Increasing price competition is hurting the brand strength of Belgium’s major supermarket chains. Only the two Dutch challengers, Albert Heijn and Jumbo, are able to buck the trend.
Declining brand strength threatens long-term strategy
In response to growing price awareness among consumers, Belgian supermarkets have significantly adjusted their marketing strategy, WPP claims in its Brand Study 2023. In order to retain their customers and market share, they have focused heavily on price promotions and discounts. This strategy is understandable given recent studies on price awareness, Johan Hellemans of WPP Belgium says: ensuring affordable options for their customers is not only a well-thought-out move, but also a vital component of the supermarkets’ marketing mix.
However, the strategy also has a major downside: “It is an economic reality that a lot of consumers look for brands they think offer value. Consumers choose based on value for money, so prices are just one part of the value equation. It may have become more important in the decision-making process, but this is not a licence to neglect other factors such as quality or service. After all, that could come at the expense of their positioning and brand value. A decline in brand value in the future, along with weakening of the basic associations of the brand, threatens a successful long-term growth strategy.”
Brand value suffers
The release of the WPP Brands Study 2023 results have allowed WPP and RetailDetail to update their overview of the Belgian supermarkets’ images. Examining how intense price competition has affected the brand positioning and value of Belgian supermarkets, the chart below shows clearly the way Belgian supermarkets tried to deal with the challenges of inflation – and the reduced purchasing power of (part of) their customers – seems to have hurt the brand strength of quite a few supermarket brands.
The BAV (Brand Asset Valuator, WPP’s measurement tool) plots brands in a power grid based on two axes. On the horizontal axis: brand recognition, consisting of brand trust and brand valuation. On the vertical axis: brand strength, consisting of the parameters brand differentiation and relevance. The horizontal axis indicates the current value, the vertical axis the future potential. It is important to note that for established brands, brand recognition is more stable than brand strength.
Lidl stands strong
Lidl manages to stand strong amid the retail chaos and maintains its position: it is the only major brand that kept its brand differentiation strength level. The other major players see their brand strength (on the vertical axis) decrease. This is certainly true of Delhaize, where additional factors are at play.
Colruyt and Carrefour also dropped quite a bit, as did (perhaps rather unexpectedly) Aldi. The more the other chains focus on prices and discounts, the more the hard discounters lose of their USP. “The traditional chains in Belgium have not done their brand differentiation any favours with their focus on prices and discounts. The tactical deployment of private labels may help sales in the short term, but a race for the bottom in prices also seems to be a race to the bottom in terms of brand strength”, Hellemans observes.
Little difference between private labels
Meanwhile, Belgian consumers are increasingly unlikely to see a distinction between major supermarkets. “In last year’s analysis, we had already warned that some tactical decisions by some brands would jeopardise their long-term prospects. However, we did not expect that this would hit the differentiation of the bigger players in the market so badly. The smaller players seem to hold their own in terms of differentiation, but they lose in terms of brand appreciation. Interestingly, Bio-Planet (Colruyt Group’s organic chain, ed.) does manage to score better in terms of brand recognition.”
The tactical use of private labels also appears to be of little use in this regard, as consumers see little to no difference between different private brands. “Supermarkets have made some cuts on some basic consumer expectations in order to save money, but it is important to strike the right balance between basic expectations and things that are considered unique and valuable – things that set you apart from the competition. Competitive prices are regarded as a basic requirement, but lowest prices are another story altogether. In the end, only one can be the cheapest. Aldi seems to be one of the bigger victims in this regard.”
“The general marketing rule states that far-reaching competition based on price can lead to falling margins and profits for all companies involved, and erode the importance of brands. The risks of an overly price-oriented communication are making themselves clear in this way.”
Jumbo and Albert Heijn profit
The big winners in these turbulent times on the Belgian market are Dutch challengers: Albert Heijn and Jumbo. Their brand strength seems to be taking full advantage of the crisis, and they could also make the biggest brand gains from the situation at Delhaize. “In terms of brand strength, Albert Heijn is coming very close to leader Colruyt. On the axis of brand strength, however, Albert Heijn has indeed taken over the leading position from Aldi.”
In the French-speaking part of the country, where Albert Heijn is not present yet, Colruyt and Aldi are fighting for brand leadership. Overall, Lidl seems to be in pole position to take over the baton across Belgium, but then it needs to invest heavily to build reach and penetration, Hellemans sees. “Albert Heijn dominating the Belgian supermarket landscape is coming overnight: it will still require substantial investments, but they are getting really close in Flanders and we suspect they will get more than a little push forwards from Delhaize. Albert Heijn becoming the strongest retail brand in Flanders is by no means an unrealistic goal anymore.”
This article part of a series of three that WPP and RetailDetail made based on the new WPP Brand Study 2023. Another article features the way in which our state of ‘permacrisis’ pushes Fearonomics onto retailers, and how they should respond, a third article focused on the effects of the crisis at Delhaize.