How do you solve a problem like Tesco?

Tesco's recent troubles read like a horror story: an accounting scandal that has forced huge changes at the top, a plummeting share price, falling sales and lost consumer confidence as shoppers turn to discount retailers such as Lidl and Aldi.

Tesco: Is this the moment where the supermarket wins back hearts and wallets?
Tesco: Is this the moment where the supermarket wins back hearts and wallets?
In January, the newly installed chief executive of Tesco, Dave Lewis, announced a major relaunch of the supermarket, including a decision to close many of its under-performing out-of-town stores in favour of more profitable local outlets, a decision that had an immediate, positive, effect on Tesco’s share price.

Lewis also put all of Tesco’s consultancy relationships under review and it was then announced that Tesco had hired Blue Rubicon to advise it on achieving a reputational turnaround.

A week later, the supermarket said it was dropping ad agency Wieden+Kennedy in favour of Bartle Bogle Hegarty (BBH).

Lewis joined the supermarket from Unilever, which has relationships with both Blue Rubicon and BBH, and both agencies resigned Sainsbury’s and Waitrose respectively to work with him at Tesco.

It remains to be seen whether BBH will only carry out ad campaigns on Tesco’s behalf or whether it will bring in its subsidiary, Seven Seconds, which has previously worked with British Airways and Waitrose on their loyalty card operations, to work on Tesco’s Clubcard operation.

But a supermarket chain of Tesco’s size is analogous to an oil tanker with a large turning circle, so can this big beast of the grocery market convince customers and the City that it has changed?

PRWeek asked experts from the consumer and financial PR worlds what Tesco needs to do to achieve the change needed to regain confidence in its brand and tell a different story.

Experts agree that there will be no quick fixes and that the job at hand is multifarious.

In September, it emerged that Tesco’s profits had been overstated to the tune of nearly £250m.

The ensuing scandal led to the suspension of senior executives, three of whom, including its finance director, have since left the business for good.

The City reacted with savagery to the scandal and wiped more than £2bn off its value as its share prices plummeted.

In the weeks following the scandal shares in Tesco reached a nadir of 164 pence in mid-December. It has since recovered to 234 pence this week, although this is still nearly a third less than in February last year, when shares were worth 335 pence. 

The market needs to be convinced that there are no more skeletons in the closet.

Ben Romney, partner at financial PR specialist Buchanan

Ben Romney, a partner at financial PR specialist Buchanan, thinks Tesco’s first job should be to demonstrate that it knows what went wrong and has put in place mechanisms to avoid any repeat in the future. 
He says: "The key issue is rebuilding trust with shareholders and stakeholders - this is very much a gradual process and there will be no quick fix."

The next step to regain the trust of investors will be for Tesco to set out a strategic roadmap to recovery and prove to the markets that management has a firm grip on the company and is able to address its problems. 

Romney continues: "If it is successful in this task then investors will slowly begin to regain confidence in the business. Obviously the business is firmly under the microscope now so any more slip-ups will be thoroughly scrutinised and harshly punished by the markets."

Romney says Brunswick, the team that handles Tesco’s financial PR, needs to refine its messaging from an investment perspective and explain what makes it such a compelling proposition, then deliver that message through appropriate channels.

"It’s a task easier said than done," says Romney. "The market needs to be convinced that there are no more skeletons in the closet, that Tesco knows what it needs to do to compete with and outperform its peers, and that it has the management team in place to deliver this strategy. Looking at the current spread of recommendations from analysts covering the stock, I would say that a consistent message has yet to be refined or rather the markets are yet to be convinced."

But City analysts and shareholders are only part of the equation in making a full recovery. 

Tesco also needs to convince its customers, many of whom have had their confidence in its low prices undermined.

Blue Rubicon’s job will not be made any easier following comments from its former chief executive, Sir Terry Leahy, to Panorama this week that the supermarket had "eroded customers’ trust" over price.

It is important for Tesco to differentiate itself from Aldi and Lidl by creating a price message that it is the best place to come for the cheapest branded products.

Andrew Bloch, founder of consumer PR specialist Frank PR
"It is the biggest supermarket in the UK and customers expect the best prices, but Tesco has failed to deliver on that and it has lost shoppers to cheaper retailers," says Andrew Bloch, founder of consumer PR specialist Frank PR. "The job at hand is to rebuild trust and reconnect with its customers."

It is an unenviable task and Bloch agrees with Romney that there will be no quick fixes, but he thinks recovery is achievable with a clear appreciation that the ‘customer is king’ as well as delivering on the things that brought the supermarket to its original, market-leading position.

Bloch says: "I think there was a problem when it was promoting its ‘Finest’ range, because it was delivering mixed messages and left consumers confused as to what Tesco stood for."

Bloch says Tesco is already starting to get its messaging right by countering Aldi and Lidl’s discounting strategy with a campaign promoting cheaper branded products.

"That was smart," says Bloch. "It is important for Tesco to differentiate itself from Aldi and Lidl by creating a price message that it is the best place to come for the cheapest branded products."

Misha Dhanak, founder and managing director of newly minted consumer agency The Romans, agrees that Tesco needs to win back customers on a price promise.

She says: "Tesco already has the answer to its problems printed on every one of its carrier bags.  ‘Every Little Helps’ was once a powerful statement of intent, letting the UK know that the brand understood its customers' needs and had their backs. Reminding its employees and the public that this is still Tesco's foremost priority and being transparent about the roadmap to get there would be a good first step towards rebuilding trust in the brand."

Tesco already has the answer to its problems printed on every one of its carrier bags.

Misha Dhanak, founder and managing director of The Romans

One analyst in Monday’s Panorama programme made the gloomy prediction that it would take "years" before Tesco is in a position where it can compete again, but Bloch does not agree with this assessment.
He says: "I don’t think it is an overnight, or a one-campaign, solution but if Tesco is smart and it uses PR intelligently it can get back to where it was. There are easy ways for it to rebuild confidence, using an effective campaign, and the advantage of smart PR is that you can be light on your feet and react quickly to challenges. The end is not nigh."

Tesco’s group corporate affairs director, Rebecca Shelley was contacted but declined to comment.

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