The wheels are im motion

Once thought of as the plucky underdog that took on Sainsbury’s, Tesco is a UK retailing powerhouse with aggressive expansion plans. But its hunger for ever-greater market share could prove its downfall. Consumers are beginning to resent its b

Tesco’s unstoppable growth is proving a headache for its image-makers. Once perceived as being the plucky people’s retailer that took on – and overcame – the might of Sainsbury’s, it is increasingly portrayed as an ugly brute disfiguring the retail landscape, destroying competition and forcing its presence on a reluctant public.

Many advertising executives believe Tesco’s &£23m ad account could soon be up for grabs and are wondering how its image should be managed to ensure disquiet over its growing market share does not tarnish the brand. Tesco confirmed its dominance of the UK food market last week with yet another strong set of Christmas sales. Its trading update revealed that in the UK, same-store sales in the seven weeks to January 8 increased 9.3 per cent on the year (including petrol), easily outstripping the performance of all its supermarket rivals.

Overall UK sales were up 12.1 per cent. According to TNS, Tesco has increased its share of non-food sales to six per cent of the UK total, up from five per cent a year ago. Profits in the year to February 2005 are expected to hit &£2.02bn.

But a number of stock market analysts have warned that Tesco’s growing power – it now accounts for &£1 in every &£8 spent by shoppers in Britain – could become a liability for the supermarket chain. With 1,878 stores across the UK, including nearly 1,000 convenience outlets acquired over the past three years, it controls almost 30 per cent of the grocery market (according to TNS) and this is expected to grow to a third this year. People are increasingly whispering in sinister tones: “Tesco is taking over.”

Tesco chief executive Sir Terry Leahy fuelled these anxieties last year when, in an interview with magazine Management Today, he said: “Our market share of UK retailing is 12.5 per cent – that leaves 87.5 per cent to go after.” Tesco’s announcement that it will open a store selling only non-food lifestyle items later this year and its continued expansion into financial services only serve to add to the impression that it is looking to extend its dominance even further.

The Wal-Mart factor

Steve Davies, an analyst at stockbroker Numis Securities, agrees that brand fatigue could become an issue for Tesco: “It happened with Wal-Mart in the US and that’s the parallel people are starting to draw. Tesco is beginning to get bad publicity in terms of planning permission, but it would only be an issue if the public decided it was an undesirable behemoth. The chain’s marketing focuses on how it reduces the price of the average shopper’s basket, which is the best counter to any accusations about dominance.”

Tesco denies its size is harmful to the public interest. “We are not dominant, there is plenty of choice in UK retailing. We focus on what customers tell us they care about – their shopping trip. Our staff have just delivered the best Christmas ever for customers and we will continue to listen to them and do the best we can to provide a better shopping trip,” says a Tesco statement.

Tesco has long been a target of protest for farmers, small store operators and campaigners such as Friends of the Earth, who object to its massive market share (18 per cent of all food sold in the UK according to TNS), the squeeze they say it puts on suppliers, and its perceived destruction of local high streets, which in turn is forcing small rivals out of business. But the backlash has gathered pace as the National Federation of Women’s Institutes, hardly a hotbed of revolutionary activity, joined calls for a boycott of supermarkets as a protest against their growing power.

Brand leaders can all too easily become the focus for public discontent. Coca-Cola, Nike, Walkers Crisps and oil company Shell have all seen their images suffer from a variety of protests and there are many who would like Tesco to be next. As it is by far the biggest food retailer in the UK, it is the number one target for discontent about supermarket power.

Cold comfort

Some admen believe that Tesco’s current price-led television campaign, with a renewed focus on the “Every Little Helps” strapline may be witty and well executed, but it is cold, clinical and lacks personality. And its completely unconnected campaign for financial services, using animated talking trolleys, is arguably just as sterile. As worries grow that the chain is becoming an unstoppable juggernaut riding roughshod across the UK’s retail landscape, many in the ad industry think Tesco needs to inject more warmth into its brand image.

Tesco says of the campaign: “The new ‘Every Little Helps’ advertising aims to demonstrate that no one tries harder for customers, than Tesco. The campaign has been well received within the industry and our customers tell us they love the new advertising – saying it is simple, honest, warm and engaging and appeals to them. They find it believable and say it closely relates to their experience of Tesco.”

It says it uses alternative advertising campaigns for different objectives, such as the Cherokee advertising and Dotty. “We will be continuing to use these different campaigns when appropriate,” it says.

In the same week that Tesco released its Christmas update, it became apparent that the advertising agency whose campaigns have helped drive the chain to the number one spot was tearing itself apart. Senior managers at Lowe London, which has handled Tesco’s advertising since 1989, were last week in “open mutiny” over plans to parachute in former Grey London chief Garry Lace as chief executive (MW January 13).

Rumours are flying around adland that two Lowe executives who have been key managers on the Tesco account could be poached by rival agencies and take the Tesco business with them. “All it would take is a phone call from Tesco marketing director Tim Mason,” says one source. Lowe managing director Mark Cadman – who is close to Mason – is said to be incandescent that he has been passed over for the top job at Lowe. There is speculation that he and chairman Paul Weinberger, the creative chief also close to Tesco executives, are in discussions about taking the Tesco account to a rival agency.

In truth, there have been questions over the direction of Tesco’s advertising since it became clear last year that the Dotty campaign featuring Prunella Scales had run its course. In October, Tesco dropped Dotty after research showed she was becoming mere “wallpaper” and that people were noticing the personality of Dotty but had stopped associating her with the Tesco brand.

To replace Dotty, Tesco launched the new “Every Little Helps” TV campaign highlighting the chain’s low prices and the attention it pays to tiny details that can help make shoppers’ lives easier. Agencies wonder whether the latest ads are just a holding campaign before Tesco decides on a new celebrity ambassador to represent its brand. Some think the current campaign represents a long-term change in direction, a more low-key – and low-cost – approach to advertising.

Stemming the tide

An important consideration for agencies hoping to pick up the account is how they can impress on Tesco management that they know how to head off any potential backlash against the chain. One insider says, “Tesco’s management is very conscious of the possibility of a backlash and knows that the time companies tend to make mistakes is when they are at their most successful.”

Tesco plays down the idea that it may split with Lowe. “We continue to be delighted with the work produced by Lowe and more importantly customers love it. Between us, we have a unique understanding of our customers and work extremely well together to develop new ideas,” says a company statement.

A dog’s dinner?

Yet even some of London’s advertising executives are up in arms over the seemingly relentless spread of Tesco. Many of them own luxury properties in upmarket locations such as Chelsea, Maida Vale and St John’s Wood and are finding to their dismay that the mass-market Tesco is setting up shop on their local high streets.

Last year, the retail giant took over the Adminstore convenience chain and started converting its Cullens, Europa and Harts stores – many in ritzy locations – to the Tesco Express fascia. “Dinner-party conversations are already turning to the subject; people are sick to death of Tesco opening up everywhere you go. Everybody is moaning about it,” complains one adman.

And another, who holds out hopes of winning the Tesco account, says: “Once Tesco starts moving into middle-class locations, it is playing with fire.” He believes that if the chain irks the “whispering” classes of media pundits and opinion-formers who live in these swanky areas, the growing backlash against Tesco’s seemingly unstoppable onslaught and homogenisation of Britain’s high streets could gather pace. He believes the Metro and Express fascias are cold and uninviting and says Tesco would be well advised to invest in giving them a more cheery aspect.

Even so, the same executives are willing to leave these considerations aside as they eye Tesco’s advertising account, which many of them believe could soon move to another agency if Weinberger and Cadman walk out of Lowe. As one rival agency source says: “It looks like a mismatch between the dynamism and ambition of Tesco and the disarray at Lowe.”

Still, most observers believe Tesco’s ad campaigns have cleverly dealt with the issue of its supposed retail dominance by forcing the emphasis back on to the consumer. “The ‘Every Little Helps’ slogan is a great line because it says Tesco got big through taking care of the little things that matter,” says one advertising source.

The latest series of Tesco ads show products set against a stark white background with familiar celebrity voice-overs. For example, one ad shows a pair of jeans priced at &£4 as the voice-over says “You could wear them to paint the town red, but let’s be honest, at four quid, you could wear them to paint your living-room red”. One source says it is a new type of marketing that is actually very simple and powerful, eschewing expensive celebrity endorsement and standing in stark contrast to Sainsbury’s Jamie Oliver campaign, which the source believes lacks credibility because Oliver is himself so rich.

Turn up the heat

But many wonder how long the current Tesco campaign can be sustained and question whether it is too sterile. “It lacks the warmth and engagement of the old campaign; it is not quite clear where it is going. It leaves you wanting a little more,” says a source.

“The question I would ask of the new campaign,” says Steve Henry, executive creative director of HHCL/Red Cell, “is: ‘Does it have a personality?’ As Tesco gets bigger, that is going to be really important. Tesco needs to maintain the view expressed in the line ‘Every Little Helps’, but it also needs a strong personality.”

Tesco’s campaign will come up against a new advertising burst from Asda in February featuring Sharon Osbourne, the wife of rock legend Ozzy and famed for doing a good job bringing up a “challenging” family. Asda is seeking to target its main market of “mums” with the campaign.

But Tesco will be left without any famous characters to feature in its ads, just a list of little things it does to make people’s lives easier. Bereft of personality, it increasingly resembles a faceless automaton hell-bent on total control.

Meanwhile, campaigners will be keeping up the pressure, which could slowly erode Tesco’s brand image. But help is at hand as London ad agencies vie to gain control of the ad account and offer their own solutions to the problem.

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