Asda Avoids Fine Despite Missing The Deadline For IT Upgrade

Asda has avoided a hefty penalty charge despite missing a target for separating its IT systems from former owner Walmart.

According to The Telegraph, the US retail giant has agreed to push back the deadline for the £800m project, which has seen Asda untangling thousands of programs responsible for checkouts, administration and payroll.

After being acquired by TDR Capital and the Issa brothers in early 2021, Asda had been aiming to complete the IT changeover, named Project Future, by February this year. Last month, industry sources warned that Asda risked millions of pounds worth of charges if it missed this target.

The Telegraph reported over the weekend that Walmart and Asda have now come to a revised agreement, including scrapping the February deadline. It follows a series of setbacks for the project, which had been touted as “mission critical” to Asda’s revival plans.

A spokesperson for Asda told the newspaper: “We continue to make good progress delivering Project Future and have successfully migrated large parts of our business to brand-new systems.

“We will continue to take a pragmatic approach when delivering the remainder of the programme, and Walmart continue to be incredibly supportive in every way in helping with the implementation.”

NamNews Implications:

• Meanwhile, given that their IT systems still need adjusting…
• …suppliers (and shoppers) may wonder about the effect on service level…
• …and react accordingly?

Aldi Raises Hourly Rate Again To Maintain Position As ‘Britain’s Best-Paying Supermarket’

Just weeks after announcing that it was increasing its hourly wages, Aldi has raised the rate again. The move comes days after key rival Lidl said it would offer its UK store staff a better rate that would have meant Aldi was no longer Britain’s best-paying supermarket.

From 1st March, Aldi Store Assistants will now be paid at least £12.75 per hour nationally and £14.05 within the M25. On 21 January, the discounter announced a rise to £12.71 nationally and £14.00 within the M25.

The rates exceed the Real Living Wage set by the Living Wage Foundation in October last year, with some staff seeing higher wages based on their length of service.

Aldi has also committed to a further pay increase for store staff from September, taking its minimum rates to £12.85 per hour nationally and £14.16 within the M25.

“This latest increase recognises the important contribution that our colleagues make day in, day out and ensures they are rewarded fully for their contribution with industry-leading pay,” said Giles Hurley, Chief Executive Officer of Aldi UK and Ireland.

“Every member of Team Aldi plays an important role in providing the best products, service and value to the millions of shoppers that visit our stores.”

Aldi revealed yesterday that it plans to invest £67m in upgrading its existing stores during 2025 as part of a programme to improve the shopping experience for its customers.

NamNews Implications:

• Who would have thought?
• Two discounters vying to be the highest retail payer of staff in the UK.
• If the quality of workers follows the rate of pay, then shopfloor motivation will make a difference…
• More reason for retail rivals to watch?
• And begging the question: Can any supplier afford to ignore the discounters?
• (just implying…)

Aldi Improving Health & Beauty Fixtures In Next Phase Of Investment Programme For Existing Stores

Aldi has revealed that it plans to invest £67m in upgrading its existing stores during 2025 as part of a programme to improve the shopping experience for its customers.

The discounter noted that it had spent almost £600m on store upgrades since 2017, and with the first phase of these updates nearly complete, it was moving on to the next stage of its store enhancement programme.

The initial store upgrades focused on creating more space for fresh, chilled, and food-to-go ranges, alongside simpler layouts, improved fixtures and energy-efficient LED lighting.

The new phase will include additional in-store features such as improved bakery and health & beauty fixtures for customers. Stores will also benefit from CO2 refrigeration upgrades, contributing to an estimated reduction in carbon emissions equivalent to heating over 6,500 homes when the programme is complete.

“Aldi’s £67m investment is a major step forward in our commitment to delivering an even better shopping experience for our customers across Britain,” said Jonathan Neale, Managing Director of National Real Estate at Aldi UK.

“Building on the success of our previous upgrades, we’re enhancing store layouts as part of our dedication to providing customers with more sustainable stores, convenience and an improved shopping experience nationwide.”

As well as store improvements, Aldi is investing approximately £650m in new openings across the UK in 2025, with a target of around 30 additional sites.

NamNews Implications:

• Aldi appears to be addressing possible negatives.
• Whilst making improvements in the estate.
• All adding to an improved shopping experience for more shoppers.
• And if their share starts growing again….

Aldi Tops Cheapest Supermarket Ranking Despite Rival’s ‘Loyalty Schemes And Flashy Promotions’

Aldi has again been named as the UK’s cheapest supermarket in a price comparison survey by trade magazine The Grocer.

The study of a basket of 33 everyday items revealed the gap between Aldi and the four largest full-price supermarkets (Tesco, Sainsbury’s, Asda and Morrisons) was 16% on average.

Despite recently announcing the return of its Rollback scheme, Asda only managed fifth place, with its basket checking out at £7.62 more expensive than Aldi’s.

Tesco was found to be 14% (£7.52) more expensive than Aldi, even when loyalty prices are applied, while third-placed Morrisons came out as £7.36 more expensive.

Lidl was in second place, just 16p behind Aldi.

“The latest data confirms that our prices simply can’t be matched and our customers know that the only place to get Aldi prices is by shopping at Aldi,” said Julie Ashfield, Managing Director for Buying at Aldi.

“Other supermarkets can try and compete with us through loyalty schemes and flashy promotions but the only thing on a roll is Aldi, being named the best on price time after time. That’s because our promise to our customers is straightforward and simple – they will make significant savings every time they shop with us.”

NamNews Implications:

• A 16% advantage on average Mults’ prices has to count for many shoppers
• Key for Aldi to give more shoppers access to their outlets
• Hence the importance of their store opening programme…
• Meanwhile key for suppliers to find ways of working with Aldi..?

Asda Trialling Automated Sampling Machine

Asda has begun testing an automated vending machine that offers free samples to customers at its store in Pilsworth, Bury.

In report a report by trade publication The Grocer, the supermarket described the machine as a “first to market innovation” that could “revolutionise in-store sampling”.

To access a free sample, shoppers have to scan their Asda Rewards loyalty app. A screen on the machine also allows customers to browse ingredient and dietary information.

The first brand testing the new machine is Müller, which is offering shoppers free samples of its Frijj milkshake.

A spokesman for Asda told The Grocer: “We are trialling a digital sampling machine at our Pilsworth store so that customers can try newly launched products from our branded partners simply by scanning their Asda Rewards ID.”

Access to the machine is being offered by the supermarket’s retail media arm, LS Eleven Media Services, and aims to help brands “engage customers with dynamic content and product trials”.

NamNews Implications:

• If only Asda was not saddled with other distractions…
• i.e. we have seen some very original ideas coming from this beleaguered grocer…
• Anyway, key for suppliers in appropriate categories to ensure their access to these sampling machines.

Historic Equal Pay Win For Tens Of Thousands Of Asda Workers

Tens of thousands of Asda’s checkout workers, customer service staff and shop floor assistants, most of whom are women, could be in line for historic payouts after the biggest ever private sector equal pay claim.

A court ruling has made clear that many of the roles on Asda’s shop floors, carried out mainly by women, are of “equal value” to the better-paid ones in the supermarket giant’s warehouses, which are predominantly filled by men.

Read the full article on the ITV website

NamNews Implications:

• It appears that this issue is heading towards a conclusion...
• ...that could cost Asda considerable sums in backdated ‘top-ups’ for workers.
• The resulting uncertainties has to add to the current pressures on Asda.
• A speedy resolution in terms of a negotiated settlement and known cost...
• ...could at least move this issue off the table.
•  Allowing the company to focus on its recovery plan?

Morrisons Hails Strongest Quarterly Performance In Four Years

CEO Rami Baitiéh’s turnaround programme at Morrisons appears to be picking up speed after the group delivered its strongest quarter since the start of 2021.

Over the 13 weeks to 27 October, the grocery retailer’s like-for-like sales increased by 4.9%, with total revenues up 4.8% to £3.8bn. The robust fourth-quarter figures meant that annual like-for-likes had grown 4.1% – a marked improvement on the 1.8% rise the previous year.

Full-year underlying EBITDA was up 11.2% to £835m on revenue that increased 3.8% to £15.3bn.

Morrisons noted that it had made good progress in improving product availability, with it up four percentage points on fresh goods. Its revamped More Card loyalty scheme also saw linked sales grow to 68% at the year-end (76% today), whilst its discounter Price Match initiative now covers over 500 everyday items.

Morrisons also highlighted progress on tackling the large debt burden left over from the takeover by CD&R. The group’s debt is now down 40% from its peak, with CFO Jo Goff saying: “A year of broad-based operational progress has helped to deliver a significantly strengthened Morrisons.

We delivered a further £150m of progress on our working capital programme in the year, taking the total since the start of the programme to £450m, and have achieved £312m in our cost-saving programme in the year.”

Other highlights of the Morrisons year included the sale of its petrol forecourts to MFG for £2.5bn and the acquisition of 36 convenience stores in the Channel Islands.

The group’s convenience store estate now stands at over 1,600 stores after rapid growth in recent years.

“This has been a year of urgent reinvigoration and positive progress for Morrisons. Customer transactions increased, market share grew from Q2, and we saw positive switching from our competitors,” said Baitiéh.

He noted that improvements across the business had resulted in “better availability in our stores, sharper prices, more effective promotions and a strong and growing loyalty scheme”, which was now starting to be reflected in its financial performance.

Baitiéh concluded: “I want to thank everyone at Morrisons for their commitment and energy every day and for playing their part in the significantly improved performance that we are reporting today.

"Supermarkets, Convenience, Online, Wholesale and Myton Food Group all contributed to the improving picture, helping us serve our customers better.”

Morrisons did not reveal how it traded over the key Christmas period. However, Kantar data released earlier this month suggested the chain lagged well behind Tesco and Sainsbury’s.

NamNews Implications:

• Latest stats looking good
• Lowering the debt burden means reduced pressure on debt servicing...
• Is it time for suppliers to join with Morrisons newfound optimism?
• (despite a probable Christmas lag vs Rivals?)

Asda Restarts Search For New Chief Executive

Asda’s new Chairman, Allan Leighton, has restarted the group’s search for a Chief Executive to support his efforts to turn around the performance of the ailing supermarket.

The company has now been without a permanent CEO since the abrupt departure of Roger Burnley in August 2021 following a fall-out over strategy with TDR Capital. Co-owner Mohsin Issa subsequently took charge of operations in 2022 while a search for a new leader was launched.

A large number of people were approached, but Asda failed to attract a candidate despite the prospect of a lucrative pay package, said to be worth up to £10m a year. Reports at the time suggested that Mohsin’s control of the business had put off some experienced industry executives.

With Mohsin having relinquished the reins of the grocer at the end of last year, Leighton is said to be seeking a candidate who he can work alongside rather than a Chief Executive he can oversee as Chairman.

A report by The Telegraph stated that Leighton would retain significant day-to-day involvement in Asda’s strategy through his Executive Chairman role.

Asda hired Leighton at the end of last year following months of falling sales and market share. Initial moves have included strengthening the group’s leadership team and restructuring its regional management setup.

Leighton has vowed to “restore Asda’s DNA” by cutting prices and improving product availability. However, he has warned that it could take as long as five years to restore the supermarket’s fortunes fully.

Earlier this month, Leighton stated his turnaround plans would be based around moves to “satisfy the daily and weekly shopping needs of ordinary working people and their families, who demand value”.

Last week, it was reported that Asda is preparing to launch its biggest Rollback price cuts campaign in years.

NamNews Implications:

• i.e. Asda is seeking a candidate who can work alongside Allan Leighton…
• …rather than a Chief Executive he can oversee as Chairman.
• (Little or no learning-curve time available...)
• i.e. Someone that has worked with Alan previously might seem the best bet…

Sainsbury’s Cutting Thousands Of Jobs In ‘Challenging’ Cost Environment

Sainsbury’s is set to cut thousands of jobs through the closure of its hot food counters and cafes, and by reducing senior management roles, amid concerns about higher labour costs from impending tax rises.

Sainsbury’s stated that the move was part of its three-year ‘Next Level’ strategy, which aims to bring more of its core food ranges to customers, while simplifying central divisions and management structures.

To create more space for its fresh food ranges, the company wants to close its remaining patisserie, hot food and pizza counters. In a further move to simplify the business, Sainsbury’s also plans to close its remaining 61 in-store cafés, subject to consultation.

They are also making changes to its central management structures to support “faster decision making and drive performance” in Sainsbury's and Argos.

Moves include: Rhian Bartlett to CCO Sainsbury’s, Graham Biggart to MD Argos & Chief Strategy and Supply Officer. Patrick Dunne, to Operating Board as Chief Property and Procurement Officer & MD SmartCharge.

In seeking £1bn of operating cost savings, all head office depts to become dedicated to the different needs of its Sainsbury’s and Argos businesses, while creating “fewer, bigger roles with clearer accountabilities”.

Sainsbury’s wants to drive faster decision-making and cost reduction via an estimated 20% reduction in senior management roles over 3 months. Overall, a proposed 3,000 reduction in roles across the business via discussions with staff affected and exploring redeployment opportunities where possible.

Chief Executive Simon Roberts said: “As we accelerate into year two and beyond of our strategy, we are facing into a particularly challenging cost environment, which means we have had to make tough choices about where we can afford to invest and where we need to do things differently to make our business more efficient and effective.

“The decisions we are announcing today are essential to ensure we continue to drive forward our momentum but have also meant some difficult choices impacting our dedicated colleagues in a number of parts of our business. We’ll be doing everything we can to support anyone impacted by today’s announcements.”

Clive Black, head of consumer research at Shore Capital, said Sainsbury’s had unveiled “further, increasingly necessary steps post the autumn Budget, to manage its cost base to enable ongoing investment”.

NamNews Implications

• Either cut job numbers or raise shelf prices...
• Looks like Sainsbury’s wants to try the ‘job-cut’ route before raising prices.
• In their attempt to deliver £1bn of operating cost savings.
• Anticipate similar moves from rivals as the Autumn Budget Tax increases impact the bottom line...

Owner Of Poundland Hires Advisers To Help Address Sales Slump

Pepco Group is reported to have drafted in City advisers to explore radical options for arresting the growing crisis at its Poundland chain.

According to Sky News, consultants from AlixPartners have been hired to address the sales slump at the discount retailer, raising questions over its future ownership.

City sources quoted in the report suggested possible formal restructuring process, prompting significant store closures or sale of the business.

AlixPartners is understood to have been formally engaged last week, with options including a company voluntary arrangement (CVA) or restructuring plan being floated by advisers on a highly preliminary basis.

Sources close to the group told Sky News no decisions had been taken and immediate focus was improving Poundland’s cash performance and reviving the chain’s customer proposition, stressing that a sale process was not underway.

Last week, Pepco Group revealed that Poundland’s performance had deteriorated further over the Christmas quarter, with like-for-like sales down 7.3% (weak clothing + general merchandise sales and “challenging” market conditions.

Poundland trading statement: they had suffered “a more difficult sales environment and consumer backdrop in the UK, + margin pressure + an increasingly higher operating cost environment”.

“We expect that the toughest comparative quarter for Poundland is now behind us – the same quarter last year represented a period prior to the changes made within our clothing and GM ranges – and therefore, we expect the negative sales performance for Poundland to moderate as we move through the year.

Poundland will also not open any net new stores during the year.

“We are continuing a comprehensive assessment of Poundland to recover trading and get the business back to its core strengths, including undertaking a thorough assessment of all costs across the business, as well as evaluating its overall competitive positioning.”

The appointment of AlixPartners comes several weeks after Stephan Borchert, the Pepco Group Chief Executive, said he would consider “every strategic option” for reviving Poundland’s performance.

He is expected to set out formal plans for the future of Poundland, along with the rest of the group, at a capital markets day on 6th March.

Among the measures the company has already taken to halt the chain’s declining performance has been to increase the range of FMCG and general merchandise products sold at its traditional £1 price point.

NamNews Implications

• Rivals have to be puzzled at how a ‘pound shop’ launched in December 1990…
• …can retail anything at a £1 price-point (having absorbed 3% average annual inflation)…
• ...meaning that a £1 in 1991 should be priced at £2.42 today.
• That said, great for Poundland to have made it work, thus far…
• But perhaps time to acknowledge that the Pound-shop concept has reached its limits…

Aldi Reveals Store Opening Plans For London

Aldi is planning to open nine stores in London this year as part of a £55m investment within the M25.

Four of the locations set for openings in the next 12 months include Wimbledon, Fulham Broadway, Caterha, and Orpington. They form part of the discounter’s £650m investment plan for the UK in 2025, which also includes store upgrades.

Aldi stated that it has a long-term ambition to open another 100 stores in London.

Jonathan Neale, Managing Director of National Real Estate at Aldi UK, commented: “We strongly believe that everyone in Britain should have access to high-quality food at our unbeatable Aldi prices. But we know that there are still thousands of shoppers in the capital that don’t yet have access to an Aldi nearby.

“We don’t think it’s fair that so many people still have to make do with big prices at other supermarkets, which is why London continues to be a real focus for us as we work to bring even more Aldi stores to shoppers across the capital.”

NamNews Implications:

• Aldi are planning for a further 100 stores.
• With little need to exaggerate their intent.
• i.e. Take it as read...
• Then presumably rivals will match the coverage…
• …at least.
• (and suppliers too, hopefully?)

Lidl GB is reaffirming its commitment to “responsible marketing” by removing all packaging designs deemed attractive to children from its least healthy own-brand products by the middle of this year.

Going further than new legislation that is set to restrict the advertising of less healthy to children from October this year, they are eliminating design elements, i.e. animated shapes, brightly coloured patterns, or playful product names that do not reflect the items themselves.

i.e. Lidl’s gummy bears will transition from bright, cartoon-adorned packaging to a simpler, more product-focused design that emphasises its fruit flavours.

In 2020, Lidl became the first supermarket in the UK to confirm the removal of cartoon characters from its breakfast cereals to help parents resist pester power.

Early 2024, they added a ban on cartoon characters from all ‘less healthy’ products aimed at children.

Lidl stated that its strengthened commitment aims to ensure that any product deemed as least healthy according to the WHO Nutrient Profiling Model or FSA Nutrient Profiling Model, alongside any breakfast cereal, cannot be marketed in a way that appeals to children, with only the healthiest of products being targeted at them.

“We know that households want to achieve healthier lifestyles, and so we’re fully committed to helping families adopt better habits while still having access to high-quality, affordable, and enjoyable products,” said Richard Bourns, Chief Commercial Officer at Lidl GB.

“As a father of young children myself, I know how influential packaging designs can be on their preferences, and therefore understand the importance of taking a proactive position to better support parents.

“Introducing these changes ahead of the upcoming legislation on advertising signals our readiness to meet and exceed these standards.

Lidl has long been making changes for the better, so it’s great that we’re continuing our legacy of leading the way in supporting healthier lifestyles by removing unhelpful packaging and enhancing designs for products that contribute to better diets, like our Funsize fruit and veg range.”

Rebecca Tobi, Senior Business and Investor Engagement Manager at the Food Foundation, added: “Despite the critical importance of good nutrition for children, commercial foods high in sugar and salt are often heavily marketed towards children, making it impossibly hard for families to navigate their way through the supermarket aisles without falling victim to pester power.

Ahead of new government regulation coming in later this year, this is a very welcome and market-leading move by Lidl GB to better support families to access healthier diets.”

NamNews Implications:

• Worth keeping in mind that this is a discounter initiative…
• And has to be a pointer for other grocers…
• Leading to some pressure on brands in affected categories, maybe?

Tesco Rolling Out Secure Chillers To Tackle Shrinkage

Tesco is rolling out secure cabinets to a further 50 of its stores to secure high-value items like champagne and sparkling wines.

The in-aisle cabinets, supplied by Wanzl, can only be opened by customers via a keypad, with an alarm sounding if the door has been left open for more than seven seconds or propped open.

A report by trade magazine The Grocer reveals that the cabinets have already been rolled out to 22 stores – including two in smaller Express stores – following a trial which started in late 2023.

The latest version of the cabinets is said to feature an updated customer journey, aimed at reducing friction for the shopper.

Lee Gilks, Wanzl’s UK head of retail shop solutions, is quoted as saying: “High-value alcohol in stores has always been a challenge. You have to strike the balance between selling things and locking things away. To fix shrinkage you could just put a massive lock on it, but that becomes a bit of a sales turn off.”

He noted that Wanzl’s solution has a “really friendly” customer interface and doesn’t stand in the way of someone getting what they want to get, but has significantly reduced theft incidents.

The Grocer’s report highlighted that future potential for the cabinets included digital header screens, weighted shelves and cameras that could record the demographics of shoppers and the products they select.

NamNews Implications:

• The balance between selling things and locking things away.
• The classic shrinkage prevention trade-off…
• Couple that with shopper perception re future use of
• - digital header screens
• - weighted shelves
• - cameras that could record the demographics of shoppers and products selected
• Perhaps a return to the shelf behind the checkout?

Asda’s New Chairman Kicks Off Restructuring After Disappointing Christmas

Six weeks after returning to Asda as Chairman, Allan Leighton has launched his first round of cost-cutting as part of an overhaul of the troubled business.

According to The Telegraph, Leighton revealed to staff last week that 13 regional managers would be leaving the business as part of a shake-up aimed at trimming headcount and improving performance.

The restructuring comes after a disastrous festive period for Asda, with recent Kantar data showing the chain suffered a 5.8% fall in sales during the 12 weeks to 29 December.

In an internal memo released on 7th January, Asda’s management confirmed that the restructuring will mean that supermarkets and express stores will now be managed across 22 “sub-regions”, down from 30.

This will mean fewer regional managers across the business with control over more stores.

“Change is never easy and unfortunately we have had to say goodbye to a number of colleagues,” the memo said.

The move comes just two months after Asda announced that it was scrapping around 475 head office roles as part of attempts to “remove duplication and simplify structures”.

Since replacing Lord Rose at the end of November, Leighton has vowed to “restore Asda’s DNA” by cutting prices and improving product availability. However, he has warned that it could take as long as five years to improve the supermarket’s fortunes, raising questions over the stewardship of majority-owner TDR Capital.

Commenting on the article by The Telegraph, an Asda spokesperson said: “We made changes to our field-based retail team regions to reflect the scale of our business across large stores and convenience.

These changes set us up to serve our customers in the best way for 2025 as we deliver Asda Price and other exciting propositions.”

NamNews Implications:

• The key issue for suppliers (and retail rivals?) has to be the extent to which these manpower cuts will be sufficient in terms of “restoring Asda’s DNA” by cutting prices and improving product availability.
• Given the probable five-year requirement for improvement of Asda’s fortunes…
• …perhaps the closing of a significant number of stores will be necessary…
•  …to allay stakeholders’ fears?

Tesco And Lidl Remain Top Performers As Discounts Drive Growth

Latest data from Kantar shows that take-home sales in the grocery sector rose by 4.3% over the four weeks to 26 January as supermarkets ramped up discount activity to attract cash-strapped shoppers after the costly Christmas period.

This also helped drive down grocery price inflation from 3.7% in December to 3.3% during the opening weeks of 2025 at a time when retailers are warning they may have to increase prices later this year to offset the hikes in employer national insurance contributions and the minimum wage. In January, prices rose fastest in categories such as chocolate confectionery, chilled smoothies & juices and butters & spreads, while they fell fastest in ambient cooking sauces, household paper products and cat food.

Spending on promotions during the four weeks rose by £274m year-on-year, accounting for 27.2% of sales – the highest level in January since 2021. Fraser McKevitt, head of retail and consumer insight at Kantar, noted that people also turned to non-branded products to help keep costs down, with own label as a proportion of sales hitting a record high of 52.3% in January. Spending on supermarket own label lines was up 5.4%, boosted by consumers buying premium products in days leading up to New Year’s Eve.

Meanwhile, the Kantar data confirmed that shoppers started the new year with a focus on wellness and health. More than 10% of the average consumer’s January grocery bill was spent on fresh fruit, vegetables and salad, totalling £1.2bn – £193m more than in December. Nathan Ward, business unit director for usage and out-of-home at Kantar, commented: “Rolling into the new year, health tends to play a bigger role in our grocery choices. Over a quarter of take-home food and drink in January is chosen with health at least partially in mind, as shoppers tell us they want to eat less processed food and feel the benefit of fibre and vitamins.”

Protein products also pulled their weight at the tills as demand for bars, bites, and drinks boosted spending on sports nutrition products. Sales for this category at supermarkets were 47% higher than last year, with over two million households buying these items during the month.

Sales of low and no alcohol drinks were 7% higher than last January, and 6.7% of households bought at least one of these alternatives. McKevitt said: “It’s no surprise to see the low and no alcohol trend make its mark in January, but given some of the generational splits we have seen in grocery, it’s interesting that older shoppers are just as likely to take these products home as younger ones. Not everyone signed up for dry January though, with 49% of people buying an alcoholic drink this month – but this is a pretty big drop from December’s 76%.”

Looking at the performance of individual retailers, sales at Lidl rose 7.4% over the 12 weeks to 26 January, making it three continual years of growth for the discounter, whose market share now stands at 7.2%. Aldi’s growth accelerated for the third consecutive month, with sales up 4.2% and its market share increasing to 10.2%.

Tesco gained the most share, with its 28.5% hold of the market now 0.7% higher than this time last year after seeing its fastest rise in sales since April 2024 at 5.6%. Sainsbury’s also outpaced the market with sales growth of 4.2% and an increase in share from 15.7 to 15.9%.

Despite an upbeat trading statement last week, sales at Morrisons were unchanged, and its market share slipped to 8.6%. Asda continued its dismal run, with its sales sliding 5.2% ahead of last week’s launch of a major Price Rollback campaign aimed at kick-starting its recovery.

Ocado was the fastest-growing grocer for the ninth consecutive month. Spending at the online retailer grew by 11.3%, meaning it now holds 1.9% of the market.

Meanwhile, M&S, whose higher proportion of clothing and general merchandise in its sales mix means it does not fall under the definition of ‘grocers’ using the research group’s Till Roll methodology, saw its grocery sales increase by 10.5% in its bricks & mortar stores.

NamNews Implications:

• Brands promoted in January to pull back share from own label.
• (Possibly a continuing issue as retailers raise shelf prices in anticipation of Autumn Budget Tax increases)
• Retailers themselves may choose to reverse the brand/own label balance to 50/50…
• …to increase the appeal to brand owners as retail media grows.
• Tesco’s growth exceeding the grocery market continues to impress…
• While Aldi & Lidl’s rate of growth and increase in share has to be of concern to rivals.
• Meanwhile, the growth of the mults and discounters, largely at the expense of Asda and Morrisons…
• …has to add to the comeback pressures each.

Some Career-change Reassurance from the NamNews Team!

Morrisons Launches Major Loyalty Prices Campaign

 

Morrisons is hoping to accelerate its sales growth by lowering the prices of over 2,000 products for members of its More Card loyalty scheme.

The price cuts will roll out in September across branded fridge, freezer and cupboard filler items. Examples include Heinz Tomato Ketchup at £2, down from £3.40, Huggies Pure Extra Care Wipes at £7, down from £11, and Sure deodorant at £2.40, down from £3.50.

As well as being signposted onshelf, the latest deals will communicated through the supermarket’s More app and by emails to its members.

Meanwhile, Morrisons has added over 70 more products to its Aldi and Lidl Price Match scheme as it tries to win back shoppers from the discounters.

The retailer will also be signposting hundreds of ‘Low Everyday Price’ items across branded and own-label lines, including cupboard staples, bakery and snacks, toiletries, cleaning products, and baby care.

While Morrisons has seen an uptick in its sales performance since Rami Baitiéh took over the role of CEO, the business has continued to lag behind the likes of Sainsbury’s and Tesco, and lose market share.

Commenting on the latest campaign to improve its competitiveness, Group Marketing Director Alex Rogerson said: “Today’s move represents our single biggest investment in loyalty and pricing for many years. Driving strong value for customers remains our number one priority, and today we are getting the big bazooka out and slashing the prices on over 2,000 products for More Card customers.

“Together with our Aldi and Lidl Price Match and our vast range of Low Everyday Prices – we have thousands of products that not only offer outstanding value on brands and essential items our customers love – but also have the quality they’ve come to expect from us.”

Last week, consumer watchdog Which? called for action to tackle “murky and confusing loyalty pricing practices” after its latest research found that some deals may not be as good as they appear.

NamNews Implications:

• Price & loyalty promos, big time!
• All now depends on perceived value vs alternatives available.
• Leading to repeat purchase…
• …the only test of success.
• And thence share growth…
• Fingers crossed!

Tesco Rapidly Expanding New Online Marketplace

Just two months after its launch, Tesco has over doubled the number of SKUs on its new online marketplace.

When it went live at the beginning of June, the site listed 9,000 products from third-party sellers across various categories, including garden & DIY, home accessories, toys, sports & leisure, petcare, greeting cards, baby & toddler, furniture, and beers, cider & spirits. Tesco stated at the time that once the marketplace was at full scale, it would be a “one-stop shop for everything customers need”.

According to trade magazine The Grocer, the range on the supermarket’s marketplace now totals more than 20,000. The report noted that the marketplace has close to doubled the total number of SKUs on Tesco.com, which offered around 28,000 products before its arrival.

Peter Filcek, Tesco’s Marketplace Director, told The Grocer that it was “really excited about expanding Marketplace over the next few months to give customers even more choice, and we look forward to working with new sellers to introduce further categories and brands to Marketplace”.

Tesco has previously stated that it is not trying to replicate Amazon. Chief Executive Ken Murphy said in June: “The primary focus of marketplace is to build out and extend the range of food, food-related and home products available to customers – so to be very clear, we are not trying to be Amazon.

"We are not trying to be all things to all people".

He noted that the grocer was making “all of those niche products that you won’t necessarily find on our shop shelves” available to shoppers.

Amazon has over 500 million products listed on its marketplace.

NamNews Implications:

• Bearing in mind there are no limits to online portfolio size…
• (i.e. Amazon 500m+)
• …one wonders how far Tesco plans to go…
• …and to what extent suppliers should attempt to keep up.
• (for a fair share of the action and cost)
• For sure, it is not even the end of the beginning…

Many Consumers Have No Plans To Switch Back To Branded Goods

A new survey suggests that some brands might find it difficult to tempt back consumers who switched to private label during the cost of living crisis.

The EY Future Consumer Index (FCI),  a survey of 23,000 consumers, 30 countries, found 28% bought private label in response to rising costs, a trend that appears to have become a sustained habit, with 66% finding the less expensive O/L satisfying their needs just as well as branded lines, with 38% having no plans to switch back.

NB the research shows this trend is not exclusive to mid- to lower-income bands. Higher-income consumers are planning to buy private label brands in the future, across every category: fresh food (60%), home and household care (56%), packaged food (52%), clothing, shoes and accessories (49%), personal care (49%), and beauty and cosmetics (39%).

According to the FCI, retailers are trying hard to capitalise on the opportunity by promoting private label aggressively – eye-level shelving and front-of-store placements – and increasing ranges. 

Instead of branded products at a lesser price, they are offering a range of product options, analysing POS data to identify early trends, (strong position to respond to buying patterns and consumer needs). EY: the closer retailers get to the consumer, the more power they have to curate buying choices, and the more they can drive lasting loyalty.

Kristina Rogers, the firm’s Global Consumer Leader, said: “..many consumer products (CP) companies are focusing on volume recovery. Simplifying the portfolio, driving down costs and unlock resources are important, but this must happen alongside innovation and marketing – they need to keep their brands inside the consumer’s circle of trust to maintain their margins and fund growth agendas.

“For retailers, better data analytics capabilities will help them target and reach consumers. They can use retail media and loyalty programs to incentivise private label purchases and create alternative revenue streams by promoting their partner brands. 

CP companies will need to take a balanced approach – promoting their brands to meet today’s goals, while also pursuing ways to keep these new consumers and earn their loyalty. Innovative new products that differentiate from private label and which consumers find valuable will be key to their future success.”

NamNews Implications:

• The brand nightmare!
• Consumer-switchers found these less expensive alternatives satisfy their needs just as well as branded lines.
• Retailers need to maintain a high level of consumer trust…
• (by delivering more than it says on the tin, every time)
• …whilst brands, the damage already having been done, have to either drop prices to a point that minimises the difference…
• …or develop the potential of Retail Media to a point where the retailer has more to gain from the brand, than from their own label alternative.

Brands Outperform Own Label While Tesco And Waitrose Make Share Gains

Latest data from Kantar shows that take-home sales at the UK’s leading grocers rose by 2.2% over the four weeks to 7 July, boosted by football fans purchasing beers, crisps and other snacks during the Euros.

Fraser McKevitt, head of retail and consumer insight at Kantar, commented: "Football fans drove beer sales up by an average of 13% on the days that the England men’s team played, compared with the same day during the previous week. Sales of crisps and snacks up 5% vs month before. With many matches played on ‘school nights’, though, some Britons chose moderation. Spending on no and low-alcohol beer soared by 38% on matchdays.”

Grocery price inflation down to 1.6% – lowest since September 2021. The drop coincided with the fastest rise in monthly footfall so far in 2024. Consumers supermarket trips up 2% this period vs one year ago.

Meanwhile, as cost of living pressures started to ease for some people, sales of branded products increased by 3.6%, outpacing own-label items, which grew by 2.7%.

After a difficult few years, Kantar noted that retailers will now be turning their attention to the King’s Speech on Wednesday to see what the newly elected government’s legislative agenda holds for the grocery sector.

Looking at the performance of individual retailers, Ocado was the fastest-growing grocer for the fifth month in a row, with sales up by 10.7% over the 12 weeks to 7 July. The online retailer now holds 1.8% of the market, up 0.1 percentage points compared with the same period last year.

Lidl saw a 7.8% jump in sales, bringing its share of the market to 8.1%. Aldi continued to struggle for growth, with its market share slipping to 10% after a 0.3% increase in sales.

Waitrose gained share for the first time since January 2022, achieving a 0.1 percentage point rise to 4.5% as spending at the retailer increased by 3.3%.

Tesco achieved its biggest share gain since November 2021, taking 27.7% of the market – a 0.7 percentage point increase versus last year – after a 4.6% rise in sales. Sainsbury’s saw its sales climb 4.7%, bringing its share to 15.3%.

Meanwhile, it was another difficult period for Asda, with its sales down 5.3% and market share slipping to 12.7%. Morrisons managed a 1% increase in sales, with its share unchanged at 8.7%.

NamNews Implications:

• Despite their efforts/initiatives, Asda continue to lose share to Tesco & Sainsbury’s.
• Given private equity involvement, anticipate cuts at Asda to improve EBITDA.
• Meanwhile, Morrisons is managing to hold share as part of a gradual turnaround.
• The switching back to brands reduces the risk of shoppers becoming loyal to own-label equivalents…
• …but the key question remains: What will Aldi do to restore growth vs Lidl?

#MarketShares
#Kantar

Tesco Aiming For Extra £1bn In Sales From Premium Range

The CEO of Tesco has revealed that the retailer is targeting an extra £1bn in sales for its Finest own-label range to meet growing demand for premium food & drink and challenge the likes of Waitrose and M&S.

Finest currently has annual sales of £2bn. Speaking to the Financial Times, Ken Murphy said: “We haven’t yet set our stall out to say ‘what would it take to get to £3bn’, but we’re very conscious it is playing an increasingly important role.”

He added: “We genuinely believe . . . that our intrinsic [food] qualities are every bit as good as anything you would get at Sainsbury’s and increasingly out of Waitrose … M&S, we probably still have a bit of work to do.”

The report notes that in the face of higher living costs, shoppers are shunning restaurants and becoming more adventurous with their cooking at home.

Data from Kantar shows that spending on premium own-label lines in the leading UK supermarkets rose 12% in the year to 9 June even as inflation eased. The figure was also nearly double the 6.9% growth in all brands owned by the grocers, including their budget ranges.

The FT highlighted that Tesco’s Finest products account for only over 3% of the group’s £61.4bn sales, although this is equivalent to about a quarter of Waitrose’s total sales and M&S’s food sales, respectively.

However, it has taken Tesco about a decade to reach the £2bn level from £1.4bn in sales in 2013. Murphy did not reveal whether there was a target date set for getting sales to £3bn, but Clive Black, a retail analyst at Shore Capital, told the FT that it would not be earlier than “the medium and long term before that number is reached” given that the industry’s annual growth is relatively modest.

NamNews Implications:

• ‘Shoppers are shunning restaurants and becoming more adventurous with their cooking at home…’
• …heightening consumer awareness of the difference made by quality ingredients…
• …and the home-cost of ingredients vs the price paid in hospitality.
• All potential threats to ‘eating out’ long term.
• Apart from increased savviness re branded equivalents in store.
• One to watch…

#OwnLabel #Hospitality

Co-op’s Retail Media Activities Boosting Brand Sales In Neighbouring Grocery Stores

Research by Co-op – in partnership with Circana – shows retail media activity for brands in its convenience stores not only boosts its own sales but also generates up to four times more sales in surrounding grocery outlets.

Brands seem to benefit from a halo effect when advertising in Co-op shops, which can boost sales in the longer term. Circana found a ‘global beer brand’ RM Co-op campaign increased sales by 12% in Co-op stores + a 3% uplift in nearby non-Co-op stores.

The non-Co-op stores uplift was 4x total incremental sales value in Co-op stores. Circana said the impact on total sales due to halo stores where the sales uplift occurred and the larger pack sizes bought in those stores.

Dean Harris, Head of Co-op Media Network, commented: “The Co-op Circana results show when brands activate campaigns with Co-op, there is an immediate positive sales impact [not only] in our store, but also with competitors in the surrounding area. As an RMN, our main goal for the brands that advertise with us is to generate sales regardless of where that customer purchases the product.”

Convenience is a frequently shopped channel for top-up missions, often in addition to a bigger shop. The data showed that Co-op shoppers engage the most with other grocers, which provides convenience retail media with an extra amplifier effect on halo sales.

Harris continued: “The analysis of the beer campaign shows that by influencing brand purchase decisions in other non-Coop stores, the retail media activation is able to generate higher incremental sales by tapping into larger pack sizes available in supermarket stores.

“This halo effect data is incredibly insightful and gives further confidence to talk to our clients about the power of retail media in the convenience setting.”

Mark Hurst, EMEA Head of Retail Media at Circana: “As the advertising industry continues to expand traditional retail media inventory and accelerate digital and addressable channels and privacy regulations limit traditional measurement methods, retailers are increasingly in need of more agile and accurate ways to measure campaign performance across channels and tactics.

“Being able to analyse media lift through a range of sales-based measurement approaches, including Test & Learn, tactical comparisons and mid-campaign analysis, results in faster and more cost-effective decision making, enabling retailers like the Co-op to demonstrate brand impact and how it drives incremental value.”

Co-op launched its retail media network early this year, claiming it was the first in the convenience sector.

NamNews Implications:

• Think of the halo-impact when several mults are advertising the same brand via retail media…
• “(Our Goal) to generate sales regardless of where that customer purchases the product.”
• i.e. A compelling sales proposition.
• Begging the question: Who needs blunt traditional media?

#RM

Aldi Still UK’s Cheapest Supermarket, Even When Compared To Loyalty Pricing Schemes

After including loyalty prices for the first time in its monthly grocery goods price comparison, consumer group Which? found that Aldi still came out cheaper than Tesco and Sainsbury’s.On a basket of 65 items, Aldi’s total came to £118.41. This was £14.49 cheaper than Sainsbury’s and £12.49 cheaper than Tesco for an equivalent list of items, even when discounts from their respective Nectar and Clubcard Prices schemes are included.

Julie Ashfield, Managing Director of Buying at Aldi UK, said: “With many households still struggling to make ends meet, we’re more committed than ever to remaining the UK’s cheapest supermarket. This latest Which? analysis shows that Aldi prices just can’t be matched, even with a loyalty card!

“At Aldi, we’re dedicated to having clear, consistently low, prices so shoppers know how much they’re spending long before they get to the till. And we’re really proud of the award-winning quality of the products we’re providing at these amazing prices.”

Aldi has seen its sales performance weaken this year as Tesco and Sainsbury’s step up their efforts to combat the discounters by expanding their price match schemes. Aldi has also faced price matching on new fronts in 2024, with Asda and Morrisons launching their own versions that also match Lidl.

In response, Aldi has ramped up its marketing activity and pledged to reduce more prices in 2024 than in any previous year, with it expecting to top the £380m investment it made in 2023.

NamNews Implications:

• But why the slowdown in growth?
• Aldi are determined to keep this ‘Cheapest Supermarket’ title’
• ..."by reducing more prices in 2024 than in any previous year...
•  …with it expecting to top the £380m investment it made in 2023"
• Watch this space…

#Aldi #CheapestSupermarket

Morrisons Develops App So Wholesale And Franchise Partners Can Top Up In Its Supermarkets

Morrisons is to allow its wholesale and franchise partners to top up on food and drink lines in its supermarkets at prices based on agreed terms.

According to trade magazine The Grocer, a newly developed app allows retailers within the Morrisons supply network to scan the items they need in stores using their smartphones.

Once they have completed their shop, they check out with a duty manager. However, rather than buying at normal in-store prices, the wholesale customer is invoiced on their existing agreed terms, with an electronic delivery note sent to their store EPoS systems and email.

Morrisons wholesale division currently stocks a range of over 9,000 products for delivery, supplying more than 1,600 stores across five countries. The top-up solution is seen as an extra tool for its customers, who will continue to be serviced by the existing delivered model.

NamNews Implications:

• Morrisons have, in effect, increased their wholesale/franchise distribution points…
• …to include all of their retail branches as a top-up facility.
• Neat!
• And probably makes them the best UK wholesaler in terms of coverage…

#Wholesale #Cash & Carry #Morrisons

Morrisons Rolls Out WIGIG Range

Morrisons ‘when it’s gone it’s gone’ (WIGIG) range has been rolled out to nearly all its supermarkets.

Having first been introduced in February, trade magazine The Grocer reveals that the chain’s WIGIG range has now reached its 450th store. It offers shoppers discounted general merchandise, similar to the offer in Aldi and Lidl’s middle aisle.

Morrisons is said to be working with several new suppliers to offer a range of products, including cookware, toys, homeware, electricals, garden, and car care. Some health & beauty, household cleaning, and food & drink lines have also been featured.

The offers are displayed on wooden crates with ‘When it’s gone it’s gone’ signage. They are live in store for three weeks at a time, with new products added weekly.

Speaking to analysts last week, Morrisons CEO Rami Baitiéh said: “Our trading mentality is growing – and nothing illustrates this more clearly than the way the whole company has got behind our range of outstanding value WIGIGs.

“For us, WIGIG is not a gimmick. It’s a strategic lever for sales growth and customer delight. The offers have to be great quality… but at genuinely outstanding prices. And while we build our strength in WIGIG, we are also building up muscle, experience and supplier relationships in GM and home & leisure… which is an area where we under-index.

“We are still at the start of our WIGIG journey, but the best traders in Morrisons now see the potential, have got behind it, and we are improving every day.”

Last month, Morrisons delivered another “solid quarter of progress” as Baitiéh implemented his recovery plan, which has focused on improving the chain’s product availability, loyalty scheme, and price competitiveness.

NamNews Implications:

• When shoppers fully understand WIGIG…
• …it becomes an opportunity and incentive to buy ‘before stocks run out’.
• With Morrisons becoming a source of once-only bargains…
• …‘providing great quality… but at genuinely outstanding prices’.

#Morrisons #WIGIG

Aldi Starts Testing Its First Loyalty Scheme

Following long-running rumours that Aldi has been developing a loyalty programme, it has been reported that the discounter has started trialling a digital-based scheme in Belgium.

The platform is accessible through an updated Aldi app, which enables shoppers in 70 stores across the West Flanders and northern Hainaut regions to earn points on purchases by scanning a QR code at the checkout. These points can then be redeemed for free products or discounts.

A spokesperson for Aldi Nord told a local news agency: “We are adapting to changing customer preferences. This digital card complements our existing discounts and promotions, offering loyal customers a way to save even more.”

Reports stated that the test is being co-led and monitored in Germany by Aldi Nord with a view to a possible international launch.

Last month, Aldi said that it had no plans to launch a loyalty app in the UK after scanners identical to those used by Lidl for its rewards scheme were spotted at its checkouts. Aldi stated that the devices had nothing to do with a potential new scheme and were instead for electronic gift cards. However, the report noted that the new scanners were only in some of the discounter’s stores.

Members of the Lidl Plus scheme scan the app at checkouts to claim discounts and personalised rewards. The app has been credited with helping Lidl become the fastest-growing bricks & mortar supermarket in the UK over the last 10 months.

In contrast, Aldi’s sales growth has lagged behind its rivals in recent times after facing tough comparatives with its strong performance last year and increased price competition.

Marc Houppermans, executive partner at Discount Retail Consulting and a former Aldi Netherlands board member, told trade publication The Grocer last month that Aldi was working on an answer to Lidl’s app at an international level but “will do it differently as many Lidl customers complain that they do not get the same discounts if they do not have the app”.

NamNews Implications:

• Truly a Reward for Loyalty and should work well on that basis.
• Unfortunately, given the low % of brands in the Aldi model...
• ...the discounter will miss out on the key benefit of branded data i.e. First Party Data that can form the backbone of optimising Retail Media Revenue
• Thereby placing Aldi at a significant disadvantage to the Mults.
• In other words, Aldi will need to radically change the % of Branded vs Aldi Surrogate brand...
• ...(say 50/50, minimum) to restore parity with the mults.

#AldiBusinessModel

Realistic Optimism, a keynote for the New Norm…

Success in business in unprecedented times means being able to accept the realities of the ‘here & now’ and going back to basics while rivals await a return to the old normal… 

As we approached the fourth (!) anniversary of Lockdown, and my family celebrated Mother’s Day in our favourite local restaurant, crowded to capacity with an eight-person queue awaiting tables, it struck me that despite the havoc wreaked by Lockdown fallout, good businesses that consistently delivered more than it says on the tin, have never had it so good. 

In fact, those businesses that refused to fall into a rabbit hole in search of Lockdown causes, but instead focused on dealing with the effect, going back to the basics of establishing what business are we in, agreeing consumer need, defining how we could meet that need consistently, and meet it better than available alternatives, every time, are doing well…

Recognising that the greatest casualty of Lockdown was trust, in that shell-shocked consumers now believe nobody. Trust was further diminished via a succession of moves by brands trying to cope with unprecedented cost increases. These moves, including shrinkflation, skimpflation i.e. ingredient dilution and drip-pricing, saw brand owners dilute hard-won brand equity by insulting the intelligence of their most loyal and increasingly savvy consumers in their assumption that the changes would not be noticed…

Moreover, when challenged, the use of Letter-of-the-Law defences, such as ‘full indications‘ of value re weight/volume declarations on pack, simply drew attention to the fact that consumers make their decisions to purchase based on perception, Spirit-of-the-Law ‘facts’, and retaliate via ‘tell-a-friend’ complaints to their social networks.

Thus years, even decades of building trust in the brand, that guarantee of consistency in offering, was traded for a theoretical gain in product profitability, as brand loyals switched to more trustworthy rivals and even own-label. Moreover, big, powerful brands that increased prices way above inflation ‘because they could’ are now experiencing loss of demand as consumers resist the scale of the brand premium and switch to own-label, find it comparable in quality and then have to be won back to the brand at extra marketing cost…

For the latest insights re the extent of Lockdown fallout, a stroll down any High Street will reveal rows of barbershops that are empty, save for a single barber consulting his mobile as he awaits a possible ‘walk-in’. Adjoining them will be pubs with too few drinkers for time of day, interspersed with restaurants that have more staff than guests…

The pattern is repeated amongst shops and supermarkets that are trying to cope with diminished demand, attempting to serve the needs of uncertain but increasingly savvy shoppers that demand demonstrable value for money, every time.

Meanwhile, the new Big Four mults are Tesco, Sainsbury, Aldi and Lidl, as Morrisons and Asda try to compete under the extra constraints of servicing excessive debt.

The evidence of Lockdown Fallout is all around us. This is our market in the here and now.

As practical business people, we need to optimise our business model within a context of these new realities. 

Welcome to doing business in the New Norm…

The one positive aspect emerging from the Lockdown turmoil is that in times of unprecedented market disruption, business opportunities abound, in that with many rivals awaiting a return to normal, those businesses that can accept market conditions ‘as is’, re-engineer their offering to meet the real needs of savvy consumers, better than available alternatives, and deliver more than it says on the tin, every time, have to win…

In short, those businesses that can ‘park’ issues like the cause of Lockdown and instead focus on managing its effect, have more chance of success in optimising the available opportunities.

Given that trust was the greatest casualty of Lockdown, the restoration of consumer trust in brands, both supplier and retailer, has to be a priority. Consumers should not have to second-guess at every stage of the buying journey. Moreover, given that the FMCG model is based on the fact that causing the consumer to make their first purchase of a brand is such an expensive process, the sale is made at a loss. It is only when the user’s expectations are exceeded by brand performance that they make a repeat purchase with less inducement that we break even on that second sale. Then, with luck, the second purchase leads to a third, at which point some profit is made. Trust is the basis of this process and has to be preserved above all else…

Given that in flat-demand markets, any growth comes at the expense of rivals – doing basic things better than the available alternatives has to be the way forward. This means being completely open-minded re assessing business and brand attributes in terms of need satisfaction compared with competitor offerings of their Product, Price, Presentation and Place combinations. Only if we can conclude that we have some competitive advantage (or can adjust the elements of our marketing mix to deliver a difference that satisfies a consumer) can we proceed…

The next reality has to be the current state of the customer base. We have to accept that the new Big Four mults are now Tesco, Sainsbury’s, Aldi and Lidl, as Morrisons and Asda slowly succumb to the market realities of servicing debt that became excessive when interest rates suddenly reverted to a more normal 5%+ after decades of artificially maintained near-zero costs of borrowing.

Although private equity-owned companies are measured in multiples of EBITDA, i.e. pre-tax Net Profit is less important, until it comes to refloating or selling the company, trying to grow market share by investing in price reduction makes servicing debt even more challenging. Excessive financial re-engineering only adds to the doubt…

The quick answer can be to sell off assets to help reduce debt; meaning reduce the size of the estate to a point where the company is more suited to the New Norm private-equity business model.

Add radical changes of company culture/management style resulting in the loss of key people and the result can mean that recovering lost share and growing the business becomes near impossible…

Post-Lockdown retailing was made for the discounters. Aldi and Lidl are each significantly larger than Tesco globally and are privately-owned with low levels of debt. They are thus capable of optimising UK market conditions in terms of growing sales and market share via good quality and low prices.

Furthermore, when necessary, they can choose to run their UK operations at a loss to achieve their ambitions. They will continue to grow share at the expense of Asda and Morrisons without fear of adequate retaliation…

Taking a longer view, the advent of retail media will radically change the financial dynamics of UK retailers. The sale of first-party data allowing access to a brand’s shoppers in the aisle will generate significant incremental and high-margin revenue for retailers that can supply good quality data via a large assortment of branded goods.

However, in the process, this will limit retailers’ ability to optimise the potential of consumer demand for own-label by causing them to have to maintain their current 50/50 split of brand and own-label in their assortments. This Retail Media revenue can be used to supplement the bottom line, allowing retailers to compete aggressively on price…

However, retail media growth will cause problems for the discounters in that with the 10/90 split of brand and surrogate label, they will not have sufficient brand data to sell. They will, therefore, have to radically change the business model to something closer to a 50/50 split by offering more brands in their assortments, or experience loss of market share as the price wars intensify…

All of these are the new realities and must be factored into business strategies. Above all, given that the uncertainties will continue, suppliers need to carefully monitor the financial health of their main customers, keeping in mind that bankruptcy happens very slowly and then too suddenly to allow any remedial action. This means continuously calculating the incremental sales required to recover losses when a customer goes bust.

There is still considerable Lockdown fallout damage lurking within supplier and retailer businesses, and it is crucial that you take remedial action before you read about another ‘unexpected’ casualty in your morning’s NamNews bulletin.

Realistic optimism means effectively managing these market realities in the New Norm, better than the next guy by applying the basics…

Tesco Must Change Clubcard Prices Logo After Losing Lidl Trademark Appeal

Tesco has lost its appeal against a ruling that it infringed Lidl’s trademark, with it now facing a costly rebranding of its Clubcard Prices scheme.

In April 2023, the discounter won a legal case against the UK’s biggest grocery retailer over the use of a yellow circle on a square blue background to promote its ‘Clubcard Prices’ offers.

Lidl had originally sued Tesco in 2020, shortly after it adopted a colour scheme that was similar to the German firm’s company logo.

After the case was heard at London’s High Court last year, the Judge issued a ruling that said Tesco had taken “unfair advantage of the distinctive reputation” for low prices held by Lidl’s trademarks.

Weeks after Lidl won the legal battle, the High Court ruled that the discounter could have an injunction to stop Tesco from copying its logo.

Tesco’s lawyers argued it was unnecessary to impose an injunction and that its infringement of Lidl’s trademark could be resolved by paying a small amount of damages. It was highlighted at the time how difficult it would be for Tesco to remove all the Clubcard Prices logos in its stores, with the cost estimated at nearly £8m.

Tesco sought to overturn the trademark infringement ruling at a hearing last month, but today, the Court of Appeal kept with the original decision. The court did overturn a decision on copyright in Tesco’s favour, but the group will now have to stop using its Clubcard Prices logo in the current form.

A Lidl spokesperson welcomed the decision, saying: “We expect Tesco now to respect the court’s decision and change its Clubcard logo to one that is not designed to look like ours.”

Tesco stated that it planned to update the logo shortly, with a spokesperson saying: “We are disappointed with the judgment relating to the colour and shape of the Clubcard Prices logo but would like to reassure customers that it will in no way impact our Clubcard Prices programme.”

NamNews Implications:

• Fortunately, the Clubcard Prices idea is now so embedded…
• …Tesco can take the £8m hit…
•  …produce a ‘modernised’ logo sufficiently distant from Lidl…
• …and get on with what really matters.

The Changing Retail Landscape: Reversible Trends or Permanent Shifts?

The past four years since the first Lockdown have seen fundamental changes and unprecedented trends develop that materially affect supplier and retailer businesses everywhere.

Whilst it can be left to others to (hopefully) explain the cause and purpose of the global Lockdown, pragmatic business people have to focus on how to cope with and optimise business opportunities amidst the resulting fallout. A key step has to be identifying the main trends emerging, where they are headed, how they affect us, and what to do about it…

Given that the greatest casualty of Lockdown was trust, we now have to deal with a world in which no one takes anything at face value, be it supplier, retailer or brand, and they want demonstrable value for money vs. available alternatives. Moreover, we have to deliver more than it says on the tin every time, to ensure profitable repeat purchases. If the consumer has to second-guess every element of the offering from a brand using letter-of-the-law rather than spirit-of-the-law assurances, then an alternative offering will probably appear more attractive…

Therefore, trust has to form the bedrock of all our relationships with consumers (See our August Editorial - Trust in the brand.

Shift from Brand to Own-Label:

Given the unprecedented increases in the cost of living arising from inflation-based price increases, it was inevitable that consumers would have to compromise on their need for brands and ‘settle’ for equivalent own-label products.

Brand owners were traditionally able to capitalise on a perceptible difference in quality by charging a brand premium. The problem for brand owners is that a consumer forced to settle for own-label may find the product was ‘not as bad as they were led to believe’. They may begin to query the size of the brand premium and may require extra inducement to return to the brand when things ‘revert to normal’…

Therefore, to maintain the current 55% (brand) to 45% (own-label) relationship, brands will have to moderate shelf-price increases in the face of retail brand improvements, and also advertise more effectively to brand loyals in the aisle via retail media, rather than via increasingly wasteful traditional media.

Meanwhile, it will be in retailers’ interest to try to preserve current brand/own-label relative shares in order to attract incremental retail media revenues. Thus, it is unlikely the current 55/45 split will reverse in the new norm…

Shift from Mults to the Discounters:

Again, unprecedented cost of living pressures has caused mult-loyals to move from major retailers ‘down’ to Aldi and Lidl in a search for more economic purchases via cheaper surrogate labels. As with own-label, many found the discounter experience was not ‘as bad as expected’, represented real value for money and helped them challenge the premium associated with shopping in the mults. All this on a brand / surrogate label balance of 10/90…

As long as current levels of inflation continue, it is unlikely that the appeal of the discounters will diminish, so they will continue to grow share at the expense of the mults.

Moreover, given that Lidl and Aldi are each bigger than Tesco globally (global sales: Aldi £123bn, Lidl £86bn, Tesco £65bn), each of the discounters can afford to sell at a loss in order to drive their UK market shares, if necessary…

However, with the advent of retail media, another dynamic enters the mult/discounter relationship. As you know, retail media networks are driven by the availability of good quality first-party data i.e. insights derived from measurable shopping behaviour arising from retailer loyalty card-based purchases of national brands. This means that for the mults, purchasing behaviour of their shoppers can be more valuable than basket contents. If necessary, the incremental revenue arising from the sale of this access to shoppers in the aisle can be used to cut shelf prices and retrieve share from the discounters.

In order to compete by securing retail media revenue, the discounters will have to adjust their brand/surrogate label balance to something like 50/50 from the current 10/90. It is probable the discounters will make this change before they surrender market share. It all depends on their global willingness to run local UK losses to maintain current momentum…

Shift from Primary Routes to Omnichannel Routes to Consumer:

Given that Lockdown has radically changed consumer value systems, we are in a consumer-centric new norm. In other words, those consumers who have survived, albeit under enormous pressure re their jobs, homes, increasing cost of living and constant uncertainty, they know their value. In return for their custom, they want to be able to buy anytime, anywhere, any place, in whatever way they require. This means suppliers will have to make their products available via every possible route to the consumer or suffer a loss of share to more flexible rivals. Suppliers will have to find ways of balancing fulfilment costs by supplying direct or via outsourcing, managing all prices & terms harmoniously in the process.

Either way, it is inevitable that the cost-to-serve will increase, making diminishing net margins a feature of the new norm. And having experienced omnichannel convenience, it is unlikely that new norm consumers will revert to limited access…

Shift from Offline to Online:

Success online means living with Amazon, operating to their standards of consumer-centricity, and still losing money… Many organisations entered online without realising the true cost of online fulfilment, with consumers unwilling to pay more than £5 delivery fees for drops that cost up to £25 to reach their front door. Meanwhile, Amazon was allowed by the market to take 30 years to gain a degree of coverage that enables it to make up to three parcel drops with each van stop, while rivals have to drive perhaps ten miles between stops.

These online rivals, along with traditional bricks & mortar retailers, also have to compete with Amazon’s 500m-strong catalogue in terms of available range. And as far as retail media revenues are concerned, Amazon are already achieving $40bn+ per annum.

When it comes to categories like healthcare, Amazon is in a position to offer diagnosis based on a combination of data from wearable tech, their knowledge of consumer lifestyle, consumption habits, food & non-food, and fulfil prescriptions to fit, deliver to patients’ homes and check progress. Compare that with a pharmacy’s current capabilities…

Moreover, with Boots currently for sale again, a £6bn acquisition could give Amazon an opportunity to provide a full national healthcare service at a stroke…

Shift from Providing More Than it Says on the Tin to Shrinkflation, Skimpflation and Slack-filling:

One of the more ominous trends arising from Lockdown fallout is the tendency of established brands to trifle with the trust of brand loyals by attempting to disguise price increases via a combination of shrinkflation, skimpflation and slack-filling. Regular readers will be aware of the ‘rationales’ put forward to justify the moves and defend against inevitable criticism.

Brand owners continue to point out that pack details give all necessary information, thus meeting letter-of-the-law requirements, ‘forgetting’ that consumers are driven by perception, the spirit-of-the-law i.e. their expectation based on years of brand loyalty, causing them to become increasingly aggrieved at their perception of being short-changed by a hitherto trusted favourite brand.

This anger may even result in them telling-a-friend: “Please me, and I will tell one friend. Disappoint me and ten friends will learn of my displeasure”. But in the new norm of social media influencers, multiply this impact by ten or even thousands to gauge the potential damage to brand franchise…

Shift from Near Zero Interest Rates to Current Normal Rates:

Following decades of artificially based near-zero interest rates that mis-footed private equity purchases of large retailers when suddenly faced with new norm borrowing costs, it was inevitable that the change to reality would cause tensions in some businesses. Recent startups, based on the assumption of continuing low rates, fell into the same trap. These positions will be difficult, if not impossible, to unwind.

And of all the trends outlined above, it is highly unlikely that current interest rates will revert to near-zero levels in the next decade, if ever. Too much damage has been done by Lockdown, and we are now in repair mode for the foreseeable future.

Overall, it appears that these unprecedented changes and trends are irreversible, and suppliers taking the risk of forecasting beyond one year ahead might benefit from acting on that basis…