As the UK’s biggest supermarket chain, with 660 stores, Tesco currently sets the benchmark for performance in the sector. This week its management dropped a bombshell on staff in the packaging design department – telling them that they would be undergoing some unexpected career changes.
The changes will involve designers being redeployed to new positions as their department is restructured, a move unlikely to be universally popular with those affected. It is, however, likely to impress investors and City analysts to whom out-sourcing certain services is often seen as a way of saving on staff overheads.
Restructuring is, of course, 1990s-speak for axing. In a nutshell, virtually all Tesco’s own-label packaging design will now be carried out by external groups, with a small design management department to police their work. On a positive note, it is likely to mean a greater volume of work for external consultancies.
Indeed, the design groups on the shortlist for Tesco’s new packaging roster were due to hear if they had been selected for work as Design Week went to press. Ten principal groups, with a further five available for support, were expected to be chosen from a list of 20. More than 40 groups were approached in the initial stages of the selection process (DW 2 October).
The successful groups will have their work cut out for them. Tesco sells a total of 25 000 own-label product lines, which represent around 45 per cent of items in a typical store. Little is known about those on the shortlist. Tesco has previously had difficulty in appointing packaging groups. This is because many of the likely candidates already work for rival supermarkets or fmcg clients, and would therefore be unable to work for the retailer even if they wanted to.
Tesco design manager Richard Murphy, who will himself be changing positions in the reshuffle, declines to comment on full details of the restructuring on the basis of commercial sensitivity. He also declines to comment on speculation that Tesco will follow a design model similar to the one used at Boots the Chemists, where Pentagram partner John McConnell acts as overall design consultant, rather than in-house personnel.
In the dog-eat-dog world of supermarket retail, every perceived trading advantage is jealously guarded, and Murphy considers Tesco’s plans to have a sound strategic base which competitors would like to learn about.
“We will be asking people [from design groups] to spend more time in-store getting to know our categories,” confirms Murphy. Each group appointed will look at specific product categories, he told Design Week two weeks ago. “I wouldn’t say we’re giving them a free hand.
The re-positioning of the design head position… and the structuring of the roster are to give us control of what our brand looks like,” he adds.
He declines to comment on speculation, from sources close to Tesco, that the restructuring is the second-year tier of a five-year plan to restructure design buying into a “best-practice” scenario.
From what is known, it appears Tesco may be falling into line with common practice in the sector. Arch rival Sainsbury’s, which formerly held the coveted position as market leader, operates a similar packaging design model to the one which Tesco is believed to be adopting. All Sainsbury’s packaging design is carried out by external consultancies, with a management function tied to the marketing department to co-ordinate their efforts.
Asda likewise out-sources all its packaging design to external consultancies, while Safeway has a core list of seven approved design groups for packaging, retaining Enterprise IG as brand guardian. Only in-store signage and leaflets are done in-house.
One issue raised by Tesco’s decision to disband the internal packaging team is the fate of the in-house packaging designers, understood to number 14, who are being redeployed.
Design manager Murphy says they have nothing to worry about, and that suitable jobs will be found. But sources close to Tesco say the designers are concerned they will be forced out of the company by the lack of packaging design-related jobs.
“I don’t see how they can say that,” says Murphy. “We have a number of internal vacancies. We would look at their skills, and where they would be best placed.” He confirms that each member of staff will be offered a number of options, including retraining.
It will be up to Tesco’s yet-to-be-appointed design manager to ensure that the roster of consultancies lives up to the challenge.
The ‘big four’ supermarkets (Tesco, Sainsbury’s, Asda and Safeway) are competing hard for customers. The latest figures from the British Retail Consortium, retail’s industry body, show sales in September grew by less than 1.5 per cent for the fourth successive month.
The figures are 1.2 per cent higher than for the same month in 1997 – but that month showed artificially low sales as many stores closed for the funeral of Diana, Princess of Wales.
BRC economist Pamela Webber says sales of food and drink in September were ‘subdued… with price inflation flat, and little growth in volumes’. Shoppers appear to be tightening their belts. ‘Customers appeared to be looking for extra value, with bigger packs and multibuy offers being taken up,’ says Webber.
Own-brand products, which are mostly cheaper than branded counterparts, are an especially important device for super markets in this kind of climate.