How Tesco won the price war and PR battle with Unilever
When two mega brands clash, it’s always going to be an interesting battle. And the recent price row between consumer goods company Unilever and retail giant Tesco is no exception.
Both brands hit the headlines earlier this month, following an attempt by Unilever to raise the wholesale prices it charges Tesco on popular brands such as Hellmann’s, Comfort and Marmite.
Unilever blamed the pound’s falling value for the 10% price increase, but Tesco refused to accept the hike and promptly removed all Unilever products from its website. Tesco boss David Lewis took the unusual step of making the feud public, claiming that Unilever had been happy to reap the rewards when the pound was strong by not passing savings on to customers, but was now trying to recoup costs as the value dropped.
The standoff sent the media into a frenzy, with British newspapers laying the blame for the row squarely at Unilever’s door. The Daily Mail criticised Unilever for exploiting the Brexit vote to hike prices, while The Sun pointed out that many of the products it was demanding price rises for were made in Britain.
However, the public spat worked out well for Tesco. Following years of controversy and bad press, the brand was in the news for the right reasons, as tabloid newspapers portrayed it as the people’s champion on low prices. This was quite a public relations coup for Britain’s biggest retailer.
The issue was resolved within 24 hours of going public, which was testament to both parties’ desire to avoid reputational damage. Though details of the agreement between the two brands were not disclosed, it’s likely that Unilever at least partially backed down in its bid to raise prices.
In a statement released shortly afterwards, Tesco said ‘we always put our customers first and we’re pleased this situation has been resolved to our satisfaction.’
This was a PR triumph for Tesco. Its stance against Unilever sent a powerful message that Tesco is prepared to be on the side of shoppers and use its influence for good. And while the palaver has cost Tesco plenty of money in lost sales, the effect on the perception of the brand has been dramatic. All the coverage of the retail giant standing up for the British shopper was invaluable. No amount of TV ads could have achieved the same result. Also, this stance hits hard against the much held perception from the past that Tesco is ‘greedy’.
And the effort appears to be paying dividends, as Tesco share prices have climbed by 5%, due no doubt in some part to the result of the battle.
Protecting your brand
As a nation, we’re still trying to make sense of Brexit. The country has been dragged in many different directions and we appear helpless to the global market forces driving down the value of our pound.
While critics claim Unilever used the falling pound as a smokescreen to raise prices, it’s likely that some products made in the UK will face the pressures of currency instability, because they use ingredients, equipment or expertise from overseas.
If you think this may affect your business in the coming months and years, how should you communicate it to your customers?
If a price increase is inevitable, the best way to maintain customers is to build brand loyalty. You need to strengthen the emotive connection between your brand and customers, improve your packaging and heavily promote reasons for purchasing your product beyond the cost. Securing third-party endorsements from influencers will also go a long way to helping you establish brand loyalty.
Finally, if the price rise is to be well received by consumers, building understanding is crucial. Social media is a powerful forum to do this, as you have total control of the narrative. Video content can be used to explain complex scenarios with expert ‘talking heads’ a powerful way to build trust.
If you want to be prepared for whatever challenges Brexit throws up for your business, contact me now on 020 8274 0807.