It’s fashionable to be disparaging about Tesco as it struggles to regain market dominance in the UK and sheds overseas holdings like leaves in Autumn. But, it continues to be one of the most innovative grocers in the world. Notwithstanding the trade’s schadenfreude associated with its current problems, the sincerest form of flattery is imitation and Tesco initiatives have been and still are copied by retailers around the globe, not least in private label.
Tesco’s founder, “Slasher” Jack Cohen, built a grocery business piling it high and selling it cheap. But it was commercializing a three tier “Good, Better, Best” private label offer that helped propel the company to international stardom. Tesco finest* is a hugely successful premium brand in the UK. Other initiatives, like its venture brands, such as Chokablok confectionery (exclusive to Tesco and, often, competing with premium fmcg products), and tertiary brands as a defensive ploy against the hard discounters (launched in September 2008) have seen only mixed success – food doing rather better than non-food skus. Most recently, and controversially, Tesco has introduced a range of faux brands largely as substitutes for its entry level Everyday Value fresh produce and meats. Why the kerfuffle in the press? Well, the faux brand names have a distinctive and very British bucolic ring to them – Rosedene Farms, Nightingale Farms, Boswell Farms, Woodside Farms – get the picture! But the farms are fictional and the fresh products under their umbrella are from a wide range of countries, not just the UK. This sticks in the craw of British farmers, food evangelists, journalists and some consumers.
What is Tesco up to?: doing what comes natural to retailers worldwide – simply copying its competitors (it’s in their genes!) – in this case, the hard discounters Aldi and Lidl. These two have used fictional farm names for years for their fresh foods and received nary a hint of criticism: exclusive faux brand names such as Ashwood Farms, Birchwood Farms, Broad Oak Farms and Strathvale Farms litter their fresh produce and meat aisles around the English-speaking world (e.g. Aldi uses its Broad Oak Farms label in the USA and Australia, too).
Originally making their names from selling ambient and frozen foods at hugely attractive discount prices, these scallywag retailers turned their attention to fresh foods with considerable success. Kantar UK data shows that both Aldi and Lidl over-index on fresh fruit and vegetable sales. Aldi’s Super 6 fruit and vegetable weekly offer has been spectacularly successful. Tesco is saying to its present and lapsed customers “you don’t have to go to Aldi and Lidl for jaw-droppingly low-priced quality fruit and veg., we’ve got it here”!
First of all, why does Tesco take stick from the press and not Aldi and Lidl? If you’re Number 1 in any market, then, it comes with the territory. You’re the nut on the coconut shy – just ask the likes of McDonalds! Secondly, was it a smart move? No – tending towards dumb! If, as Tesco does, you make a song and dance about supporting British farmers, then, you sell pork products from Holland and produce from Morocco and Senegal under a brand name reeking of Britishness, then, you get what you deserve! Tesco quite clearly mark on the packs the country of origin of the produce. But that misses the point – what harassed shoppers see on the shelves are comforting British rural images and the clearly marked “Produce of Spain” is lost in the cacophony of background shopping noise and activity!
Only 3 years ago, Tesco’s CEO was apologizing for his company’s contribution to the “Horsegate” scandal. Now, faux brands are nowhere near in the same league, but in an era where transparency and traceability for food products are top of mind, retailers must tread very carefully. A loss of integrity translates very quickly into loss of trust and fewer customers. Asda, also hemorrhaging sales from the hard discounter fresh food onslaught, has been more circumspect and opted for “Grower’s Selection” as its label on discount produce, replacing the dull-sounding grocery entry level Smart Price. The anonymous “Grower” has proved more acceptable to the press and British farmers but the new label hasn’t translated into sky-rocketing sales for Asda.
Private label is one of the most important components in the “Differentiation Mix” that grocers can use to confer character to their offer. It’s very difficult to express your point of difference from competitors with ubiquitously available products such as Coca-Cola. Tesco has been and still is world class in private label. We know it’s extremely tough at the grocery retail coalface, but Tesco should be leading not copying when it comes to this vital area of retail competition.