Talking shop: Tesco stresses finer points of difference
By Ben Cooper | 10 October 2013
Tesco hopes relaunch of Finest range will further boost UK operations, which reported H1 profit rise last week
Tesco relaunched its premium own-label range, finest, this week as part of the extensive revamp of its UK business. Ben Cooper reports.
In the heyday of supermarket expansion when the major UK retailers were transforming the country's grocery sector and taking the lion's share of the market in the process, the role own label played was key.
The big supermarket chains were no longer just large shops where consumers could buy in quantity at convenient times of day and at good prices - they were 'brands'. And not just retail brands - a fascia or name above a door - but companies that put their names to products, and to many products at that.
Moreover, as time went on, these were not just seen as cheap alternatives or 'me-toos'. Consumers increasingly saw them as representing good quality and this further cemented the supermarkets' dominance.
And recent events underlines that own label was not only critical during these companies' rise to power but remains vital today as they battle with each other and with competitors at both ends of the price spectrum.
Earlier this month, Sainsbury's chief executive Justin King said investment in the quality of its own brand had been crucial in meeting the challenge posed by discount retailers. And this week saw Tesco relaunch its premium own-label range, now rebranded as finest rather than the outmoded Finest, as part of the revamp of its UK business.
Analysts view Tesco's and Asda's position as more parlous than Sainsbury's in that, like Morrisons, they were losing share not only to Waitrose, M&S and Sainsbury's at the quality end of the price spectrum but also losing out to heavy discounters at the other end of the market. It is no coincidence Morrisons has just launched a major marketing push behind its M Kitchen convenience range including new TV advertising, in-store marketing, online ads and "roadshows" in towns across the country, allowing consumers to tase the products.
Own label is at the heart of what Tesco has been doing to revive its UK fortunes. In addition to re-ranging its clothing business and putting more staff on the shop floor - notably in the fruit and vegetable area - the country's biggest grocer rebranded its budget price 'Tesco Value' range as 'Everyday Value' and has now unveiled a major revamp for its premium own-label line-up.
Darren Shirley, analyst at Shore Capital, is in no doubt the finest relaunch is critical to Tesco CEO Philip Clarke's plans to put the retailer back in the ascendancy. "We see the outcome of this relaunch as one of the more important steps in a journey that is essential to the group's medium-term trading and financial prospects," he said in a note, which also praised the other measures Clarke has initiated as "necessary, appropriate, well thought-through and largely executed in sound fashion in-store". With consumers now seeking "evermore diverse and interesting lines", the relaunch of finest is "timely and important", he added.
The idea that supermarket own labels are seen as brands in their own right is only reinforced by the status of the Tesco finest range. Even prior to the relaunch, the range, originally launched in 1998, was a GBP1.4bn brand.
In addition to the lower-case 'f', finest has been substantially re-ranged, with 200 SKUs removed but a further 400 added, with an emphasis on specialist ingredients, niche suppliers, provenance, seasonality and sustainability.
The timing of the move is critical as the retailer builds towards the Christmas trading period and the accompanying spike in sales of more indulgent, specialty products. Tesco claims the re-launch of finest is twice the size of the 'Everyday Value' revamp.
Speaking to just-food at the launch event this week, Tesco UK managing director Chris Bush stressed the importance of having own-label products that can match the aspirations of consumers at all price levels, but equally how important it is to continue to develop these ranges as tastes and market requirements evolve.
"In every category we're very clear on the range hierarchy," Bush told just-food. "We need a product that is good, better and best. And Everyday Value was absolutely at the entry price point in each category. It's a great product, good quality, good pricing. The Tesco brand [is] in the middle and finest is at the very best end of that hierarchy.
"And that's worked very well for us in the past but you can't stand still. You've constantly got to look at the products, reset the benchmarks, improve the products, make sure the pricing is right and that's exactly what we're doing here today with finest."
The expansion of the major supermarket chains was predicated on the idea that they could be a 'one stop shop', offering all products and satisfying customers' needs for varying qualities and price points. As Waitrose has expanded and the discounters have come to the fore, it is well documented portfolio shopping is far more common. Consumers may come to Tesco and Asda for bulk and commodity items but may seek out better quality products at Waitrose or M&S.
However, Tesco has "always been a brand that's made everyone welcome", Bush continued, and the retailer believes the finest relaunch underlined the continuation of that commitment. Tesco still argues it can offer a sufficiently broad gamut of products to meet all requirements and, if not eliminate, certainly limit the haemorrhaging of sales to discounters and the more upmarket food retailers.
"We've already got a huge number of customers who buy the finest brand and it's very important that we keep re-benchmarking that finest brand and keep setting the standards as high as we can. That creates loyalty to the brand and that's really what it's about," Bush said.
Ironically, as Shirley observed, the 'Tesco' element of the branding for finest range appears to have been "de-emphasised" in the new packaging, and Darren Shirley sees this as no bad thing. "We believe that this is a sound move with Tesco needing its customers to associate the business with good and interesting food rather than some of the less endearing elements of this large corporation in recent times."
As finest sits within a strategy aimed at allowing Tesco to address all market segments, it can by definition only be one part of the equation, but the emphasis the retailer has placed on the relaunch suggests it sees this as a very important area, and one where it has to get things right.
Shirley agrees. The new finest line may not be "a silver bullet" for Tesco UK, he says, but it is a "major potential piece in the jigsaw".
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