himself a supporter of New Labour shortly after the 1997 election, was invited to chair the Welfare to Work initiative and is close to Derek Higgs, the former merchant banker who runs Partnerships UK and will next week publish his government-sponsored review of corporate governance.

But Sir Peter lacks the grit and hands-on image of, say, Sir Terry Leahy at Tesco or Sir Ken Morrison. "He's very good at marketing the company, very good at delivering an image and the quality position of Sainsbury's," says one analyst. "But Tesco and Morrisons are far more hands-on than Sainsbury's. The perception that [Sainsbury's] is more interested in marketing, and not a true grocer, can be a huge negative point."

Sir Peter didn't get to be chief executive of a household name by courting popularity. But he'll need all the cheeky charm of Jamie Oliver if Sainsbury's is to end up a winner in the battle for Safeway.