A new study by Bernstein Research has suggested that Tesco is going further than any other UK retailer in using its private-label range to take on the discounters.
In a briefing note, Tesco: There is no escaping the new 'Exclusive at Tesco' ranges, analyst Bruno Monteyne says that Tesco is utilising full-page advertising and a myriad of other media channels to get its message across.
Making An Impact
In particular, Monteyne points to an advert that appeared on the back page of City AM, a London freesheet, last week.
‘The advertisement was remarkable in three different ways: (1) it's big: seemingly part of a national advertisement campaign with full page adverts, (2) the style looks like that of a discounter advert, and (3) the price: Tesco is 31% cheaper than the comparable basket at Lidl,’ Monteyne wrote.
‘Tesco is going further than any other retailer, and further than we expected, in amending its ranges to counter the discounters.
‘Tesco's message to consumers will be: “Why go anywhere else? We've got the essentials at the right/best price. And if you need anything beyond the essentials, you have it all in one place.”’
Price Positioning
Monteyne also noted that Tesco is also continuing to ‘raise the bar’ in terms of its price positioning – again, with one eye on what Aldi and Lidl are doing.
‘Tesco is far from finished in investing in the retail proposition. While cutting costs and expanding the margins, they continue to raise the bar in terms of pricing,’ Monteyne wrote.
‘That is long term the right thing for sustainable market share, but in the short term it is likely to impact the rate of margin recovery,’ he further noted.
Monteyne added that he expects the discounters to amend their prices to fall into line with Tesco’s new pricing policy, which could, in turn, impact their growth aspirations.
‘We expect the discounters will adjust their prices to come in line with Tesco on those products,’ he wrote.
‘That will further deteriorate their profitability levels which in turn is likely to further reduce their appetite for new store openings in the future,’ Monteyne added.
Bernstein Research has rated Tesco ‘outperform’.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
