A copycat row between Kellogg and Tesco threatens to damage an industry code of conduct hailed as a breakthrough in retailer-manufacturer relations less than 12 months ago.
A range of Tesco own-label cereals, launched four weeks ago, appears to blatantly flout an Institute of Grocery Distribution code designed to protect manufacturers from copycat products.
Both Kellogg and Tesco signed the IGD’s Dispute Resolution Procedure when it was launched earlier this year to mediate and resolve copycat disputes. Conflict over lookalike products and retailers “piggy-backing” on manufacturers’ marketing spends soured relations two years ago and led to the creation of the IGD code.
One observer says: “Tesco is a leading member of the IGD and has subscribed to the IGD’s code. But it is blatantly flouting it in an attempt to take advantage of Kellogg’s investment in the market over a number of years. The question is, how effective is the IGD’s policy? The credibility of the IGD itself is at stake.”
Other signatories are now questioning the validity of the code, which was intended to prevent conflict. One manufacturer says it will consider pulling out if Tesco is allowed to take advantage of it.
“Is the IGD code just a way of buying the retailers’ time, so they get a breathing space to launch copycats?” asks a spokesman for the manufacturer. “If the mediation drags on and results in little change, then what is the benefit to me in being part of this process?”
Tesco Cornflakes, Honey Nut Cornflakes and Frosted Flakes are described by industry sources as “obviously similar” to Kellogg’s packaging of its Cornflakes, Crunchy Nut Cornflakes and Frosties. The contents of Tesco’s own-label cereals is being provided by Kellogg’s rival Cereal Partners – owned by Nestlé and General Mills – which has added to Kellogg’s anger.
Ironically, Nestlé itself recently remonstrated with Tesco over its launch of a product that closely resembled Gold 37.
Tesco is heavily promoting its own-label cereals in-store and is launching a new price-focused promotion to take advantage of the Kellogg’s-sponsored National Breakfast Week in September.
Among the terms of the confidential code, signatories agree to “encourage competition but avoid commercial plagiarism in packaging and trade dress” and “minimise the risk of consumers either selecting products by mistake, or assuming that different products have been made by the same manufacturer”. They must also agree to mediation.
Under the terms of the procedure, the two opposing parties call discussions at operational level, then at director level. If no agreement is reached, the matter is referred to the Centre for Dispute Resolution.
IGD chief executive John Beaumont says the procedure can only focus on solving disputes rather than preventing them. “The procedure is about agreeing to discuss it and trying to resolve it in a business-like manner. It is an agreement to discuss it rather than not to do it in the first place.”
He refuses to say whether Kellogg and Tesco have been in mediation but Kellogg appears to be more interested in action, through a Leo Burnett-produced press, poster and TV ad campaign, stressing that the cereal giant does not make own-label.
The press ads launched last week feature a thinly-veiled attack on Tesco: “Next time you buy cereal, take a careful look at the box. It may be in a clever lookalike package. But if it doesn’t carry our name, it isn’t the genuine article.”
The supermarket chain denies that its own-label range has copycat brands and says the packaging will not be altered. Kellogg refuses to comment.
According to IRI InfoScan figures, Kellogg has seen its share of the market drop from 49.5 per cent in December 1993, to 44.7 per cent for 1996 (MAT, to June), while own-label cereal has grown from 18.3 per cent to 23.9 per cent for the same period.
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