Below is an interesting, if distinctly British, assessment of UK retailer Tesco’s expansion of its private brand portfolio, from the British trade magazine Marketing Week. In 2011 the retailer began to launch a set of private brands which they dubbed “Venture Brands”, the move was a dramatic addition to their portfolio strategy; which rested almost exclusively on the Tesco name and corresponding sub-brands. This strategy worked well for the retailer, who took advantage of weak national brands in the UK and their well-established retail brand to grow private brand penetration to levels, which make U.S. retailers green with envy.
However, the strategy is nothing new for U.S. retailers who have a long history of building brands that have potential beyond their own retail brand equities. Examples include iconic U.S. private brands like Craftsman and Kenmore at Sears, Lucerne at Safeway and Eight O’clock Coffee, which was sold by A&P in 2003 for at least $107.5 million to Gryphon Investors.
U.S. retailers should be cautious to interpret Tesco’s shifting sales and strategy as anything more than their own management and economic issues.
Where next for Tesco’s Venture Brands?
Do the brands Chokablok, Halo and Parioli ring any bells? Tesco’s venture brands were an attempt by the supermarket to become an FMCG (Fast Moving Consumer Goods) brand owner and were a big deal for the supermarket when they began to rollout in 2011, hailed by then CEO Philip Clarke’s as integral to its seven-part strategy.
Fast forward three- years and the supermarket’s current travails mean its attention is elsewhere.
The aim of Venture Brands, Clarke said at the time, was to create a house of brands that could take on premium offerings from companies such as Unilever and Procter & Gamble. The hope was that it would boost loyalty to Tesco by offering shopper products they couldn’t find anywhere else, giving people a reason to shop in its stores rather than at its rivals.
Natalie Berg, analyst at Planet Retail, said the logic made sense at the time, with the supermarket needing to offer points of difference in a “homogenous market” where they all offered the same brands.
Using Tesco’s firepower to move into FMCG
At the time Tesco was posting strong sales, with annual revenues across the group up 8.2 per cent. Clarke was keen to maintain that growth while stamping his own name on Tesco.
Ramping up standalone brand ranges, where Tesco had seen success with clothing range F&F and electronics brand Technika, seemed a logical strategic move.
The hope was that Chockablok ice-cream would take on Häagen-Dazs. The New York Soup Company would knock back New Covent Garden soups and the Carousel toy brand would overtake Fisher Price.
However, since then Tesco’s fortunes have changed for the worse. It posted its worst results in two decades earlier this year and sales are slumping, down 3.8 per cent according to the latest Kantar Worldpanel figures.
Clarke is now out and will be replaced by Unilever’s Dave Lewis, with the hope his experience in branding can help lead Tesco out of its funk. So what of the venture brands?