Tesco’s launch of a clutch of entry-level own-brand labels has been billed as a tactic to fight back against the discounters.
Tesco group chief executive Dave Lewis and UK boss Matt Davies may have had Aldi and Lidl uppermost in their thoughts when rubber-stamping the initiative, but it is another adversary that could find itself bearing the brunt of the impact of the new ‘Farms’ brands.
In the blue corner – a resurgent and increasingly confident Tesco. In the green – a wobbling and slightly groggy Asda.
Asda boss Andy Clarke had already admitted that Tesco’s performance over Christmas “surprised” the grocer, as it did the sector in general.
While that nine-week period of improved trading would have been a stinging blow to Asda, the launch of Tesco’s Farms brands could prove to be a knockdown – if not a knockout – punch.
“The launch of Tesco’s Farms brands could prove to be a knockdown – if not a knockout – punch”
Asda had already lost customers to Aldi and Lidl in droves as the discount duo landed a flurry of jabs to the supermarket giant’s every day low price credentials, which are simply no longer unique in a market characterised by food price deflation.
In retaliation, Clarke has increased both the focus and investment into the Walmart-owned grocer’s quality message as it bids to mount a sustained counterattack.
But in its battle to fight back against the discounters, Asda may have been caught with its guard down after Tesco sidestepped Asda’s ongoing quality offensive and dealt it an unexpected blow.
If customers were returning – or even planning to return – to Asda because of its perceived higher quality produce than Aldi and Lidl, Tesco’s initiative could throw another alternative shopping destination firmly into the mix.
The seven new Farms brands certainly catch the eye. They are colourful, professional and look far from cheap – but their price points more than contradict the latter.
Carrots at 49p per kilogram, six kiwis for 59p, 500g of beef mince for £1.69, £1.35 for 300g of bacon and £2.82 per 195g of sirloin steak are prices that scream value, without the potential stigma previously associated with purchasing Tesco’s ‘Everyday Value’ or its former blue and white striped ‘Tesco Value’ ranges.
“I think Aldi and Lidl have raised the bar in terms of own-brand quality. We have to step that on and be very competitive in that space”
Speaking at Retail Week Live just days ago, Asda’s incoming chief customer officer, Andy Murray, admitted that the Walmart-owned grocer had sometimes “lost focus” of what made it “great” as it battled with the discounters.
He said the grocer needed to draw on its “assets”, including “talking about the Asda price” more in a bid to win back shoppers and revitalise ailing sales, but also revealed that revamping the grocer’s own-label proposition would be one of his “top priorities”.
“Customers want great quality and I think Aldi and Lidl have raised the bar in terms of own-brand quality that we are seeing in the marketplace,” Murray said at the event. “We have to step that on and be very competitive in that space.”
Now that Tesco has landed another punch on price, Clarke, Murray and the rest of Asda’s senior team may have found themselves on the ropes once again.
While Asda is clearly not ready to throw in the towel, work to get its own-label proposition fighting fit while making the most of its price credentials again needs to be completed quickly and effectively to prevent it falling further behind its peers.