About About Contact Contact
Throughout millennia, feasting has always been a popular human trait.  And ever since the Roman festival of Saturnalia, which pre-dates Christmas, the end of December has been a time of truly excessive food and alcohol consumption over most of the globe.  For this ritual to survive in the cold, dark, northern parts of the planet, the prudent carefully fattened the cattle and pigs, stored up extra vegetables, fruit and grain, and brewed strong liquor so there would be plenty to eat and drink at the most important celebration of the year. In today’s industrialised world, few people bother to store natural foodstuffs as the majority of us are now psychologically as well as physically divorced from its creation.  For the big Christmas feast, as well as our usual groceries, we’ll buy extra vegetables, fruit, fancy breads and butter, and lots of treats, as well as, of course, a turkey.  But most of us will purchase finished food products: ready prepared vegetables and sauces, and an oven-ready bird.  In fact you are far more likely to have bought the mince pies and the Christmas pudding and cake from a supermarket than to have made them yourself from the basic ingredients.  Thus Xmas is usually a time of great abundance for Britain’s big four grocery supermarkets.  Yet all four faced declining sales.  So what was different about December 2014? In an effort to get as large a share as possible of the Christmas spend Tesco, Sainsbury's, Asda and Morrison spend a fortune on television advertising leading up to and throughout all the festivities.  If you were in the Britain and joined the nine million people who watched the highly popular Downton Abbey special Christmas episode, you will have seen some of the different advertising approaches used.  If you missed them you can see Tesco's Christmas ad here, Sainsbury's here, Asda’s here and Morrison's here.  Judging by Youtube viewing figures, Sainsbury's Christmas TV ad was the outright winner, certainly in terms of general approval, with 411 times the views on YouTube of either Morrison or Asda, and 19 times the views of Tesco.  But despite being high on emotion the popularity of Sainsbury's Christmas TV ad has not stopped its slide in market share.  Nor did the heavy advertising spend made by Tesco, Asda and Morrison appear to do anything much for their businesses.  I can well imagine the defensive post-Christmas PowerPoint presentations from the respective advertising agencies where they defend their actions, and all the money spent, by insisting that things would have been much worse if their clients hadn't advertised.  Having worked in and studied advertising for many years I can confirm academic findings that show there is no correlation between advertising and increased sales for an already well-established brand.  This fact confounds the wishful statistics produced annually by every advertising agency trying to prove the opposite. What was really different in December2014 was the German invasion – it was the first year in Britain that Lidl and Aldi joined the Christmas TV advertising bonanza.  But their advertising agencies will not be under the same sort of pressure as those which work for Tesco, Sainsbury's, Asda and Morrison because “the discounters,” as Lidl and Aldi are disdainfully called, are steadily and significantly increasing market share, and it particularly showed at Christmas.  Schwartz Group, who own Lidl, is actually Europe's largest food retailer and Aldi is not that much smaller.  These two operators now have a combined British market share of 8.6% (Kantar World Panel figures) and, as they’ve been growing like Topsy in an otherwise shrinking food market, analysts have started to notice.  In truth these two companies, both run with astonishing efficiency, have been growing slowly but surely in Britain since the mid- 1990s when their managements correctly observed that British supermarkets had some of the fattest profit margins in global food retailing, and they both took advantage of this golden opportunity. Many initially sceptical market analysts now think that the combined British food retailing market share of these upstart “discounters” could eventually reach 20-25%.  If my own family’s shopping behaviour is anything to go by, and we know many people like us, then the big four grocery supermarkets are really in trouble.   We rarely visit Aldi, but we’ve been shopping at Lidl for some years now and the proportion of our food purchases bought there has steadily grown.  For the month of December our grocery shopping broke down as follows – 49% Lidl, 34% Sainsbury's, 14% Waitrose and 3% Tesco.  Naturally we shop at the stores most convenient to us, but only for the items we can’t get from Lidl.  For example, we use Good Hemp long-life milk instead of cows’ milk because, like the majority of western Europeans, we are lactose intolerant.  (Unlike the majority, we luckily know this.)  Of the big four grocery supermarkets only the larger branches of Sainsbury's, Tesco’s and Waitrose stock Good Hemp long-life milk and, as there’s only a large Sainsbury’s convenient to us, we buy it there.  Sainsbury’s also stocks “free from gluten” bread as well as sheep’s yoghurt, so that often determines where we shop for our primary top-up of items not provided by Lidl.  Our preferred Peruvian decaffeinated coffee requires a trip to Waitrose and we also prefer to buy fresh salad, vegetables and some fruit from Waitrose’s or Sainsbury's because these green groceries are usually much better than the hitherto limited, and sometimes poor quality, selection on offer at Lidl.  In fact, fresh food is Lidl’s Achilles heel.  Historically both Lidl and Aldi tended to avoid stocking produce that deteriorates quickly, in order to maximise profits and increase discounts.  To this day Lidl still doesn't mark many fresh food items with a date stamp that can be read by customers, which is very irritating.  And the quality of Lidl’s vegetables and fruit is variable.  Several times we’ve been caught with supposedly fresh food which has died very quickly but, to be fair, the produce is often superb and half the price we’d pay elsewhere.  These German stores may have their limitations but they offer exceptionally good value, and not just on the basic foodstuffs.  Lidl is where we buy items like good French or New World wines, smoked salmon, duck, meat and fish terrines, dark chocolate, frozen prawns and crayfish tails, as well as venison steaks and the occasional lobsters when they are in stock.  What also makes Lidl our favourite store are the extraordinary and quixotic non-food items periodically available.  We have nothing but praise for Lidl's sun-loungers, electric blender, kettle, toaster, non-fat grill, chopping board, saucepan, steam  inhaler, shaver, hairdryer, digital radios, exercise weights, LED floor-standing lights, radio- controlled alarm clocks, door mat, posture pillow, dressing gowns and leather gloves that we now possess.  The design, quality and value of these disparate items is exceptional and usually carries a three-year guarantee.  There’s simply no contest when one compares similar items when they are ever available from Tesco, Sainsbury's, Asda and Morrison.  You may have noticed that Tesco, the largest British supermarket, only accounts for a tiny proportion of our grocery shop.  This could be because, although it’s in walking distance, it’s only a convenience store with very limited stock.  But the reality is that even when we lived in London and had a choice of all the large supermarkets, Tesco was never popular with us. Of Britain’s big four Tesco is in the most trouble with a financial accounting scandal that has already cost several directors their jobs, and a Moody's share rating set at junk status.  The scandal is a complex story but essentially, faced with rapidly declining sales, rebates from suppliers for exceeding sales targets were booked when they should not have been.  It’s a sad situation and one that even caught out the famous American investor Warren Buffett who, from 2006, had been buying up Tesco shares until he held a 5% stake in the company – his largest investment outside the U.S.  Now Buffett says: "I made a mistake on Tesco. That was a huge mistake by me."  In the year to December 2014 Tesco shares have fallen 43% and Buffett is cutting his losses by quickly reducing his stake. As one of the world's largest grocery supermarkets Tesco's decline didn't happen overnight.  Much of it was caused by starving the core British business of investment and management time when it was sorely needed during the company’s ill-fated expansion into the U.S.  The American development was a poorly conceived and researched store format called Fresh & Easy.  The result was a disaster: by U.S. standards the produce wasn't fresh, and purchasing via self-checkout stations wasn't considered easy by customers used to a friendly and efficient packing service.  That American episode alone cost Tesco £2 billion and, perhaps more importantly, several years of senior management's primary attention and focus.  Unlike the London stock market, I'm not hopeful that Tesco's new chief executive Dave Lewis is capable of continuing to make the right decisions to really turn the situation around.  He comes from Unilever and his career has been built around branding, this at time when Tesco needs somebody with real street-trading cred and retailing running in their blood. Like most of the world’s major supermarkets Tesco was created by a remarkable individual.  This one was called Jack Cohen and he began his business life after the Second World War running a street-market stall in Hackney, in the impoverished East end of London.  Cohen started Tesco as a discounter, trading in shops that looked as much as possible like his beloved market stalls.  “Pile it high and sell it cheap!” was his famous maxim and, like the enthusiastic barker he was at heart, he used every sales trick in the book.  I'm old enough to remember going into a Tesco store with all the goods displayed in their cardboard boxes, stacked up on the shelves and on the floor, in order to save costs and time, much as you see nowadays in Aldi or Lidl stores. I reckon that the only way to beat off the competition and restore the fortunes of Tesco in the U.K. will be to take a bold decision similar to one once made its founder:  In 1963, in response to a competitor, Jack Cohen introduced Green Shield stamps, a simple reward saving scheme based on the amount of money spent.  The stamps were hugely popular and for many years Cohen was a major advocate of this promotion scheme designed to drive sales.  Yet in 1977 when new discounters like Kwik Save started to take business away from Tesco, Cohen immediately abandoned Green Shield stamps and shrewdly transferred every penny saved to make extra discounts on Tesco's prices.  The modern promotional equivalent of Green Shield stamps is now the Tesco Clubcard, a loyalty reward system that returns around 1p for every £1 spent, but that often features “specials” which are far more generous.  Just like Green Shield stamps, the Clubcard has been very successful in the past, but it’s now hopelessly out of date.  Tesco relies on analysing Clubcard percentage purchasing to monitor what its customers are buying, yet this knowledge primarily benefits the company – the customers neither see nor care about data, all they want is the lowest price possible.  You can bet your bottom dollar that Jack Cohen would have been on to this by now.  Tesco may have become a fashionable “big data” driven company, but this hasn't stopped them having the steepest sales decline of the big four British supermarkets.  Today’s customers consider 1p in the £ a derisory discount, and most occasional shoppers like me wouldn’t bother having a Clubcard.  Interestingly, of Britain's big four supermarkets Asda's sales have actually declined the least as they have ignored loyalty schemes and simply concentrated on getting the all-important lowest price. I very much doubt that Tesco's new chief executive has the retailing nous to abandon the Clubcard scheme so that he can compete on prices with Aldi and Lidl.  Yet it will take that for Tesco to have a chance of becoming competitive now.  Jack Cohen’s trading instinct told him Green Shield stamps had had a good run but outlived their usefulness.  He knew that if the market situation, or the customers, changed then you did whatever was needed to keep sales up.  The problem with Tesco’s management is that they may know business theory and how to analyse data ad infinitum but they’ve never learnt to run a market stall or to empathise with their customers.  Jack Cohen would have thoroughly approved of the attitude of Aldi and Lidl.  Like him, they started their family businesses in a time of austerity and despite their having grown into huge international enterprises, larger than Tesco, they both continue to be private, family-run businesses concentrating on piling the goods high and selling them at the lowest possible price. January 2015 
Click here to download the PowerPoint chart: Click here to download the PowerPoint chart:
...with analysis & insight...
Home Home Archive: Free PowerPoint download Free PowerPoint download
Click image to enlarge
Click here to download the PowerPoint chart: Click here to download the PowerPoint chart: Click here to download the PowerPoint chart: Click here to download the PowerPoint chart:

Pile it high and continue to sell it

cheap!

Click here to download the PowerPoint chart: Click here to download the PowerPoint chart: Click to return to page
Archive Archive
About
Contact
Home
Throughout millennia, feasting has always been a popular human trait.  And ever since the Roman festival of Saturnalia, which pre-dates Christmas, the end of December has been a time of truly excessive food and alcohol consumption over most of the globe.  For this ritual to survive in the cold, dark, northern parts of the planet, the prudent carefully fattened the cattle and pigs, stored up extra vegetables, fruit and grain, and brewed strong liquor so there would be plenty to eat and drink at the most important celebration of the year. In today’s industrialised world, few people bother to store natural foodstuffs as the majority of us are now psychologically as well as physically divorced from its creation.  For the big Christmas feast, as well as our usual groceries, we’ll buy extra vegetables, fruit, fancy breads and butter, and lots of treats, as well as, of course, a turkey.  But most of us will purchase finished food products: ready prepared vegetables and sauces, and an oven-ready bird.  In fact you are far more likely to have bought the mince pies and the Christmas pudding and cake from a supermarket than to have made them yourself from the basic ingredients.  Thus Xmas is usually a time of great abundance for Britain’s big four grocery supermarkets.  Yet all four faced declining sales.  So what was different about December 2014? In an effort to get as large a share as possible of the Christmas spend Tesco, Sainsbury's, Asda and Morrison spend a fortune on television advertising leading up to and throughout all the festivities.  If you were in the Britain and joined the nine million people who watched the highly popular Downton Abbey special Christmas episode, you will have seen some of the different advertising approaches used.  If you missed them you can see Tesco's Christmas ad here, Sainsbury's here, Asda’s here and Morrison's here.  Judging by Youtube viewing figures, Sainsbury's Christmas TV ad was the outright winner, certainly in terms of general approval, with 411 times the views on YouTube of either Morrison or Asda, and 19 times the views of Tesco.  But despite being high on emotion the popularity of Sainsbury's Christmas TV ad has not stopped its slide in market share.  Nor did the heavy advertising spend made by Tesco, Asda and Morrison appear to do anything much for their businesses.  I can well imagine the defensive post-Christmas PowerPoint presentations from the respective advertising agencies where they defend their actions, and all the money spent, by insisting that things would have been much worse if their clients hadn't advertised.  Having worked in and studied advertising for many years I can confirm academic findings that show there is no correlation between advertising and increased sales for an already well-established brand.  This fact confounds the wishful statistics produced annually by every advertising agency trying to prove the opposite. What was really different in December2014 was the German invasion – it was the first year in Britain that Lidl and Aldi joined the Christmas TV advertising bonanza.  But their advertising agencies will not be under the same sort of pressure as those which work for Tesco, Sainsbury's, Asda and Morrison because “the discounters,” as Lidl and Aldi are disdainfully called, are steadily and significantly increasing market share, and it particularly showed at Christmas.  Schwartz Group, who own Lidl, is actually Europe's largest food retailer and Aldi is not that much smaller.  These two operators now have a combined British market share of 8.6% (Kantar World Panel figures) and, as they’ve been growing like Topsy in an otherwise shrinking food market, analysts have started to notice.  In truth these two companies, both run with astonishing efficiency, have been growing slowly but surely in Britain since the mid- 1990s when their managements correctly observed that British supermarkets had some of the fattest profit margins in global food retailing, and they both took advantage of this golden opportunity. Many initially sceptical market analysts now think that the combined British food retailing market share of these upstart “discounters” could eventually reach 20-25%.  If my own family’s shopping behaviour is anything to go by, and we know many people like us, then the big four grocery supermarkets are really in trouble.   We rarely visit Aldi, but we’ve been shopping at Lidl for some years now and the proportion of our food purchases bought there has steadily grown.  For the month of December our grocery shopping broke down as follows – 49% Lidl, 34% Sainsbury's, 14% Waitrose and 3% Tesco.  Naturally we shop at the stores most convenient to us, but only for the items we can’t get from Lidl.  For example, we use Good Hemp long-life milk instead of cows’ milk because, like the majority of western Europeans, we are lactose intolerant.  (Unlike the majority, we luckily know this.)  Of the big four grocery supermarkets only the larger branches of Sainsbury's, Tesco’s and Waitrose stock Good Hemp long-life milk and, as there’s only a large Sainsbury’s convenient to us, we buy it there.  Sainsbury’s also stocks “free from gluten” bread as well as sheep’s yoghurt, so that often determines where we shop for our primary top-up of items not provided by Lidl.  Our preferred Peruvian decaffeinated coffee requires a trip to Waitrose and we also prefer to buy fresh salad, vegetables and some fruit from Waitrose’s or Sainsbury's because these green groceries are usually much better than the hitherto limited, and sometimes poor quality, selection on offer at Lidl.  In fact, fresh food is Lidl’s Achilles heel.  Historically both Lidl and Aldi tended to avoid stocking produce that deteriorates quickly, in order to maximise profits and increase discounts.  To this day Lidl still doesn't mark many fresh food items with a date stamp that can be read by customers, which is very irritating.  And the quality of Lidl’s vegetables and fruit is variable.  Several times we’ve been caught with supposedly fresh food which has died very quickly but, to be fair, the produce is often superb and half the price we’d pay elsewhere.  These German stores may have their limitations but they offer exceptionally good value, and not just on the basic foodstuffs.  Lidl is where we buy items like good French or New World wines, smoked salmon, duck, meat and fish terrines, dark chocolate, frozen prawns and crayfish tails, as well as venison steaks and the occasional lobsters when they are in stock.  What also makes Lidl our favourite store are the extraordinary and quixotic non-food items periodically available.  We have nothing but praise for Lidl's sun-loungers, electric blender, kettle, toaster, non-fat grill, chopping board, saucepan, steam  inhaler, shaver, hairdryer, digital radios, exercise weights, LED floor-standing lights, radio-controlled alarm clocks, door mat, posture pillow, dressing gowns and leather gloves that we now possess.  The design, quality and value of these disparate items is exceptional and usually carries a three-year guarantee.  There’s simply no contest when one compares similar items when they are ever available from Tesco, Sainsbury's, Asda and Morrison.  You may have noticed that Tesco, the largest British supermarket, only accounts for a tiny proportion of our grocery shop.  This could be because, although it’s in walking distance, it’s only a convenience store with very limited stock.  But the reality is that even when we lived in London and had a choice of all the large supermarkets, Tesco was never popular with us. Of Britain’s big four Tesco is in the most trouble with a financial accounting scandal that has already cost several directors their jobs, and a Moody's share rating set at junk status.  The scandal is a complex story but essentially, faced with rapidly declining sales, rebates from suppliers for exceeding sales targets were booked when they should not have been.  It’s a sad situation and one that even caught out the famous American investor Warren Buffett who, from 2006, had been buying up Tesco shares until he held a 5% stake in the company – his largest investment outside the U.S.  Now Buffett says: "I made a mistake on Tesco. That was a huge mistake by me."  In the year to December 2014 Tesco shares have fallen 43% and Buffett is cutting his losses by quickly reducing his stake. As one of the world's largest grocery supermarkets Tesco's decline didn't happen overnight.  Much of it was caused by starving the core British business of investment and management time when it was sorely needed during the company’s ill-fated expansion into the U.S.  The American development was a poorly conceived and researched store format called Fresh & Easy.  The result was a disaster: by U.S. standards the produce wasn't fresh, and purchasing via self-checkout stations wasn't considered easy by customers used to a friendly and efficient packing service.  That American episode alone cost Tesco £2 billion and, perhaps more importantly, several years of senior management's primary attention and focus.  Unlike the London stock market, I'm not hopeful that Tesco's new chief executive Dave Lewis is capable of continuing to make the right decisions to really turn the situation around.  He comes from Unilever and his career has been built around branding, this at time when Tesco needs somebody with real street-trading cred and retailing running in their blood. Like most of the world’s major supermarkets Tesco was created by a remarkable individual.  This one was called Jack Cohen and he began his business life after the Second World War running a street-market stall in Hackney, in the impoverished East end of London.  Cohen started Tesco as a discounter, trading in shops that looked as much as possible like his beloved market stalls.  “Pile it high and sell it cheap!” was his famous maxim and, like the enthusiastic barker he was at heart, he used every sales trick in the book.  I'm old enough to remember going into a Tesco store with all the goods displayed in their cardboard boxes, stacked up on the shelves and on the floor, in order to save costs and time, much as you see nowadays in Aldi or Lidl stores. I reckon that the only way to beat off the competition and restore the fortunes of Tesco in the U.K. will be to take a bold decision similar to one once made its founder:  In 1963, in response to a competitor, Jack Cohen introduced Green Shield stamps, a simple reward saving scheme based on the amount of money spent.  The stamps were hugely popular and for many years Cohen was a major advocate of this promotion scheme designed to drive sales.  Yet in 1977 when new discounters like Kwik Save started to take business away from Tesco, Cohen immediately abandoned Green Shield stamps and shrewdly transferred every penny saved to make extra discounts on Tesco's prices.  The modern promotional equivalent of Green Shield stamps is now the Tesco Clubcard, a loyalty reward system that returns around 1p for every £1 spent, but that often features “specials” which are far more generous.  Just like Green Shield stamps, the Clubcard has been very successful in the past, but it’s now hopelessly out of date.  Tesco relies on analysing Clubcard percentage purchasing to monitor what its customers are buying, yet this knowledge primarily benefits the company – the customers neither see nor care about data, all they want is the lowest price possible.  You can bet your bottom dollar that Jack Cohen would have been on to this by now.  Tesco may have become a fashionable “big data” driven company, but this hasn't stopped them having the steepest sales decline of the big four British supermarkets.  Today’s customers consider 1p in the £ a derisory discount, and most occasional shoppers like me wouldn’t bother having a Clubcard.  Interestingly, of Britain's big four supermarkets Asda's sales have actually declined the least as they have ignored loyalty schemes and simply concentrated on getting the all-important lowest price. I very much doubt that Tesco's new chief executive has the retailing nous to abandon the Clubcard scheme so that he can compete on prices with Aldi and Lidl.  Yet it will take that for Tesco to have a chance of becoming competitive now.  Jack Cohen’s trading instinct told him Green Shield stamps had had a good run but outlived their usefulness.  He knew that if the market situation, or the customers, changed then you did whatever was needed to keep sales up.  The problem with Tesco’s management is that they may know business theory and how to analyse data ad infinitum but they’ve never learnt to run a market stall or to empathise with their customers.  Jack Cohen would have thoroughly approved of the attitude of Aldi and Lidl.  Like him, they started their family businesses in a time of austerity and despite their having grown into huge international enterprises, larger than Tesco, they both continue to be private, family-run businesses concentrating on piling the goods high and selling them at the lowest possible price. January 2015 

Pile it high and continue

to sell it cheap!

Click here to download the PowerPoint chart: Click here to download the PowerPoint chart: Click to return to page