Is the era of the discount label now over in food retail?

According to Tesco, fewer of its customers are dropping premium, ethical and organic lines in favour of cheaper alternatives, suggesting savvy consumers may be turning their backs on discount goods

No

Sidonie Kingsmill, food marketing director, Tesco Stores

Our premium and ethical ranges are picking up in sales, but not at the expense of our value and discounter ranges, which are performing strongly.

Our research shows one in four customers continues to buy Discount Brand items every time they shop.
Most customers have a mixed basket containing Value products as well as Finest. It is people's perceptions of value that inform their purchasing patterns, and that is as likely to come from premium ranges as others.

Tesco Value was first marketed in the 90s, and it has gone from strength to strength through years of economic prosperity as well as leaner times. Tesco's success is in its appeal to a wide demographic with lower-tier ranges continuing to be relevant.

The rise in premium is the clearest signal yet that confidence is slowly returning to consumers and their household finances. This won't be true for every family, especially those hit hard by the recession. There is no contradiction in seeing growth at both ends of the spectrum.

 

No

Andrew Edwards, group chief executive, Leo Burnett

This question invites images of frenzied, price-obsessed shoppers fighting their way to the latest in-store bargain, but the truth about shopping through the recession is more complex.

We carried out extensive research at the beginning of the year that indicated consumers were not simply trading down, they were trading smart. True, they were economising in many areas, but not only was value still a more important consideration than price alone, quality was becoming critical.

Even with the threat of economic Armageddon now fading, many of the new attitudes and behaviours it has encouraged are likely to continue. In the same way that many people don't see a contradiction in buying clothes from both Primark and Selfridges, we will begin to see more shopping baskets where premium products and discount labels happily co-exist.

Clever consumption at all ends of the value spectrum will be the order of the day. The discount label will continue to be a feature, but the rigid view of the discount shopper will become increasingly obsolete.

 

No

John Nicholas, chief marketing officer, The Tetley Group

Signs of recovery in Tesco premium ranges are hardly a signal of the end of discount labels, and I see no slow-down in the performance of discount retailers and pound shops.

Any product category needs a range of brand offerings, from low-price to premium. During a recession, there can be some movement down that axis and conversely, upon recovery, up the axis.

But even in buoyant market conditions, cheaper brands perform a key role to particular consumer seg­ments, especially where they perform the basic elements of the category well, rather than being poor-quality equiva­lents of more premium products.

Discount brands are also important in being an entry-level for consumers otherwise unattracted to the market, in the same way as easyJet brought new categories of consumers to regular air travel. The much bigger opportunity will be the creation of cheaper brands to attract less affluent consumers in emerging markets - look at Tata's Nano car (£1300 in India) to understand how that ‘discount brand' will expand India's car market.

 

Maybe

James Murphy, founding partner, Adam & Eve

What customers have always wanted is genuine value - the right balance between quality and price. Too often discount labels get this balance wrong.

Consumers' desire for genuine value is more acute than ever, but has not automatically resulted in a flight to no-frills brands - not least because, in many cases, the discount has been too deep and trade-off in quality too steep.

The success of Essential Waitrose is an example of genuine value, where quality and price are perfectly balanced for a discerning customer trying to be a bit more frugal.

We don't have a Kwik Save culture in the UK, and brands such as this and Netto have struggled, as consumers are unwilling to accept full-on no-frills retail in food.

It seems that however strapped for cash we are, it is wrong to view food as a commodity shop. It is an essential and emotional.

 

Discussion

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