Tesco’s Carlsberg de-list – just another overcrowd inevitability?

Whilst both parties understandably remain silent on the specific reasons for de-listing most of the Carlsberg range, it seems obvious that the brand’s scale and importance required a carefully calculated decision.

We are patently not privy to the specifics, but here on the outside, NAMs need to explore possible rationale/scenarios as a basis for identifying the implications for their brands, and taking evasive action, where necessary...

Consumer need has to be a starting point
Logically, when compared with available alternatives, Carlsberg was deemed to have less relative appeal than other brands and own-label, from the perspective of Tesco shoppers.

In practice, this meant that Tesco shoppers believe that the brand’s combination of Product/performance, Price, Presentation/Promotion, and Place is less appealing than other members of the category.

Whilst the Carlsberg marketing team might beg to differ, the fact remains that their consumer-appeal message is not reaching Tesco, or did not survive the BCG assessment.

Retailer need comes next
Here Tesco must have assessed the brand’s combination of Product/on-shelf performance, Prices & Terms, Presentation (how well the offering is put across, at all levels) and Place/availability, all compared with available alternatives in making a decision based on relative competitive appeal.

Whilst this can be a relatively simple process, it has to be kept in mind that Tesco is changing radically in most aspects of its decision-making-process, with a different balance of traditional and new influencers in the mix, all operating under an intense City spotlight… 

At some stage, Tesco decided that Carlsberg was deficient, and made the de-list move.

Why this matters for NAMs
The issue for NAMs is not only the possibility of their brand becoming a casualty of the Tesco re-set, but also the inevitability of this culling process being applied by other retailers in an overcrowded, insufficiently differentiated market, as they strive to optimise their relative competitive appeal, with no facilities for taking prisoners.

The answer has to lie in making a fundamental assessment of your brand’s real pulling power with the consumer, and integrating this with an effectively communicated trade offering that emphasises your advantages, and eliminates anything that dilutes its appeal, before the buyer does the inevitable…   

Inconvenient convenience at Morrisons - an iceberg tip in retail property revaluation?

Morrisons latest results indicating the likely closure of 23 convenience outlets, coupled with the 25% write-down of its property portfolio is simply an overt acknowledgement that Bricks & Mortar UK retail is over-spaced.

Essentially, this means that given the emergence of the squeezed-middle issue, coupled with the development of online, physical retail space - and large stores in particular - are now not as valuable as before the global financial crisis. In addition, given that there are no alternative uses that can deliver sales of £1k per sq. ft. per annum, then the property values have to be written down to market value, in order to satisfy the auditors.

However, if all mults placed their redundant properties on the market simultaneously, market values would be driven down. Therefore actual property sell-offs will be gradual.

Incidentally, this means that in the short to medium term the mults will be in the market for innovative use of their redundant space via productive in-store theatre...

In addition, retail net margins are unlikely to rise in the flat-line price-cut future...

Meanwhile, as far as the stockmarket is concerned, the mults' fixed asset base is over-valued, meaning that the reduced net margin vs. excessive capital employed relationship is driving down the ROCE, and with it the share price...

Morrisons is simply grasping this property write-down nettle now, partly in readiness for the arrival of Mr Potts, whilst Mr Higginson is allegedly departing for the beach, hopefully leaving his mobile switched on...

Finally, given their Tesco heritage, the Morrisons' team will not have missed the fact of Dave Lewis' radical-cull moves to eliminate product/people/property overlaps in simplifying the Tesco onshelf offer.

The results are already coming through via increased growth for Tesco, and other retailers not implementing similar programmes, could find themselves left at the station, as the post-modern retail train gathers pace...