Market analysts Euromonitor continues its examination of UK retailers with a look this week at media means and private brands. According to the report, UK retailers Tesco and Sainsbury's are leveraging the trust consumers have in their brands to launch a series of successful new ventures.
Taste the Difference and Finest have come to be recognised as integral parts of the larger Tesco and Sainsbury's brands and draw into their stores a valuable consumer demographic which they then go on to cater to with healthcare, beauty, home care, and finally into housewares and financial services.
Turning to new promotional opportunities, all major multiple grocers from Asda to Sainsbury's, from Tesco to Somerfield and the Co-op, produce magazines, which focus on food and lifestyle. They contain recipes, give-aways and in the case of Sainsbury's magazine, feature some of the most well known food writers in the UK including Delia Smith and Nigel Slater. These glossy, well presented publications attract significant advertising revenue from virtually all of the major manufacturers.
The reason behind this is simple, writes Euromonitor. Consumer magazines generate high response rates. A consumer magazine presented to the public, which eschews a hard sell message in favour of entertaining and informing the reader, is a highly targeted and effective medium to advertise a new product.
While response rates for consumer direct mail is 10 per cent, according to the Direct Marketing Information Service, this compares to 78 per cent of consumer magazine readers who buy/try products mentioned in a magazine and 81 per cent of readers who believe consumer magazines are a better way to inform of products/services, upholds the Association of Publishing Agencies. In circulation terms Safeway ranks highest among multiple grocer consumer magazines, and is the fifth largest publication in the UK with a total monthly average net circulation of 1,757,190 as of June 2002.
Euromonitor reports that as the fmcg retail market in the UK continues to consolidate, most recently with the £519m purchase by Tesco of the T & S convenience store chain and on-going rumours of Safeway take-over bids, the multiple grocer will become the dominant advertising medium for fmcg products.
Strong private label activity within Tesco and Sainsbury's focused on premium ranges of foods and building share within cosmetics and toiletries and OTC is driven by the need to attract high-spend shoppers, and offer solutions as well as products, thereby developing loyalty.
These retail chains are becoming increasingly integrated in the UK consumer's life from butter to bank accounts, milk to mobiles and tea to TV home shopping. In an environment where TV advertising is costly and increasingly ineffective, and where the value of building customer relationships is paramount, multiple grocers represent an attractive partner in new product launches and marketing ad spend.
Indeed manufacturers may find that advertising through grocery multiples becomes less of a choice and more of a requirement if the UK moves closer to the Swedish model where three big grocery chains dominate fmcg retailing. According to Dagens Media, a Swedish media publication, brands are asked to feature in ads for the big three Swedish retailers and to contribute towards their cost.
Multiple grocers will increasingly dictate new product launches as they seek to exploit their own natural market advantage in short shelf life products and premium food where the success of private labels such as Finest has helped to develop an enviable level of trust with the UK public.
Euromonitor concludes that manufacturers will find good partnerships with multiple grocers crucial to the success of new products and exclusivity agreements between the two will become increasingly common.