The big grocers are all looking to reconnect with customers as sales decline. Retail Week takes a look at whether anti-corporate sentiment is affecting the supermarkets.

Asda offered assistance to flood-hit communities.

It’s no secret that the big grocers aren’t having the best year. A sluggish market and low food inflation have caused some problems, but there’s another strand to the leading grocers’ troubles that has made them more vulnerable to a squeezed market.

Consumers have become restless, eager for change, and in some cases, tired of the corporate values they think the big four represent.

Many shoppers are ditching them in favour of the German discounters. Aldi and Lidl have steadily won market share from the established supermarkets with a focus on cost and quality. But despite their rising popularity they are not seen in the same corporate light as the grocer giants.

Clive Black, analyst at Shore Capital, believes there is an air of anti-corporatism among consumers that is causing them to turn away from supermarkets.

He said in a note in February of the grocers’ collective market share loss: “Is this collective weakness because of an antipathy to large stores that predominate amongst the big four? Is it about their propositions, promotions and prices? Or is there a growing collective distrust and disconnection with the dominant brands that is leading folk elsewhere?”

Too little, too late?

Five months on, Black still believes this distrust could cause a real problem for the large British supermarkets. “The big four have a remarkable degree of market concentration in the UK,” he says. “Such concentration can appear dominant at times but most concentrated markets eventually become a victim of customer dissatisfaction, political interference or entrepreneurship.

“It is price, entrepreneurship and a will on behalf of customers tired of the big four’s inflexibility and corporatism that is driving change.”

The big grocers themselves hardly need telling. Tesco chief executive Philip Clarke said at the grocer’s investor and analyst seminar earlier this year: “I’m now in my 40th year at Tesco and I have not seen such change in all those years. Words such as ‘biggest’ and ‘best’ are no longer admired since the banking crisis. Now it’s about being ‘better’.”

For supermarket bosses, “better” increasingly means less corporate. In the last year, the supermarkets have implemented strategies designed to increase the profile of their businesses in local communities. But it is not your average corporate responsibility clause; it is a serious bid to win back customers by giving something back.

From working with local schools to funding large-scale international projects, it’s hard to find a grocer that isn’t doing something to enhance their corporate reputation.

“Consumers are more switched on when it comes to the practices of the grocers”

Andrew Stevens, senior analyst, Verdict Retail

Black, however, is sceptical that they will have any real effect. It might be a case of changing too little, too late, and that even seemingly ethical retailers such as the Co-op have suffered reputational damage.

“The business cycle has come full circle and the next generation of British grocery retailing will be much more about entrepreneurship, price, fragmentation and focus. Within these contexts, corporate affairs and social responsibility will have a role to play, but they will not be a driving force for change; even more so after the Co-op’s travails.”

Andrew Stevens, senior analyst for grocery at Verdict Retail, says part of the issue is that shoppers are more educated than they used to be.

“Consumers are more switched-on when it comes to understanding what the practices and tactics of the grocers are.

“There’s an awareness of where food comes from and people are far more educated than they have been in the past. And if you look at the popularity of the discounters, people are now aware that they pay more for the extras that the supermarkets give you,” he says.

This newfound savviness has led to a sense of disconnect between shoppers and the established grocers, he says, and it will be difficult to tackle from a retailer’s point of view.

Sainsbury’s and Waitrose have done well because they’ve managed to connect with shoppers on an emotional and ethical level, Stevens says, but changing what a retailer stands for is tough. “It’s incredibly difficult for a retailer to change what they are,” he says.

Public opinion and perception can be slow to change, and Paul Martin, managing director of consultancy Boxwood Insights, says that is causing some of the problems facing Tesco, Morrisons and the Co-operative.

He says: “Tesco has been seen as the big bully on the block for many years, and there’s an element of that influencing the demise of the big guys.”

However, Stevens says that all is not always as it seems. The Co-operative Group might have taken a bashing in the press, but the parts of its business that are well run and steeped in a local community are performing well.

“If you look at the Midcounties Co-op it’s performing well. The Co-operative Group might not be seen as trustworthy, but the co-operative movement and idea itself is.”

Martin says part of the disconnection between consumers and big supermarket groups is an inevitable consequence of growth. “The larger you get the more complex your organisation is, and the more difficult it is to stay in touch with today’s consumer.”

Retailers’ response

The grocers argue their stores all have deep ties with their local communities, and a look at their activities shows the efforts they put into building trust and a connection with consumers.

Allan Edwards, Asda’s senior director for public affairs and CSR, says: “Trust is built over a long period of activity and engagement and Asda has been engaged with its customers and local communities for nearly 50 years.

“We have grown our customer base to around 19 million loyal shoppers visiting Asda every week – a number that we are very proud of and we hope that our work in communities continues to grow that trust.”

Asda runs a variety of community schemes, including its Community Life programme, which is a national initiative designed and tailored to support each of the grocer’s local communities.

Edwards says: “The aim is to make the areas around our Asda stores better places to live, work and grow up, delivered through engagement with and investment in our communities within our ‘Asda mile’ – the area directly around our stores.”

This involves Asda employees integrating the brand into the local area, through initiatives such as helping schoolchildren grow vegetables, renovating nurseries, organising tea parties and helping at care homes.

Similarly, Morrisons’ Community Champions scheme encourages stores to market the brand while taking part in, or organising, more altruistic projects in the local community.

Guy Mason, head of corporate affairs at Morrisons, says the scheme was a head office-led progression of what had already been happening naturally in stores.

“We always knew that every store had at least one colleague that was their unofficial community champion – fundraising and getting involved in local groups,” he explains. “That’s why when we were thinking about our points of difference at the beginning of last year, we thought it was time to make that an official part of the store team.”

Local heritage

Most grocers are keen to point out how their history as local market-stalls or independent retailers is reflected in their values today. Marks & Spencer, for instance, ran a marketing campaign in 2009 highlighting its roots as a Victorian Penny Bazaar in Leeds.

Chris Taylor, Marks & Spencer’s director of retail operations, says: “I think the big plus that Marks & Spencer has is a real long heritage and a long-standing ethos based on the local. All the stores we open have a very strong connection and that is recognised to some degree very clearly by the customer. It’s so embedded in the culture that community participation happens naturally and instinctively in stores that we never have to force it.”

Marks & Spencer is the headline partner for Macmillan Cancer Support’s World’s Biggest Coffee Morning in September, when each store or cafe puts on a coffee morning for the public to raise money for the charity.

“It’s incredibly difficult for a retailer to change what they are”

Andrew Stevens, senior analyst, Verdict Retail

It also worked with the Marine Conservation Society for its Big Beach Clean-up, where staff and members of the public helped clean-up a local stretch of coastline over a week.

Waitrose, meanwhile, works with local food banks, promotes healthy eating in stores and encourages its partners to volunteer at local causes and charities for a set amount of hours a year.

However, the most noticeable of its community strategies is Community Matters, or the ‘green tokens’ scheme, where shoppers vote for a local charity or cause in-store to receive a share of a £1,000 donation from Waitrose.

“The donations really make a difference and help shops to engage with their local communities, from supporting youth sports to providing care for people suffering with life threatening illnesses,” says Tina Varns, Waitrose community, sustainability and ethical sourcing manager.

Changing perceptions

Bryan Roberts, director of retail insights at Kantar Retail, believes that attempts to move away from a corporate image can indeed produce a positive outcome for retailers. “While the cynical might firmly categorise these activities as reputation management, I think that this misses the point somewhat,” he explains. “As Walmart discovered during Hurricane Katrina [when it delivered supplies, including free prescription drugs, to those affected] doing the right thing in these circumstances can generate improved perceptions – a beneficial by-product of behaving like a decent corporate citizen.

He says: “The benefits of these types of activities – be they planned or a spontaneous reaction to unforeseen events – are manifold. They benefit communities, they can galvanise the workforce around worthy causes, they enhance reputation and they enable a stronger dialogue with the public.”

Martin says it’s an uphill struggle for any retailer battling to change their public image. “The bigger you are the bigger the challenge is to really stay connected with the consumer. Aldi has a very simple business model. It’s pretty easy for the customer to understand and easier to deliver that value proposition. The customer expects less, so you deliver what you promise.”

He thinks that getting back into customers’ good books, and moving away from a ‘big’ corporate image, is a task that will take a while. “It’s a long-term game, and is a vicious circle to a degree. But you have to do it.”

In a world where market growth is almost stagnant and food inflation is the lowest it has ever been, anti-corporate sentiment is an unwelcome challenge for big grocers, and it looks likely to be a stubborn one.

What some of the big grocers are doing

Sainsbury’s: The retailer’s Active Kids scheme encourages schoolchildren to become more active through its Paralympic sponsorship and equipment donation programme.

Its community investment programme raises money for Comic Relief, the Royal British Legion and other causes.

The Million Meals Appeal donated food to vulnerable people.

The Co-operative: The mutual’s Community Fund allows members to donate loyalty points collected in-store to the fund, which it distributes among local charities and causes. Co-operative Schools sponsors schools and academies in deprived communities.

Tesco: Its Community Champions scheme is an attempt to understand and assist local communities. Tesco for Schools and Clubs is a voucher scheme that provides equipment for young people.