The recent row between Tesco and Sainsbury has been characterised by many as just another skirmish in an ongoing war between the two companies.
It may turn out to be rather more fundamental than that.
The background is this. Tesco are guaranteeing that their own label prices will never be more expensive than their competitors, but Sainsbury protested to the Advertising Standards Authority saying that price is not everything and in doing comparisons Tesco needs to take into account other issues like animal welfare and responsible sourcing. Tesco responded that the way food is produced is not a primary reason for purchase, and what matters to their customers is that they are getting the best deal possible.
The Authority found in favour of Tesco, ruling that Tesco had compared prices on the basis of products meeting the same need, and that food such as meat eggs or fish are interchangeable.
Sainsbury are incensed by the ruling, and by Tesco’s attitude. They are convinced that consumers care about where their food comes from, and that being on a budget should not mean sacrificing ethical considerations.
They have retaliated with an advertising campaign pointing out the ethical standards it applies to food sourcing, but which Tesco do not. An advert for bananas has the headline “Same price, different values” and points out that all Sainsbury’s bananas are Fairtrade but Tesco’s are not. A second advert with the same headline pictures two rolls both containing ham from each supermarket’s lowest price range, but pointing out that Sainsbury’s ham comes from British pork, whilst Tesco’s does not. Other advertisements show that the low price “Basics” tea from Sainsbury is Fairtrade, Basic eggs are from cage free hens, and Basics fish fingers come from Pollack a fish which is in plentiful supply.
What lies behind Sainsbury’s strong reaction is a realisation that building a distinctive brand which persuades shoppers to opt for a particular supermarket is more vital than ever in today’s low growth, budget conscious retailing climate. Price as a differentiator is not the weapon it was, now that all the major supermarkets are committed to selling branded goods at the same price as competitors. And own label goods are increasingly price matched too. So the persuasive brand has to offer “price plus”. Sainsbury have chosen ethical sourcing as their point of difference. Other options could be superior quality or exemplary service.
Tesco by contrast seem not to have identified their point of difference. Worse, they continue to come across as arrogant. Their reaction to the ASA issue is dismissive of what consumers value, seeming to say that when on a budget nothing else matters apart from price. Which is not the case as the horsemeat scandal, in which Tesco was embroiled, amply demonstrates. Tesco have upset farmers too. As the NFU pointed out on behalf of British pig farmers, “comparing EU ham with ham produced in Britain is wrong, and misleading to consumers”.
In this altercation between the two companies, Sainsbury is the one projecting a strong brand image, which will stand them in good stead in the long run.