NO - Raoul Pinnell, Chairman, Strategic Investment Partners
The data indicates that a similar - and big - customer segment has affection for Tesco and Hovis. Confrontational negotiations that deliver such an outcome deny customers choice.
It would seem both brand owners have failed in their negotiations.
An unfortunate consequence would appear that the one with more clout (the channel - Tesco) has allowed itself to be seen as the bully.
Could it not have found a way forward? With Tesco's avowed skill of communicating with customers, could it not have delivered an innovative solution? How about extra Clubcard points on Hovis products, to help balance the price increase? Both brands could make an investment in 'helping British farmers to grow more effectively - so that they can 'plant and harvest more efficiently' or to 'aid those in Africa who might go hungry as a result of increases in the price of flour'.
Crazy ideas, maybe. But shouldn't this have been the focus of the negotiation, to produce a win for all out of a difficult situation?
MAYBE - Bart Michels, Managing director, Added Value
This feels reminiscent of David and Goliath. Premier Foods is taking on the giant of the supermarkets and seems prepared to brave the consequences. Is it heroic or foolhardy? The truth lies in the brand's real strength and its value proposition. Only time will tell. Will customers shop elsewhere if they can't find Hovis? Or will they trade down or across to other brands and own-label?
On the one hand, you have to love this confidence - it shows real belief in brand strength. But it's also a genuine fight for survival, as the ability to charge a premium in the face of mounting ingredient costs is what will guarantee a long-term place on the branded shelves.
It's great to see this. It's like a brand version of X Factor with Hovis as a contestant and Tesco as Simon Cowell. Cowell can express an opinion, but the public votes count for more. Come to think of it, maybe all brands should do this. What better way to know how strong your value proposition is and whether you'll be missed? I've a feeling Hovis is loved enough to be back soon.
YES - Ian Billington, Managing partner, Billington Cartmell
The Hovis/Tesco dispute is true market dynamics at work, in terms of buyer-side positioning and supplier economics.
Premier Foods has looked at its cost-margin ratios and made a call, while Tesco has responded with delistings.
In retailer terminology, space productivity is created for higher-margin, competing brands or own-label products - all with the 'people's value champion' positioning front of mind.
Historically, brand owners have 'bought' Nielsen share by supplying selected brand lines at a loss or low margin on the questionable strategy of brand presence and trial penetration. Yet for a mature brand in a mature market in the country's biggest retailer, this would be unsustainable, particularly with further adverse commodity price swings.
Premier will have evaluated the cost/benefit of range reduction. With the rising cost of raw materials forcing more brand-owners to confront the perceived robust margins that retailers enjoy, we can expect to see many such jousts, as retailers defend their consumer value.
YES - Steve Harding, Global chief executive, OgilvyAction
On the face of it, this does not appear to be a smart move, and Hovis has found itself between a rock and a hard place. The price of wheat has almost doubled, so the price of producing a loaf will have increased. Hovis has therefore sought to raise prices to sustain its profit margin.
It's a bold decision, but for Hovis, it's the right one. Wheat prices are likely to remain high until the next harvest, and the industry cannot afford to absorb the price rises. Neither can Premier Foods, with a reported £1.4bn debt.
The long-term damage of having 12 product lines delisted in Britain's biggest supermarket means Hovis can't afford to remain at loggerheads with Tesco. The move will boost its rivals and close the door on a huge number of shoppers. Tesco will not want to lose out here either, because Hovis commands considerable brand loyalty.
It's a lose-lose situation that will be resolved. A compromise agreement is the most likely outcome - and quickly.
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