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Tesco readies advertising blitz for low cost own-brand range

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By Jennifer Faull, Deputy Editor

October 3, 2018 | 6 min read

Four months after rebranding its ‘Everyday Value’ own-brand range to ‘Exclusively at Tesco’, the retailer revealed plans for an advertising blitz as it looks to aggressively promote the low-cost offering to stave off competition from Aldi and Lidl.

Tesco

Tesco

The own-brand range was developed with the sole intention of rivalling the German discounters, with Tesco benchmarking the price and quality of the brand against the two.

Though Tesco is only 80% complete with the overhaul - planning the addition of another 80 or so products by the end of the year – it claimed six in 10 people already have a preference for Tesco’s budget range over Lidl or Aldi.

Numbers at a glance

  • 13% year-on-year rise in group sales to £28.3bn for the first half of its financial year.
  • UK and Ireland like-for-like sales grew 3.8% in the first half.
  • Revenue grew 12% to £31.7bn.
  • Pretax profits rose 2% to £564m.
  • However, group operating profit grew 24.4% but only to £933m, missing analyst expectations of £978m.
  • Shared fell almost 9%

“We’ve made a significant investment and taken us a long time to plan for it,” chief executive Dave Lewis told analysts today [3 October] during its trading update for the first half of the year.

“We’ll start to communicate it now. You’ll see more [advertising] in the next few days, weeks and months.”

The marketing push will also see Tesco run in-store ads “calling out” the basket values for comparable products in Lidl and Aldi. It was a tactic favored at the height of the supermarket war between the 'Big Four' and German rivals, and one which retailers largely moved away from for fear of entering a race to the bottom on price that it would ultimately struggle to win.

However, the founder of shopper marketing agency Savvy, Catherine Shuttleworth, said Tesco’s U-turn was necessary.

“Price continues to be the most important factor when choosing a supermarket with convenience becoming an increasingly important part of the value equation over the past two years,” she said.

“It doesn’t come as a surprise that Tesco is reminding us through its ad campaign that it is the home of low-price high-quality own label products in the UK, as shoppers are pulling in their belts and shopping around more than ever. It’s a sensible move on its part; Tesco has made massive investments in re-defining its own-label range this year including a strong pipeline of new products so it’s no surprise it has decided to shout about it.”

Quality perception on the up

Tesco’s recovery plan – implemented in 2014 following the accounting scandal – has seen several celebrity fronted ads to talk up the quality of products and more recently its M&S food-porn style ‘Food Love Stories’ campaign was lauded by Lewis as the key to its crowning as ‘Most Improved Brand’ by YouGov.

The chief exec’s confidence that shifting to promote products with the lowest prices won’t dent its recovery to be seen as a 'quality' retailer is rooted in what he dubbed the “stable value perception” it has achieved. Lewis claimed the quality perception of Tesco since it hit a low four years ago is now up 3.6 points and continuing to grow [see graph below].

“In 2014 trust in the brand was zero. The gap between Tesco and the average of competitors was a significant weakness in the business proposition,” he said, calling out the efforts of chief customer officer Allessandra Bellini since she joined 18 months ago as key to its revival.

“We’ve worked hard and there’s a number of things that have built the perception. We’re at a point where we’ll see the fruits of a plan that’s been three years in the making.”

Tom Moore, head of retail and shopper and marketing agency Geometry Global, said Tesco has had great success with Food Love Stories in rebuilding its credentials around food quality and giving people reasons to come in store. But he warned that with the new advertising tactic in the lead up to Christmas, “the key for Tesco as it continues to fight discounters will be to balance the value message with quality”.

“It needs to ensure against eroding the excellent quality credentials it has fought hard to rebuild,” he said.

tesco

Cannibalisation?

The overriding concern will be whether the ramped-up focus on the ‘Exclusively at Tesco’ line will stunt the growth of its core Sainsbury’s-rivalling, own-brand range. It makes up the overwhelming majority of products on shelves (over 4,000 compared to 400).

“We have an assumption to what the impact from communicating [Exclusively at Tesco] will be but the critical thing for us is positioning the offering for customers that is best value,” said Lewis.

“We have an assumption of what will happen to the category and our predictions of what the cannibalisation would be has not been too bad at all. So, we’ll see in the second half of the year, but I’m very confident of the plan we have.”

And then there’s the impact it might have on the Jack’s brand – set up as a separate entity with the same intention of drawing customers away from the discounters. However, analysts warned not to get hung up.

Shuttleworth said: “This won’t be a major impact on Jack's given that there are currently only four stores in discreet locations. There are on the other hand over 3,000 Tesco stores across the UK and communicating value and quality has to be at the heart of their comms strategy.

“In terms of cannibalisation, as Lewis said at the launch of Jacks, it’s better to cannibalise themselves than let someone else take their shoppers.”

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