Sainsbury's and Asda - The Wedding of the Year?
So the process has begun of two behemoth’s of the retail grocery world coming together as one.
Much has already been written on the logic behind the proposed merger of Sainsbury’s and Asda with the BBC producing a handy guide to the ‘deal of the century’ in nine charts (http://www.bbc.co.uk/news/business-43947212).
As marketers we are inevitably drawn to the branding challenges the merger brings. How can these two brands be most effectively be positioned to compete against the previous market leader Tesco on the one hand and the insurgence of the discounters on the other?
It’s not the first time a deal of this magnitude has come about and, from a personal perspective, I was immediately transported back to 2010 and the Orange/ T Mobile merger. It was a fantastic experience to be involved in as a leader and one which I think has come clear pointers for the Sainsburys and Asda teams as they start to bring the two businesses together.
For all those clever strategy presentations we worked on and all those great two by two charts positioning the two brands against distinct segments, the key take out for me looking back is that, as with so many things, it’s all about the people. The Drucker quote ‘culture eats strategy for breakfast’ is oft repeated but it’s never more pertinent than in a situation such as this.
The cultural challenges of bringing together two businesses of this scale are immense and cannot be overstated.
1. Becoming a Leader
It’s one thing to achieve market leadership through competition - It’s a goal the business has worked towards. There is clear momentum behind the business and no doubt confidence in the strategy that has led the company there in the first place. Effective market leaders exude that sense of confidence and posture in the market from knowing they’re the best around.
Sure, there’s a risk of complacency but the very best manage to keep this hunger. It’s always tempting to draw on sporting analogies here – Usain Bolt, Roger Federer, Cristiano Ronaldo, Serena Williams etc exude a certainty that they know they’re at the top of their game and manage to do so season after season.
However, for two businesses who were previously challenging a leader to suddenly be thrust into first place through a merger or joint venture can require an almost instant pivot in company culture. On the one hand, maintaining a challenger mentality internally can be a real asset but, on the other, there are now much bigger customer expectations to match when you’re number one.
2. Managing Multiple Brands
From a marketing strategy perspective, the idea of more tightly positioned and targeted brands helping reach a broader cross section of consumers makes perfect sense. However, in reality the processes required to do this effectively cannot be learned overnight. Yes, the likes of P&G et al are incredibly adept at managing a brand portfolio. However, these have been honed over many years and finely tuned to within an inch of their lives.
It’s a very different scenario when your marketing team (s) have spent most of their careers zealously guarding the equity of the masterbrand, pushing back on anything which is seen to damage this precious corporate asset. The risk is that suddenly marketing planning discussions become very internally focused i.e. rather than worrying about how to face into the competition, marketers are spending too much time worrying about how to position each brand against each other. Even with a solid and reliable segmentation to underpin this decision making, internal targets can lead to commercial and brand strategies in almost direct opposition.
3. Shared vs Distinct Assets
These cultural challenges are exacerbated yet further by the different pressures being exerted on each part of the organisation. Inevitably, in order to hit the business case behind the merger, certain functions need to evolve to become ‘shared services’ . These could be back office or central functions e.g. legal/ finance/ HR/ logistics but the marketing team also has some logical synergies. Functions such as Insight, CRM, planning, media for example are logical candidates to act as a central team across both brands.
Yet again, however, this irrefutable logic can build hidden tensions within the marketing process. Central teams who have previously seen themselves as working for a brand can find themselves with a lack of identity, working for a holding company or corporate brand. At the same time they can find themselves often juggling two masters with no clear path to escalation for resolving prioritisation calls across the two brands. Of course, the same tension is to be found within the brand teams. Once dedicated resources are now split across both brands and frustration can build as they find they have to wait in a queue.
None of these challenges are insurmountable of course but they highlight the internal tensions that often simmer beneath the surface of a company culture. Equally, though, they cannot be overlooked – it’s in these human interactions where a strategy will succeed or fail, not in the slick PowerPoint presentation pulled together by the advising consultants!
For EE the solution lay in a common brand. This new identity provided the ‘glue’ to hold the business together and unite previously disparate teams. However, this was far more than a ‘paint job’. This was a brand with a ‘hard centre’. A brand with substance at the heart. The ability to ‘re-farm’ 1800 MHz spectrum to offer 4G services in advance of the competition added unique weight to the re-branding. There was no doubting market leadership internally now – EE were first, and first on merit. First to market with 4G and the only network able to offer a 4G enabled iPhone – a unique first mover advantage.
I’m sure Sainsbury’s and Asda will be able to navigate their way through the complexities of moving from mono to multi-brand strategy but they also need to consider what unique point of difference these combined brands can bring to provide substance to the merger. Sure, price savings will always be appealing to the consumer but, in a market as competitive as grocery, one could argue these are a given rather than a differentiator.
Let’s watch this space….
For more on the Story of EE, Olaf Swantee wrote it in a book with Stuart Jackson (https://www.amazon.co.uk/4G-Mobile-Revolution-Innovation-Transformation/dp/0749479396)