So, after fits and starts, the long-awaited consolidation of the
supermarkets sector has begun.
The news that Somerfield and Kwik Save are to merge has caused the
retail analysts to work themselves up into a frenzy of anticipation
about economies of scale, reduced headcounts and enhanced buying and
It’s not as exciting a deal as the one mooted between Asda and Safeway
(which perhaps will be on again now), but it’ll do for starters.
The parties involved must decide on a market positioning for the new
chain. This is where it gets interesting. Is it going to be a mid-market
Somerfield or a downmarket Kwik Save? (I think we can presume upmarket
is out of the question.) On the basis that Somerfield is more upmarket
(or, if you prefer, less downmarket) than Kwik Save, will they meet
somewhere in the middle? Or, given the differing geographical profiles
of the pair, will they continue to run as separate brands? There may be
an argument for this but, if they do, then clearly some of the savings
will be lost, not least if any combined advertising budget (according to
AC Nielsen MEAL, Somerfield spends about pounds 15 million and Kwik Save
pounds 8 million) continues to be split between two brands. By combining
the spend behind one brand they can at least begin to match Asda and
If anything, one suspects the approach will be to focus the new
operation closer to the Somerfield brand. Not only is Somerfield likely
to be the dominant player, but it is also obvious that the Kwik Save
approach has not been working - as evidenced by its recent attempts to
introduce higher-margin products.
Now that it has dropped Lesley Joseph (hooray) and replaced her with the
hard-pressed Mum character, Somerfield has found a credible advertising
proposition and, moreover, one that is campaignable. It may be a case of
the tail wagging the dog, but when it comes to decide on the positioning
of the stores, those ads should influence the choice.
According to a survey conducted in the US last week by Leo Burnett,
consumers had difficulty picking out the official sponsors of the Winter
Olympics (McDonald’s, Visa, Coke, IBM) from non-sponsors (Nike, Pepsi
and AT&T). This confirms what many have long suspected: first, that when
it is so easy to organise product placement and ambush advertising,
official sponsorship is a waste of time; second, that when it comes to
sports and TV, the illusion of glamour remains such that a sponsor and
his money are too easily parted - even at dollars 40-50 million a pop.
Yet these giant global brands return time after time to the World Cup
and the Olympics.
One of the paradoxes of modern marketing is that, while clients demand
their agencies be accountable for spend in conventional media such as TV
and print (driving more and more agencies to defend themselves under the
cloak of ’media neutrality’), all such considerations go out of the
window at the first mention of sports sponsorship.