Love it or hate it: What the Tesco-Unilever spat tells us about brand loyalty

The public spat between Unilever and Tesco yesterday was settled before it really got going, but it still raises some important questions for our industry, specifically when it comes to the retailer-supplier relationship.

Firstly, Unilever will have needed to make some concessions, but the same goes for Tesco. And although many customers may not knowingly hold any allegiance to Unilever as a corporate entity, the FMCG giant is in a very powerful position: it has what customers want. It’s not far-fetched to say that customers would change who they shop with in order to find Unilever products, such as Marmite or Ben & Jerry’s. That’s the mark of a ‘true brand’, since anything else is just a product.

The media coverage around the dispute has primarily focused on Marmite and that’s no accident. I can’t think of an FMCG product more divisive: you literally do “love it or hate it” and if you love it, you really love it and nothing else will do. Ben & Jerry’s was second as measured by share of coverage; with its unique flavours, you’ll be hard-pressed to make a switch to another ice-cream to deliver the same experience.

Where Unilever could suffer the most is on its fifth most popular product: Comfort. There simply aren’t enough customers who really care if they buy lavender Comfort or lavender Lenor. Brand loyalty is redundant in this category as it’s mainly driven by price and promotion. If consumers see Lenor is 10% cheaper than the Comfort alternative, the former is more likely to end up in their shopping basket. This is where the balance of power starts to swing back to Tesco.

I have no doubt that other FMCGs will follow Unilever’s lead to varying levels of success. However, it all depends on the strength of their brands. It’s rare for a FMCG brand to drive true loyalty because shoppers generally value price more highly, but when it does, in the case of Marmite, customers will choose the brand over the retailer. The result will be higher prices in-store, which will eventually deter customers from buying brands they’re not loyal to. I also suspect that many FMCGs will use Brexit as a vehicle to justify pushing their prices up.

When the Big Four were in their ascendency, they were all-powerful. However, it’s been an uphill battle driven by the growth of the discounters, combined with the increased costs of running online delivery operations and much larger, more fragmented store estates. Traditional grocers now rely on the power of the brands they stock to differentiate themselves and ensure shoppers remain loyal. If they fail to stock a ‘true brand’, such as Marmite, then they risk losing more than just one product: it’s the whole of a customer’s shopping basket that leaves with them.

The Tesco/Unilever furore has exposed the delicate state of retailer and brand relationships to the public, which runs far deeper than cost prices. Retailers have traditionally held the majority of the power but it looks like the tables are starting to turn. In reality though, it’s neither the retailer nor brand that holds the true power. The customer is the real judge, jury and executioner in retail; they will ultimately dictate the future for both.

Matt Lee is co-founder and director at shopper media agency Capture