The wars of the grocers

Supermarkets have hiked their ad spends in a bid to woo value-conscious shoppers. Media Week discovers how the recession has created a retail price war fought through deal-based advertising

The wars of the grocers
The wars of the grocers

Supermarkets are buoying up the declining media market with massive hikes in ad budgets as they fight an increasingly frenzied price war.

Food retailers have shifted the bulk of their media spend into deal-based advertising and are waging relentless price campaigns through newspapers and 10-second TV ads. The supermarket chains are credited with propping up the declining revenues of tabloids such as the Daily Mail and The Sun over the past six months, with retailers accounting for an astonishing 80% of the papers' ad revenues on some days.

The battle is on among mid-market and discount supermarkets to catch AB shoppers downtrading from Marks & Spencer and Waitrose, and to reassure existing customers they can still get good deals from their chosen supermarket. The big question for media owners and agencies is how long this shot in the arm from retail will last.

While many advertisers have slashed budgets in response to the downturn, food retailers have supercharged their ad spends as they battle to attract customers. "As long as the recession lasts, price will be the top issue for supermarkets," says one media buyer. "Retail price wars will dominate TV and press for some time." Others believe grocers will soon shift their focus from hammering price messages into people's minds.

For the time being, the retailers' unremitting ad campaigns appear to be having an effect: last week, Tesco announced record-breaking sales of more than £1bn a week.

Strong performances
Paul Cowper, brand specialist at consultancy Added Value, says: "Sainsbury's like-for-like sales are up strongly and Asda, which is focusing on discounts, and Morrisons, with its messages on freshness, are both doing really well.

"Marks & Spencer shares soared recently when the company announced it hadn't done as badly as expected, while Tesco rebranding as Britain's biggest discounter marks the return of marketing language we haven't seen for a long time."

Cowper says the main job of retailers' deal advertising is to lure shoppers into a supermarket for cheap basics in the hope they will do their main shopping there. Tesco chief executive Sir Terry Leahy claims £10bn of supermarket shopping switches between different chains each year, and this movement explains the explosion of comparison ads, as supermarkets vie for a share of that fluid spend.

In the first six weeks of 2009, Asda leapt ahead of the pack to become the UK's biggest-spending supermarket, ramming home its "lowest price" message. Last year, the sector's media budgets hit £345m as all the big chains boosted their ad activity, with the exception of Marks & Spencer. Tesco's £102m budget - up 18% on 2007 - towered above its rivals, although Asda increased its spend 32% to confront its larger rival head-on.

Tesco has a share of almost a third of the grocery market - twice as much as second-placed Asda -and the rivalry has provoked a fierce price comparison battle between the two. Asda has hit back at Tesco's claim that it is the UK's biggest discounter through price comparison TV ads set to an instrumental arrangement of the song "Who do you think you are kidding, Mr Hitler?"

Asda's price comparisons are validated by, the popularity of which has highlighted the importance of online comparison shopping in the price war. Helen Curtin, assistant director on the Asda account at Carat, says: "It's the year of iconics rather than brand ads." The chain has dropped celebrities in favour of price messages and has brought back its iconic pocket-tapping ads as it vies with Tesco and Morrisons to persuade shoppers it offers the best value.

Asda has also attempted to use spoiler tactics against Tesco. Last September, when Tesco launched its "Britain's biggest discounter" campaign, its agency Initiative booked every full- colour spot in the first 20 pages of all the popular and mid-market newspapers.

Asda got wind of the campaign and Carat subsequently booked full-colour ads in the back pages of the same papers. On the whole, observers believe Asda has beaten its bigger rival in the advertising wars - although Tesco is so far ahead of the market and has such a wide spread of interests that it is likely to win out overall on profits.

Another tactic increasingly used by Asda, according to one media buyer for a rival chain, is to increase media exposure around pay days. "Asda is focusing its ads on weeks where people are heading towards the end of their budget or where they are about to spend their new salary," he says.

The tit-for-tat price battle has been welcome news for national newspapers (see box, page 24) but the out-of-home industry is continuing its fight for a higher share of deal-based advertising revenue. New printing technology enables quicker turnaround of campaigns, which can be pasted within two days, claims JCDecaux's managing director, sales, Spencer Berwin. He points to his company's work with Tesco to deliver a six-sheet poster blitz on non-food goods in the run-up to Christmas as an example of outdoor's flexibility.

JCDecaux offered exclusivity on the deal, so other supermarkets were frozen out. However, most of the big chains cut their poster spend last year and there is little evidence that supermarkets relish promoting food products through outdoor media.

But Berwin says: "Many of our clients are fast-moving consumer goods advertisers and there is no reason why supermarkets can't promote food products as well. We own the high street; we are a 24-hour medium and we can respond quickly to price promotions."

A startling change in supermarkets' TV advertising in the recession is a huge shift towards shorter commercials. According to research from Sainsbury's agency PHD, the chain increased its television ratings (TVRs) from 10-second ads from just 1,000 in 2007 to 14,000 in 2008.

Meanwhile, Asda more than doubled its 10-second ads last year, and both Asda and Tesco boosted their use of 20-second commercials as they created more price comparison ads.

This trend is adding to the clutter in TV ad breaks, although station bosses are proactively selling deals on short-form ads as they struggle to shore up revenue and draw money away from press.

PHD partner Lindsay Weedon says: "The shift to shorter ads has been huge and the TV market is quite congested. But, at the same time, some of the smaller chains such as Aldi and The Co-operative are taking the chance to do longer brand ads."

Weedon believes the rise of deal advertising is a reaction to the trend that shoppers are making more trips to the supermarket, but spending less each time. "Every day there are promiscuous shoppers who we need to convert to Sainsbury's," she says.

Sainsbury's has bound together price and food messages through its "Feed your family for a fiver" campaign, which was kick-started by Jamie Oliver last April. "The ads are there to reassure those who already shop at Sainsbury's and to help convince those who shop at competitor stores," says Weedon. "Different campaigns target different stores and we know who we are stealing shoppers from." Weedon declines to give details, but claims Sainsbury's has kept out of the price comparison wars between Tesco, Asda and Morrisons.

"Our focus groups show people are bored with slanging matches where everyone says the same thing," she explains. "It is confusing and people often turn to to make their own comparisons." Sainsbury's invested heavily in radio advertising last year, with its £4m radio spend more than double that of Tesco and outstripping both Asda and Marks & Spencer.

Despite the fixation with low prices, shoppers are still concerned about the social and environmental effects of consumerism. The Co-op dispensed with the usual promotional messages in its two-and- a-half minute commercial featuring Bob Dylan's Blowin' in the Wind soundtrack in February.

Social responsibility
The ad, which first aired during an entire ad break in Coronation Street, promotes The Co-op's ethical promise. The high brand concept covers all the Co-op businesses, including finance and food, although it doesn't mention one in particular.

Patrick Allen, Co-operative marketing director, says there has been a "phenomenal" reaction to the ads, which promote the organisation's values of social responsibility.

Allen criticises the price-led advertising approach of the major multiples. "The race to the bottom is a mistake," he says. "The supermarkets are losing credibility. They are focusing on each other and not on what their consumers want."

Another interesting facet of the supermarket price wars is the tension between branded and own-label products. For example, Sainsbury's has run the Switch & Save campaign depicting its own-label version of top branded products as better value. At the same time, it is offering brand owners the chance to advertise their food products on its fleet of 800 delivery vans, in a deal organised by truck media company In Your Space.

Buying and planning supermarket advertising has always been one of the fiercest-fought of all marketing showdowns - and, as the downturn continues, many expect the battles to become even more intense. Given the rapid disintegration of other advertising revenues in the past year, the explosion in supermarket marketing is good news for anyone who makes a living out of media.

Do Middle England's daily papers have supermarkets over a barrel?

Supermarkets appear to be propping up national newspaper ad revenues these days, although some believe the tabloids have got the grocers over a barrel.

The mid-market nationals are the only media that can reach the massed shoppers of Middle England while also complying with the food retailers' tough demands for quick-turnaround advertising.

Alan Brydon, head of press at MPG, says: "Retail held up The Sun and the Daily Mail pre-Christmas: The Sun had consecutive record weeks. These papers deliver Middle England mass-market shoppers like nothing else."

Brydon believes The Sun and the Daily Mail have considerable clout over the supermarkets because the chains have few alternatives to using the papers to publicise their price cuts.
Lead times in TV and outdoor are too slow to respond to last-minute price changes, and TV stations are obliged to run ads in their breaks, so if demand is low they must drop their prices.

But newspapers can simply hold out for target yields and cut pagination if necessary. The deep pockets of powerful newspaper bosses Rupert Murdoch and Lord Rothermere mean they can walk away if the supermarkets refuse to pay the asking price.

The Daily Mail denies it uses its position to strong-arm the supermarkets, which are themselves the usual target of accusations that they use their stranglehold on the market to squeeze suppliers.

Deputy advertising director Rosemary Gorman says: "There is huge choice out there, with TV prices as cheap as the early '90s. We are a good communications vehicle and we can get fresh messages out there every day of the week, but we haven't got the supermarkets over a barrel."

Supermarket sweep: The players

Sainsbury's (PHD)
Strapline: "Try something new today"
Ad spend in 2008*: £69m, +10% Yr/yr
Ad spend Jan-Feb 2009**: £7.3m, -10% Prd/prd
Market share: 14.8%, with value sales growth of 5%
A surprise winner in the supermarket wars, Sainsbury's has hammered home its value message with the "Feed your family for a fiver" campaign and the "Switch & Save" executions promoting own-label products. Sainsbury's is the heaviest user of 10-second TV ads. Like-for-like sales rose 6.2%, excluding petrol, in the 11 weeks to March 21. The rise is attributed to shoppers trading down from Waitrose and Marks & Spencer.

Tesco (Initiative)
Strapline: "Every little helps"
Ad spend in 2008: £102m, +18.4% Yr/yr
Ad spend Jan-Feb 2009: £11.3m, level Prd/prd
Market share: 27.6%, with value sales growth of 3.3%
Tesco has promoted its "Britain's biggest discounter" line to stem the drift of shoppers to cheaper supermarkets such as Asda and Aldi. But the spiralling investment in advertising has failed to pay off in a like-for-like sales increase. However, with a market share of about 30%, the chain has huge resources to draw on. Its six-sheet poster campaign before Christmas shows it is willing to innovate and try out alternatives to newspapers.

Waitrose (Manning Gottlieb OMD)
Strapline: "Everyone deserves Waitrose"
Ad spend in 2008: £16.9m, +34% Yr/yr
Ad spend Jan-Feb 2009: £724,000, +33% Prd/Prd
Market share: 3.5%, with value sales growth of 1.3%
Like Marks & Spencer, the upmarket store has been hit by consumers down-trading to cheaper retailers. So, even the John Lewis-owned chain has resorted to price messages and has launched a basic Essential range. With media buying by Manning Gottlieb OMD, the chain has run many 10-second TV advertisements and longer 40-second brand campaigns.

Morrisons (Mediaedge:cia)
Strapline: "Fresh choice for you"
Ad spend in 2008: £60m, +6% Yr/yr
Ad spend Jan-Feb 2009: £6.9m, +6.5% Prd/prd
Market share: 10.5%, with value sales growth of 6.9%
Since its relaunch just before Christmas 2007, when it outspent all other supermarkets with a heavyweight campaign featuring a string of minor celebrities, Morrisons has powered ahead, spending heavily on advertising. While others have veered away from using celebrities, they seem to be doing the trick for Morrisons, which is hammering home the message that it does fresh food as well as anyone else.

Co-operative/Somerfield **** (Rocket)
Strapline: "Good For food"
Ad spend in 2008: £18m, +25% Yr/yr (Co-op), £21m, +21% Yr/yr (Somerfield)
Ad spend Jan-Feb 2009: £5.8m, +66% Prd/prd (Co-op), £2.9m, +8.5% Prd/prd (Somerfield)
Combined market share: 9.2%, with value sales up 1.7% (Co-op) and down 1.2% (Somerfield)
Co-op Food has merged with Somerfield to create a 3,000-strong chain of mainly convenience stores. The chain, concentrates on local door-drops, using TV at Christmas. The social messages of the TV ad featuring Bob Dylan's Blowin' in the Wind contrasts with the price messages of rivals.

Marks & Spencer (Walker Media)
Strapline: "This is not just food, this is M&S food"
Ad spend in 2008 (including clothes): £53m, -17.7% Yr/yr
Ad spend Jan-Feb 2009: £2.2m, -45% Prd/prd
Market share: 3.7%, with value sales growth of 2.6%
The Marks & Spencer premium food offer looks increasingly out of place as shoppers trade down. It has hit back with its "Dine in for two for £10" promotion. M&S chief executive Sir Stuart Rose attributes the overall rise in food sales in the first 12 weeks of 2009 to its Wise Buys, Dine In and Family Favourites offers. But the chain needs to boost spending and hammer home a value message.

(Universal McCann Manchester)
Strapline: "Don't change your lifestyle, change your supermarket"
Ad spend in 2008: £16.4m, +9.5% Yr/yr
Ad spend Jan-Feb 2009: £2.1m, +14.3% Prd/prd
Market share: 2.9%**
As major chains run more 10-second price-fighting ads, Aldi has gone the other way, launching longer brand commercials featuring TV chef Phil Vickery that demonstrate quality. The theory is that Aldi has established its reputation as a discounter and is now showing it can compete with the top chains. Aldi is thought to have attracted AB shoppers for certain products and has increased market share.

Lidl and Netto
Strapline: "Where quality is cheaper" (Lidl), "Great products at discount prices" (Netto)
Ad spend in 2008: £13.8m, -12.3% Yr/yr (Lidl), £1.3m, -29% Yr/yr (Netto)
Ad spend Jan-Feb 2009: £1.8m, -8% Yr/yr (Lidl), £274,000, +36% Yr/yr (Netto)
Market share: 2.4% (Lidl), 0.7% (Netto)
Lidl, which has run TV ads in Northern Ireland, has profited from the revival of interest in discount supermarkets. Danish-owned Netto is one of the most brutal of the discounters, boasting it has no frills, fancy displays or special lighting. It claims to be 20% cheaper than rival supermarkets.

* Source for ad spend and market share: The Nielsen Company. Market shares are based on figures for the 12 weeks to 21 March 2009, and sales growth is year on year. ** Period from 1 January to 22 February   *** Source for Aldi's figures is TNS Worldpanel. **** Media buying for Somerfield is currently handled by WWAV Rapp Collins

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