When rebrands go wrong

(And how to avoid the pitfalls)

Will New Covent Garden survive Tesco's delisting?

Delisting. Is there a more terrifying or horrendous word in the branding vocabulary?

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It occurs when one of your retailers, often one of the biggest, decides that they no longer want to stock you. The retailer in question loses a brand that they clearly believe they can live without, while you suddenly find yourself with a gaping hole in your sales figures.

Last week it happened to the New Covent Garden Soup Company (NCG). Rob Dixon, the marketing controller at the Daniels Group, which recently acquired the soup brand, was told that Tesco had conducted a “winter range review” and decided that his brand was surplus to requirements.

The decision must have come as a bit of a shock. New Covent Garden single-handedly invented the fresh soup category back in 1987 and, according to Nielsen, is Britain’s second leading brand of soup (after Heinz) with £55m in sales.

The financial implications of the decision are, as is usually the case when a big boy like Tesco delists you, knee-tremblingly bad. Tesco accounted for nearly 20 per cent of NCG’s annual sales. No matter what the brand does for the rest of this year and the next few, there is no way it can reclaim that kind of shortfall. And it’s especially bad news for the Daniels Group because NCG is its biggest brand by some distance - making up around a third of its total revenues.

It’s easy in situations like this to look at the retailer in question and assume some Machiavellian plot to destroy a good brand or exact revenge for a forgotten injustice once conducted by NCG on Tesco. The reality, of course, is that it is just business.

Like any world-class retailer, Tesco has reviewed all the brands in its assortment, looking for ones that it can alter, optimise or remove in its never-ending quest to drive profitability. Thanks to its amazing Clubcard data and the fact that it has been selling 20,000 pots of NCG every day for the past decade, Tesco presumably has a strong case for delisting the brand. The enduring challenge for a brand like NCG, and indeed every other that sells through big retail, is accepting that supermarkets know so much more about your customers than you could ever imagine.

We can only guess what data drove Tesco to its decision to delist. The smart money is on two distinct but inter-related observations. First, NCG has been losing a bit of lustre of late. According to Nielsen, the brand has fallen in value by 8 per cent in the past year. Second, private label soup is growing rapidly in popularity among British consumers. Despite the overall penetration of private label remaining flat at almost 50 per cent of UK grocery sales, Symphony IRI noted last year that soups were the fastest growing category for home brand penetration.

Tesco, it would seem, is betting that its private label lines of fresh soup - its New York Soup Company brand and its Tesco Finest range - can step into the vacuum left by NCG’s removal. At present, its New York Soup brand generates barely a quarter of the sales that NCG was achieving at Tesco. But with NCG delisted, prominent in-store promotion and the steep margins of the fresh soup category ensuring that Tesco does not have to sell as much of its own soup to justify the switch in profits terms - it would seem that the move will prove worthwhile. Rarely does a supermarket like Tesco make such a major move without the data and experimentation in place to expect success.

Where does this leave NCG? One has to feel sympathy for the brand given that it has recently refreshed its packaging and is to launch a major brand building campaign on TV next week designed to “encapsulate everything we stand for and are passionate about when it comes to soup”.

But, as the great fashion designer and brand guru Tom Ford once observed: the right thing at the wrong time is still the wrong thing. NCG did everything right, but just a little too late to avoid Tesco’s delisting decision.

The lesson for all FMCG brands is one that they hardly need to be reminded of. The growth of private labels may have reached its maximal threshold a few years ago but the constant threat it poses to individual brands and particular categories remains as pertinent as ever.

Brand building in FMCG was always a constant endeavour, but the metabolism of the market has become so much more frenzied in recent years thanks to supermarket competition and the ever present threat from private labels. If you stop innovating, investing, brand building - even if it’s just a momentary lapse in attention - the risk of delisting and eventual decline remain.

Supermarkets are no respecters of brand heritage. Theirs is a world in which every week marks a new era in their strategic battle against their equally insistent competitors.

And those competitors will now watch with interest as Tesco tries to prosper with its own private label soup brands as the standard bearer for the category. If it succeeds, this might not be the last dreaded delisting moment that NCG will have to endure.

Readers' comments (16)

  • Dear Mark,

    Please double-check the 50% private labels' share. I remember noting 29,5% value share from a recent release here.

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  • Is this Tesco acknowledging that Aldi's concept of stocking only private label products is the way forward for British supermarkets ?

    Interesting times ahead...

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  • The 50% figure is exactly right.

    It is based on the data just for the UK and just groceries sold through supermarkets and discounters. It's been confirmed in all the recent research data into Pricate Label penetration - specifically the studies by IRI, Kantar and Nielsen.

    Having said that , the 50% figure is wildly variant based on supermarket (aldi 95%, tesco 52%) and category (eggs 85%, beer 7%).

    I will tweet the latest report for reference.

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  • Excellent article.

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  • I was devistated last week to find my favourite fresh Chicken soup had been replaced with Tesco's own. Not as tasty and lacking the chunks of chicken that made the NCG soup so very delicious.
    I've literally stopped buying my lunch at Tesco now because NCG soup was a good value, healthy meal that can't be matched by Tesco's own. Trust me, I've tried most of the flavours already. No more though.

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  • I was devistated last week to find my favourite fresh Chicken soup had been replaced with Tesco's own. Not as tasty and lacking the chunks of chicken that made the NCG soup so very delicious.
    I've literally stopped buying my lunch at Tesco now because NCG soup was a good value, healthy meal that can't be matched by Tesco's own. Trust me, I've tried most of the flavours already. No more though.

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  • This could well be cyclical I suspect - the 'own brand' will make its mark in the short-term, and then external brands may need to be reintroduced to invigorate sales.

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  • What's next?

    Even if it doesn't work for them, NCG won't be in a position to tell them to sod off. Another reason to support our independents.

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  • Are the owners the same Daniels that bought a load of zombie brands from Premier and are reported to planning to turn them into a £3bn portfolio. On this track record it doesn't look promising!!!

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  • A victim of poor brand management, as trade mag the Grocer points out 3 designs in 2 years, it's hard to see what marketing problem that can address. But it will have made it increasingly difficult for consumers to find and buy their fav's. The owners have bought a shed load of old brands from Premier, expect a load of redesigns and similar fates. Suppose it'll keep a design agency well remunerated for a couple of years!

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