The shock news coming from Tesco this week – yet another profit warning and a revolving door at CEO level – reinforces previous comments in MAA on the huge challenges facing juggernaut bricks and mortar brands in a changing world.
Some time ago I talked about the ‘Brand Iceberg,’ a reference of course to the Titanic – briefly regarded as unsinkable. Tesco has been in a choppy sea for some time and many experts, in the City and elsewhere, believe it is a brand losing its relevance, or positioning, whilst other brands were chipping away. Eating Tesco’s lunch so to speak.
As we all know the UK grocery market is in three groupings; the added value brands of Waitrose and M&S, the price fighting brands of Aldi and Lidl, leaving Tesco, Sainsbury’s, Asda, Morrisons, and the Co-op all in the crowded middle market. To make it even more confusing, Lidl is introducing £40 bottles of wine to go after the Waitrose customer.
Where will all this end?
Dave Lewis (left), the new CEO of Tesco, is a high flyer from the world of Unilever with a reputation for commercial and brand success. On his very long ‘to-do’ list when he arrives in October will be ‘what is the Tesco brand?’ today and tomorrow, not yesterday.
This is a bit of a club at the moment with M&S still trying to figure this out with their clothing business in decline and also at Morrisons for different reasons. These are juggernauts with massive capital costs that are stubbornly fixed, making nimble footwork very difficult.
The difference for Dave Lewis is at Unilever he can change the packaging on Dove fairly swiftly using the same production asset whereas at Tesco the production asset is an over-supply of retail property. Quite a different set of challenges.
In all the work I do with client companies I find it rare for the organisation in question to have its radar switched on to future trends – the iceberg again. I suspect the average member of the public can sniff a problem before the company concerned accepts there is a bad smell in the room. M&S must be the perfect example on the non-food side. I have heard females of all ages saying for years that M&S has lost the plot.
This point came home to me many years ago working on Rolls Royce cars. After doing our due diligence we presented our findings to the board including a summary of the end buyer profile; this was basically rock stars, footballers and scrap metal dealers. One board member nearly choked and said “we don’t sell cars to those kinds of people.” Time to wake up and smell the coffee.
They were living in the past and hadn’t a clue about the forward view of their business. Obviously they all retired at the earliest convenient moment.
I don’t have a complete answer but one ingredient in this complex mix is, in my humble opinion, the need to be liked as a brand. In my sheltered world people like Waitrose and they go out of their way to shop there. One brand that seems to grasp this emotional element is Aldi.
Their advertising is funny, warm, a bit irreverent and clear. I’ve seen the 69p TV spot several times and I just smile and get the message. Tesco advertising doesn’t pull off these attributes in my book, leaving me a bit ‘so what?’ I’m sure agency Wieden + Kennedy can pull a giant rabbit out of the hat for a new boss who is a brand professional.
I just hope he gives them the chance.