Tesco's Brand Guarantee doesn't mask need for offers

Will Tesco’s new Brand Guarantee enable Tesco to dial down promotions? Does the new cashback price promise mark a flight to EDLP? 

On the evidence of Tesco’s promotional mix in the weekend running up to the launch: no. While the number of promotions at Tesco fell 7% versus last year (and the average saving has reduced by 130 basis points), promotions will remain a key ingredient in Tesco’s ongoing strategy, says Assosia MD Kay Staniland.

“Shoppers still want to see promotional activity, and to be able to select the offers they want. You won’t really know how much you’re saving on the Brand Guarantee until you are at the tills, so the offers still need to be communicated at point of pick-up.”

That’s why Tesco actually increased the number of promotions it ran by 1.1% month on month to 2,585, and the average saving increased by 50 basis points to 32.25% [Assosia 4 w/e 11 October]. Only Sainsbury’s has more products on offer right now. And competition is as fierce as ever.

The big four all upped the average % saving month on month - in the case of Asda by as much as 4.3%. Asda also came even closer to matching Tesco in the number of promotions it runs, up 1.4% to 2,494.

And Morrisons is working hard to close the gap with a 3.2% increase month on month, taking the number of promotions to 2,307. In fact, only Waitrose showed the slightest inclination to offer less money off: the average month-on-month saving was down by 130 basis points - though of course they also have Pick Your Own Offers on top.

“Tesco needed to do something different,” Staniland believes. “With market share losses, financial woes and reorganisation across the board, the instant savings will surely appeal to consumers who simply want to save money.”

However, she warned Brand Guarantee “could prove an expensive exercise for Tesco”. “Whilst it is all good for consumers, Tesco will in effect be matching the promotions of its competitors. If Tesco has 4x330ml Coke on promotion and Sainsbury’s has 4x300ml Pepsi, both products will really be promotional prices, as Tesco will be matching that price.”