Sunday, June 26, 2011

Tesco Bringing Fresh & Easy Neighborhood Market's 'goodness for kids' Brand to the UK - With a 'Tesco' Twist

Private Brand Showase

Something we've suggested in Fresh & Easy Buzz that United Kingdom (UK)-based Tesco should do regarding its corporate private brand development strategy in relation to its Fresh & Easy Neighborhood Market chain in the U.S. is to create synergies between its UK proprietary product brands and Fresh & Easy store brands, a number of which, like "eatwell" and "goodness for kids" in the consumables category either don't have ("eatwell") or don't need to include ("fresh&easy goodness for kids") the "fresh&easy" brand name anywhere on them.

Additionally, where "fresh&easy" is used on the brand packaging-label in conjunction with the primary brand name, such as on the "goodness for kids" line, it can easily be replaced with, for example,"Tesco."

Fresh & Easy Neighborhood Market also has a number of proprietary brands of California wine that in our analysis Tesco would be wise to offer for sale in its stores in United Kingdom, which in fact is something we suggested and offered details about in this March 8, 2011 story - Tesco's Fresh & Easy ♥'s California With 27 New Varieties of Proprietary Brand Wines From the Golden State - in relation to the private brand synergies we think Tesco is missing out on between its U.S. Fresh & Easy chain and its flagship operations in the United Kingdom, which accounts for nearly 70% of the global retailer's annual sales.

The Fresh & Easy-developed proprietary brand California wines can be shipped directly from California to the UK, since that's how the numerous brands and varieties of California wine already sold in Tesco's stores in that country get there anyway.

Tesco could also offer the Fresh & Easy proprietary brand California wines in its other divisions in Europe and also selectively in Asia, where it has numerous stores.

Wine consumption in China, for example, is growing by double-digits. Additionally, California wines are popular in Japan. And wine-consumption is also fast-growing in South Korea, were consumers regularly buy and enjoy food and beverage products imported from the U.S., just like the Japanese people do. Tesco has stores in all three nations.

Offering the California wines (at present sold only in the 176 Fresh & Easy stores) in its UK stores would greatly increase the volume for the proprietary brand wines, which in turn would allow Tesco to obtain a lower cost of goods from the California wineries that produce the products for Fresh & Easy. That, in-turn, would allow Fresh & Easy Neighborhood Market to make a higher gross margin on the wines than it does currently. And Fresh & Easy needs all the margin help it can find.

It's important to note that within the brand synergy strategy we describe, care must be taken to create products under the brands that fit the respective nation's food palate. For example, a "goodness for kids" brand cottage pie (fresh-prepared foods category) might be a good product variety for Tesco's UK stores, but we wouldn't suggest it for Fresh & Easy Neighborhood Market in America.

The key proposition behind our analysis and suggestion is simple: Brands are brands. If  Fresh & Easy has one or more brands that have utility in Tesco's UK operations - and like-wise at Fresh & Easy - the retailer should take advantage of this and import and cross-pollinate between the two countries, making sure to follow the provision noted above, along with doing the same thing when it comes to product brand packaging and product labels.

'Tesco goodness for kids' brand - via Fresh & Easy

Apparently Tesco has taken our advice - or come to a similar realization and conclusion on its own - because the retailer is currently preparing to roll out a new brand, "Tesco Goodness for kids," in its UK stores which, accept for substituting the "fresh&easy" name with "Tesco" on the product labels, is identical to Fresh & Easy's "goodness for kids" brand, which we've reported on and written extensively about in the blog. (See those stories here.)

Tesco is replacing its "Disney" brand of food products for kids, which it licenses from the California company of theme park, movie and all around brand fame, with the "Tesco goodness for kids" brand, created by the product development and category management teams at El Segundo, California-headquartered Fresh & Easy, which happens to be a short drive from Disneyland, in Anaheim, California.

We learned about the new brand for Tesco UK a few weeks ago, and expect the retailer to launch the first items in the range in its stores in the next week or two, based on information from our sources.

Additionally, Bryan Roberts, an astute observer of the UK food retailing scene and director of retail insights there for Kantar Retail EMEA, late last week spotted a sticker on one of the Disney brand food items in a Tesco store that mentioned the new "Tesco goodness for kids" brand will soon be replacing the "Disney" branded food products for kids. Roberts took a photograph of the brand sticker (pictured at top), which he shared with Fresh & Easy Buzz, as part of a discussion we had about the brand and its origins at Fresh & Easy.

Venture brands

CEO, Philip Clarke, recently announced a new product brand strategy for Tesco, which it's calling venture brands.

Tesco's venture brands program is very similar to what Safeway Stores, Inc. does is the U.S., which is the development and creation of numerous brands - O Organics, Eating Right, Open Nature, Snack Artist and a number of others - that don't use the chain's name on the product's packages or labels at all.

Instead of being private or store brands, they just happen to be product "brands" that have been developed by a retailer and sold in its stores. And in the case of O Organics and Eating Right, Safeway Stores, Inc. markets the brands to other retailers in the U.S. and globally, which is something Tesco is looking into doing with some of its venture brands once they're introduced into its stores and have a bit of a track-record behind them.

Among the first batch of the numerous planned venture brands Tesco is currently developing include "ChokaBlok" ice-cream, La-thams dog food and NutriCat cat food, according to Sidonie Kingsmill, brands development director for Tesco.

"Our venture brands are very different to own-label; they will never be 'me-too' products," she says. "We look at where the customer opportunities are, where brands are not succeeding and what we can do in addition to brands. We’re in a unique position as the biggest retailer (in the UK), with access to the best suppliers worldwide."

'ChokaBlok' ice cream

One of those first venture brands, "ChokaBlok" premium ice cream (pictured above), was recently launched and is available in Tesco's stores in the UK. The brand, which initially features five flavors of ice cream (listed and pictured here), doesn't carry the Tesco name anywhere on it, in keeping with Tesco's venture brands strategy. The key branding proposition behind the product's name, which was created by UK branding agency Mayday, is that the ice cream is 'chok' full of the best quality ingredients Tesco could find.

The "Tesco goodness for kids" brand isn't part of the venture brands portfolio, since it's taken from Fresh & Easy Neighborhood Market's existing brand portfolio and includes the Tesco name as part of the brand name.

Ice cream is a popular category (and product) in California, Nevada and Arizona, where Tesco has its 176 Fresh & Easy stores.

Fresh & Easy Neighborhood Market also has a private or proprietary brand focus - about 60-65% of the about 5,000 SKUs in the small-format stores are proprietary brands.

In our analysis an opinion, based on the two examples offered above and a few others others, Tesco should  launch the new "Chokablok" brand of ice cream in the 176 U.S. Fresh & Easy stores.

Doing so not only would create the second-leg of the Fresh & Easy-Tesco UK product brand synergy program - Fresh & Easy Neighborood Market-developed "goodness for kids" being the initial leg - it also would give Fresh & Easy an interesting brand exclusive - "ChokaBlok" ice cream -  to its stores in California (127 units), Nevada (21) and Arizona (28).

Fresh & Easy Neighborhood Market's current private brand ice cream supplier in the U.S. should be able to produce the product to Tesco's recipe, making any minor changes needed for the American palate. And its packaging suppliers can create the identical packages using existing art work from Tesco.

If  brand "ChokaBlok" were to do well in the Fresh & Easy stores, the grocer's category management team could create its own line extensions under the brand for the U.S. stores, which Tesco's UK team also will be doing. Each operation -U.S. and UK - could then pick and choose from the other's creations, in terms of which new items to bring into its respective chains' stores.

This is a good example of the power of brand synergy. Having two teams in two different countries working on developing new items under the same brand offers the potential for twice the creativity, which might translate to twice the success. There are also important cost-savings that can be realized, particularly in the long-term.

In fact, we'll even offer a suggestion to Tesco for a "ChokaBlok" brand line extension, in the ice cream novelty category.

The product suggestion: "ChokaBlok Ice Cream Sliders," which would be mini ice cream sandwiches - two cookie-type wafers with various flavors of ice cream "sandwiched" in the middle. In our analysis and opinion such an item would fit well in both the U.S. and UK. And the name - "ChokaBlok Ice Cream Sliders" - plays well off of the super-popular mini hamburgers of the same name (sliders)

A good and logical place to start in developing the ice cream sliders would be to take two or three of the existing flavors of "ChokaBlok" (cost-efficient) and use them as the filling for the "Chokablok Ice Cream Sliders." That's another example of synergy; in this case in product development - taking an existing product, the current available flavors of ChokaBlok" ice cream, and use it to create a new product - the sliders/ ice cream sandwiches.

And that's another way of describing brand synergy, which if done right and well, is something that could help Tesco as it tries to break-even with its Fresh & Easy chain in America between know and February 2013, which is something CEO Philip Clarke, who took over the corner office at Tesco's global headquarters in the UK has pledged he will do.

The 'goodness' in brand development synergies

Meanwhile the launch of the "Tesco goodness for kids" brand in Tesco's stores is an important brand development milestone for Tesco Group overall and for Fresh & Easy in particular, as it is the first example of significant product development synergy between Tesco's U.S. outpost and the mother ship in the UK.

It also should be a confidence builder for the team at Fresh & Easy that developed the "goodness for kids" brand because the parent companies decision to launch a version of the brand in the UK, where Tesco is the leading food and grocery chain, suggests an appreciation for the teams work across the pond in El Segundo.

You should also expect to see some of the venture brands Tesco is developing - and maybe even "ChokaBlok" Ice Cream - on the shelves of the Fresh & Easy stores in the Western U.S. in the future, just as you might see some of those California wines developed by Fresh & Easy, along with one or more of its other proprietary food product brands, in addition to "goodness for kids," coming soon to a Tesco-owned store in the UK, and perhaps elsewhere in Europe and even in Asia, in the not too distant future.

1 comment:

Anonymous said...

There's a good reason why Tesco in the UK has a limited wine selection from California.

CA wines have a poor value perception in the UK, largely based on what has been commonly available in the past. It's a perception problem (not a quality problem) that would be hard to overcome, to gain shelf space within a typical 40ft double aisle dedicated to wine in a typical large UK supermarket. EU tariff barriers don't exactly help, either, in hitting a profit margin.

UK shoppers believe that they can get better value on wines from Chile or Australia, or indeed European "domestic" wines. Aussie wines in particular are often heavily discounted as a loss leader (which is possible due to enormous established volumes and, I think, slightly more favourable tariff treatment).