Tesco and Wal-Mart are feeling the heat in Britain and in the US.Glynn Davis looks at the attitudes of consumers in other countries

Tesco and Wal-Mart might be bitter rivals on the international grocery stage, but they share a common problem in their home markets: they are both fighting a backlash from a growing band of consumers concerned about the power they wield.
Evidence of this feeling towards Tesco came in recent research commissioned by The Grocer that showed 32% of shoppers think the supermarket has become too powerful. And in the US, Wal-Mart has been defending itself from pressure groups and the unions for many years.
Both have recently sought third-party public relations advice, with Tesco bringing in former Sun editor David Yelland as an advisor and Wal-Mart appointing a team from PR company Edelman.
So what’s behind the backlash - and is it a global trend? Andrew Seth, author of the book: Supermarket Wars - Global Strategies for Food Retailers, says it is ironic that the backlash is most prominent in the UK and the US, where the world’s foremost free market economies exist. But he suggests it is this freedom that has enabled Wal-Mart and Tesco to grow so rapidly in recent years, which has caused alarm in certain quarters.
Seth suggests such that protest groups are particularly prevalent in the UK. “The British are known for being vocal and having a love of toppling tall poppies. A minority of people would go to the cross over these issues.”
Such people tend to be opinion
leaders and Seth says they have been adept at using the media to argue their case. He does not believe that it is the media itself that is driving opposition to Tesco and Wal-Mart.
Christina Veiders, managing editor of Supermarket News in the US, supports this argument, adding that Wal-Mart also cleverly uses the media to fight its corner. “Although they don’t talk to trade magazines like us, they do talk to the New York Times and the New York Post - they are very media-savvy.”
Elsewhere in the world, however, there is less of a culture of protest - even in countries where there is one dominant player. Michael Heffernan, analyst at Melbourne-based broker FW Holst, says Australian consumers remain unfazed by Woolworths’ 30% hold on that country’s domestic grocery market. “It is very well regarded and people get a pretty good deal from it. There is no backlash as it has been a tremendous performer both for shareholders and for customers with its prices - so everybody is happy,” he explains.
In France, Olivier Costil, deputy editor-in-chief of leading retail industry magazine LSA, agrees that a different consumer mentality limits the chances of a backlash emerging against market leader Carrefour.
“We do not have the same problems with protests in France as consumers don’t have the same kind of mindset as in the UK. There is not such a contest-driven culture and there is not as much consumer power in France.”
Although the unions represent a powerful force in France, Costil says they have been more focused on the rise of Aldi and Lidl, which are of more social concern because staff salaries are lower than those offered by Carrefour.
There is also evidence that the French market is protective towards its domestic players, regardless of size. That the Carrefour takeover of Promodes, which gave the combined entity 30% of the food market, was waved through without any serious competition issues indicates that the French are willing to accept the downside of having a dominant domestic operator if it makes it difficult for overseas players to enter their market.
An analyst with experience in the French market believes Carrefour has also managed to avoid any negative sentiment building up by trading through a number of fascias such as Champion, Ed and Marche Plus.
“People don’t realise they are owned by the same company. I’d not say it is a deliberate policy as a lot of the fascias are a result of various mergers, but the net result is that people are much less conscious of Carrefour’s size - unlike Tesco with its mono-branding. There is much less of a sense of a monopoly,” he explains.
Mike Dawson, foreign reporter on Frankfurt-based food industry newspaper Lebensmittel Zeitung, paints a similar picture in Germany, where both Metro and Rewe control large shares of the food market through a variety of fascias.
However, he says Rewe is understood to be considering re-badging it stores - which include Penny Markt, Toom Markt and Minimal - under a single brand, which
he believes would be a huge mistake. “The synergies might be good but the knock-on effects could be bad as German consumers could get worried. If the managers look at what is happening to Wal-Mart and Tesco, they will see it’s a dangerous game.”
Dawson also believes that because there is very little value-add to food products in Germany, which keeps prices down, there is little interest from the media and consumers in the food market’s concentration in a small number of companies’ hands. “Because it is not innovative, it is way behind on prices. And because these prices are rock bottom, customers are kept happy,” he says.
Seth suggests this low pricing - especially from hard discounter Aldi - has, in fact, proved to be something of a saviour to Germans during a tough period for their economy. “Although Aldi might have the market by the scruff of the neck, it has helped the German consumer out of a hole in recent years,” he says.
Also benefiting most German supermarkets is their private status, which helps them to stay out of the limelight. Unlike Tesco, which causes an angry furore every time it announces its ever-larger profits, the German grocers do not have to reveal their figures to the general public.
This combination of factors has ensured German supermarkets remain fairly immune from consumer backlash.
And the situation is the same in The Netherlands where Peter Smit, from the news desk at trade magazine Distrifood, says there is no bad feeling towards the supermarkets, including the Ahold-owned Albert Heijn that commands 26% of that country’s food market.
He believes the basic issue that negates a backlash against Ahold is the fact that many small independent retailers still operate in The Netherlands. Unlike the situation in many other countries, they have not been crushed by the multiples’ superstores.
“Tesco is building big outlets in the UK that are destroying small shop owners but in The Netherlands, although the supermarkets do try to get space for superstores, they are not allowed to,” he says.
This difficulty in getting planning permission for large hypermarkets has helped keep the average store size at a modest 1,100 square metres. Even the mighty Albert Heijn has only managed to secure permission for four of its XL format stores that measure 3,000 square metres.
As long as consumers can continue to cycle to their nearby grocery stores, then Smit believes that a backlash against Ahold is unlikely.
But he is concerned that larger edge-of-town stores have begun to appear on the landscape - as evidenced by the opening of a small number of Aldi and Lidl stores. “Maybe in 10 years they could be commonplace, but for now the consumers are not worried,” says Smit.
While this remains the case, Tesco and Wal-Mart will continue to be the main targets of a consumer backlash. With no sign of the negative feeling abating in either case, it will take all the PR expertise of Yelland and Edelman to keep things under control.