Troubled Tesco Revamps With New Marketing Plan and U.K. Ad Review

Red Brick Road Keeps Part of Business; 13 Agencies Will Compete for Rest of $175 Million Account

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Supermarket giant Tesco, announcing its first drop in U.K. profits in 20 years, today outlined a $1.7 billion "Build a better Tesco" plan. The aim is to boost domestic performance after years of neglecting U.K. stores to invest in overseas expansion in the U.S., Asia and continental Europe.

Tesco CEO Philip Clarke
Tesco CEO Philip Clarke

The U.K.'s biggest retailer, Tesco has a six-point plan that includes a brand and marketing element promising to focus on "Better, clearer, more relevant communication with customers." Now that Tesco's brand has lost its way, the company's long-running "Every Little Helps" campaign has lost its impact.

A review of part of Tesco's $175 million U.K. ad account, currently at The Red Brick Road, has just started. Matt Atkinson, Tesco's group marketing and digital officer, said in a statement: "During the time we have worked with The Red Brick Road, the way brands and consumers engage has changed, and it seems to be a good opportunity for us both to step back and take a fresh look."

Tesco was a founding client of the agency when it launched in 2005, after Frank Lowe left his own agency, Lowe London, and took the Tesco business after almost 20 years at the shop. The review does not include Tesco's trade communications, which will remain with The Red Brick Road. During the review, handled by search consultant Oystercatchers, Tesco will see credentials from 13 agencies and invite six to pitch. A decision is expected in July.

A central tenet of the marketing overhaul is the return of data-insight company Dunnhumby to the heart of the business, to help Tesco focus on improving the customer experience. Dunnhumby was behind the 1994 launch of the Tesco Clubcard, a loyalty card that was considered revolutionary at the time. Tesco bought Dunnhumby in 2001.

Tesco's six points also comprise rebranding its value range as Everyday Value, recruiting 8,000 new staff members, introducing a "warmer look and feel" to its stores, better prices and promotions, improved range and quality, and a more flexible and customer-friendly online offering. Plans to open new superstores have been cut back.

Today's announcement was made by CEO Philip Clarke, who took over from Terry Leahy in July and has adopted a more open approach to communications. Mr. Atkinson -- formerly group chief executive of EHS 4D, a Havas-owned direct marketing, data and digital agency -- joined Tesco the same month.

"We want to put the heart and soul back into Tesco," Mr. Clarke said in a statement. "We are committing [more than $1.7 billion] to make the U.K. shopping trip better for customers, more staff giving improved service in-store, refreshed stores that are better and easier places to shop, lower prices and even more value from an improved product range."

Tesco's U.K. profit for the year through February slipped 1%, to $4 billion, but worldwide profit was up 5%, to $6 billion.

In the U.S., Tesco's Fresh & Easy chain, launched in November 2007, is taking longer than expected to turn a profit. But it reduced losses by 18% last year, to $244 million, and is expected to be in the black in 2013. There are 185 Fresh & Easy stores, with the aim of reaching 230 by February 2013 -- 70 fewer than previously planned.

The slowing of China's economy and wage increases means Tesco will scale back its store openings there to 16 hypermarkets this year.

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