In the news this week

09 Jan 2015|Added Value

Marks and Spencer revealed a significant drop in sales of clothing, gifts and homewear over the Christmas period, largely due to holding back on discounting and online delivery issues. M&S insisted their clothing was well received and it was down to disruption at its online distribution centre in Castle Donington that caused the 5.8% slump in like-for-like sales in its general merchandise division during the 13 weeks to 27th December.

M&S always has an explanation as to why general merchandise offer continues to perform so poorly – and it always seems to be an “unpredictable event” – but the real challenge is that whereas their food business has a distinctive positioning the general merchandise offer is not the best, the cheapest, the most convenient or the most fashionable – it’s much easier to say what general merchandise doesn’t stand for than what it does. Until M&S can really define why people should shop their general merchandise offer and deliver the experience that supports that positioning, it will continue to suffer.
Matt Woodhams, Added Value Brand Director

In other news Tesco begins implementing a revival plan and in the process will be closing 43 unprofitable UK stores and halt construction on almost 50 others. Tesco enjoyed a reasonably good Christmas with like-for-like sales falling just 0.3% in the six weeks over Christmas but in a year of four profit warnings and the accounting scandal Tesco’s new chief executive, Dave Lewis, has a hefty task ahead to turn things around in 2015.

As well as closing stores Tesco is closing its head office in Cheshunt in 2016, and selling Tesco Broadband and Blinkbox video streaming service to TalkTalk.

Tesco is fundamentally a great business (reflected in pretty good like for like performance over Christmas in the current climate) with a rather large collection of problems which are painful to solve but far from insurmountable – too many shops, too many peripheral interests that are not competitively advantaged in their sector and where Tesco’s core skills and brand offer aren’t relevant for example. The investor response to these announcements addressing some of these reflects that Tesco is headed in the right direction, but this will be a long and bumpy road.
Matt Woodhams, Added Value Brand Director

Coca-Cola are also implementing cost-cutting efforts as they announced this week that they were to cut up to 1,800 jobs from their global workforce of about 130,000. The job cuts will affect both the firm’s Atlanta headquarters and its international operations as they reported slow growth and a 14% fall in earnings for the third quarter of last year. Muhtar Kent, chief executive, said Coca-Cola was focused on “streamlining and simplifying its operations.

Increasingly, consumers are understanding the detrimental effects of too much sugar in food, and so are turning away from fizzy drinks. Coca Cola, as a global leader, had an opportunity to make a bold statement by replacing all refined sugar with stevia. Instead it launched a ‘green’ variant. Coca-Cola is a brand which had previously shaped culture, but is now in danger of being left behind by a cultural shift which they appear not to have fully appreciated.
Emily Smith, Added Value Brand Associate Director

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