The premium label has entered a new phase in its journey across Tesco ranges. Elaine Watson asks how much further it can go
How long does it take to build a billion pound brand? In the case of Tesco Finest, about six years if growth continues at current rates. That’s not bad going for a range that started life in 1998 as a handful of posh ready meals and now competes with high street specialists on everything from clothing to homewares as a major lifestyle brand rubbing shoulders with the likes of Next.
Already bigger than brand stalwarts such as Coke and Walkers in UK sales, Finest now looks set to break the £1bn barrier by next Christmas - if current double digit growth is maintained.
But how much further can Tesco take its premium label, and will rivals follow in its footsteps or forge their own paths?
So far, the premium range steamroller shows little sign of slowing, with Finest groceries now in Poland, Finest homewares arriving in the UK earlier this year, Finest credit cards following shortly after and Finest clothing hitting stores this week, boosting the range to 1,250 lines.
The premium brand’s latest foray into menswear is just the start of a bigger journey, says a spokeswoman. The 18-strong range, which includes polo shirts, trousers and jackets in blended cashmere, merino wool and Italian moleskin, could also be extended into women’s clothing if the menswear proves a hit. “The opportunities are endless,” the spokeswoman adds.
A key factor in Tesco’s success with Finest has been the recognition that sub-branding is less about categorising customers, and more about occasions, she says. In other words, there is no such thing as a Finest or a Value customer.
Indeed, Clubcard data shows shoppers typically buy into both ranges - Finest if they are looking for something special, and Value for everyday items. “Half of our customers buy a Finest product every week and this rises to 60% in the run-up to Christmas,” adds the spokeswoman.
And the competition is first to hand out praise where it’s due. Provided customers can see the superiority of a premium line, says Asda senior brand manager Jon Smythe, there is no reason why brands like Tesco Finest or Asda Extra Special cannot stretch into every category.
“Customers understand the concept of good, better and best for non-food, so we would never say never. However, we must establish credibility on food before taking Extra Special beyond food.”
Safeway’s product development director Judith Batchelar agrees: “Take our premium range, The Best - the best in terms of procurement, production methods and ingredients. The growth of premium ranges shows customers understand this principle on food. The same can apply on non-food.”
Sainsbury’s Taste the Difference is perhaps the only premium label that cannot be stretched beyond food, by virtue of its restrictive name. Nevertheless, Sainsbury has forged its own path on private label with new ranges such as Active Naturals toiletries.
Like Asda, Safeway is focusing on extending The Best into meat, produce and ready meals before embarking on any non-food initiatives, Batchelar says. “But the success of The Best branded flowers proves customers are prepared to pay extra in any category if the superiority of the product is apparent.”
The argument put forward by the likes of the Consumers’ Association - that premium ranges are a cynical ploy to boost margins by putting bog standard products in fancy packaging and charging twice the price - just doesn’t wash, claims Batchelar.
For a start, consumers aren’t stupid. And secondly, the margins argument is flawed.
“Premium products are superior in every way, so they cost more to make. Retailers are not making huge margins on them.”
How long does it take to build a billion pound brand? In the case of Tesco Finest, about six years if growth continues at current rates. That’s not bad going for a range that started life in 1998 as a handful of posh ready meals and now competes with high street specialists on everything from clothing to homewares as a major lifestyle brand rubbing shoulders with the likes of Next.
Already bigger than brand stalwarts such as Coke and Walkers in UK sales, Finest now looks set to break the £1bn barrier by next Christmas - if current double digit growth is maintained.
But how much further can Tesco take its premium label, and will rivals follow in its footsteps or forge their own paths?
So far, the premium range steamroller shows little sign of slowing, with Finest groceries now in Poland, Finest homewares arriving in the UK earlier this year, Finest credit cards following shortly after and Finest clothing hitting stores this week, boosting the range to 1,250 lines.
The premium brand’s latest foray into menswear is just the start of a bigger journey, says a spokeswoman. The 18-strong range, which includes polo shirts, trousers and jackets in blended cashmere, merino wool and Italian moleskin, could also be extended into women’s clothing if the menswear proves a hit. “The opportunities are endless,” the spokeswoman adds.
A key factor in Tesco’s success with Finest has been the recognition that sub-branding is less about categorising customers, and more about occasions, she says. In other words, there is no such thing as a Finest or a Value customer.
Indeed, Clubcard data shows shoppers typically buy into both ranges - Finest if they are looking for something special, and Value for everyday items. “Half of our customers buy a Finest product every week and this rises to 60% in the run-up to Christmas,” adds the spokeswoman.
And the competition is first to hand out praise where it’s due. Provided customers can see the superiority of a premium line, says Asda senior brand manager Jon Smythe, there is no reason why brands like Tesco Finest or Asda Extra Special cannot stretch into every category.
“Customers understand the concept of good, better and best for non-food, so we would never say never. However, we must establish credibility on food before taking Extra Special beyond food.”
Safeway’s product development director Judith Batchelar agrees: “Take our premium range, The Best - the best in terms of procurement, production methods and ingredients. The growth of premium ranges shows customers understand this principle on food. The same can apply on non-food.”
Sainsbury’s Taste the Difference is perhaps the only premium label that cannot be stretched beyond food, by virtue of its restrictive name. Nevertheless, Sainsbury has forged its own path on private label with new ranges such as Active Naturals toiletries.
Like Asda, Safeway is focusing on extending The Best into meat, produce and ready meals before embarking on any non-food initiatives, Batchelar says. “But the success of The Best branded flowers proves customers are prepared to pay extra in any category if the superiority of the product is apparent.”
The argument put forward by the likes of the Consumers’ Association - that premium ranges are a cynical ploy to boost margins by putting bog standard products in fancy packaging and charging twice the price - just doesn’t wash, claims Batchelar.
For a start, consumers aren’t stupid. And secondly, the margins argument is flawed.
“Premium products are superior in every way, so they cost more to make. Retailers are not making huge margins on them.”
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