Supermarkets should remember the consequences of the Perrier scandal

February 18, 2013

Malcolm WalkerDuring the early part of 1990, health officials in North Carolina, USA, made an alarming discovery. Some Perrier bottled mineral water, whose purity was so legendary they had used it to benchmark other water supplies, was found to be contaminated with minute traces of benzene.

Benzene is a natural component of crude oil. Ingested in sufficient quantities, it can cause cancer in humans. Of course, there was no question of that happening in North Carolina. As a Federal Food and Drug Administration official drily observed at the time: “At these levels there is no immediate hazard. Over many years, if you consumed about 16 fluid ounces a day, your lifetime risk of cancer might increase by one in a million, which we consider a negligible risk.”

But no one was listening to the FDA’s voice of reason. Panic broke out all over the USA – and not just there. Perrier, at that time world leader in the mineral water category, was obliged to withdraw its entire global inventory of 160 million bottles. Brand integrity was further compromised by the discovery that the “natural” bubbles in the bottled potion were actually added back later. Perrier never fully recovered: it lost its leadership and became just another branded mineral water, albeit still a famous French one. Commercially, the crisis was if anything even more disastrous. The independent Perrier bottled water company was, within two years, sold to Nestlé.

I think you know where I’m leading with this. Fast-forward 23 years, to a full-page ad that appeared in yesterday’s national newspapers. It was inserted by Malcolm Walker, founder and chief executive of  leading UK food retailer Iceland. Its purpose was to divert responsibility for the horse meat scandal now engulfing our supermarkets by pointing the finger of blame at cheapskate procurement in local government, the National Health Service – and its equally unscrupulous counterpart in the catering industry – which has connived at bringing down processed food costs to their lowest possible denominator. Doubtless, judging from the ensuing squawks of indignation, the Iceland boss has a point – though how exactly his tirade exonerates the supermarkets from their own ruthless manipulation of supplier lines is not entirely clear. However, Walker does not stop there. Having scored some points on behalf of his sector, he then goes on to trash it by adopting a “holier than thou” approach:

“Iceland does not sell cheap food. We sell high-quality own label frozen food that is good value. We do not sell – and never sold – ‘white pack’ economy products.” Unlike, he carefully does not add, Tesco and Asda. And, just to ram the point home, he goes on to claim that “no horse meat has ever been found in an Iceland product”.

Well, almost none. At the bottom of the ad there is a mealy-mouthed admission that 0.1% of equine DNA was indeed found in two Iceland Quarter Pound burgers. But these don’t count, because the test, carried out by the Food Safety Authority of Ireland, was not an “accredited” one, and the discovered traces of horse were “well below the current accepted threshold level” of 1%. So, yaboo sucks to any critics.

Nice one, Malcolm. You’ve managed to spread, or at least smear, the blame far and wide, and thrown into the processor just a hint of xenophobia. Ireland, Romania, France – these horse-eating monkeys, they’re not like us – not to be trusted, whatever their professions of rigorously adhering to EU-wide standards. But, leaving aside the lowly populism of his message, Walker, in waxing eloquent about the infinitesimal amount of contamination in his own burgers, has committed a revealing tactical blunder.

Perrier logoThe current food scandal is not about parts per billion contaminants found in horse meat; it’s about trust in the brand. Just like the benzene found in Perrier all those years ago, consumers would have to ingest an awful lot of horse burger infected with “bute” equine painkiller (over 500 250 gram ones, to be precise) before experiencing any appreciable side effect. But that won’t prevent them passing summary judgement on those august brands – at the head of the supply chain – that have allowed this scandal to happen: namely the UK grocery multiples.

Possibly with devastating consequences for future sales.

One interesting aspect of this scandal is that its ramifications have now moved on from cheap lines of processed meat – in short, “poor people” – to ready-made meals. In the other words, the sort of thing consumed by affluent and articulate members of the middle-class. That’s bad news even for elite purveyors, such as Waitrose and M&S.

In all probability there’s nothing to worry about. But that’s not the point, is it? My local butcher tells me business has gone gang-busters over the past couple of weeks. And for good reason. In the past, there was a perception (false, as it happens, in many cases) that local businesses could not match supermarket fresh meat prices. Now, understandably, people seem a lot more concerned about local provenance. If you must have lasagne, it’s as well to see the meat being minced while you wait, rather than trusting the word of some supermarket about the integrity of its supply line.

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Horse meat scandal puts grocers through the mincer

January 17, 2013

TescoUntil a couple of days ago, few outside the food retail and logistics business would ever have heard of Silvercrest. Now it has achieved household notoriety as the weak-link in the food chain that has served illegal horse meat up on British tables, in the guise of own-label supermarket beef burgers.

The reputational damage has, rightly, been severe for all those involved. Tesco – which fessed up to at least one line of its apparently legit beef burgers being contaminated with 29% horse meat – has seen £300m wiped from its stock market valuation overnight and has now taken out full-page ads in most national newspapers, grovelling abjectly. The timing could not have been worse, from a corporate point of view. Just days ago, a halfway decent set of financials had seemed to indicate that Tesco was on the ramp of recovery.

Luckily for Tesco, it is no longer alone. A host of other high street names – Aldi, Lidl, Sainsbury, Asda, the Co-Op, Morrisons, Burger King among them – have now opted to clear their shelves of the offensive products. In some cases because they use the same supplier, ABP/Silvercrest, in others merely as a “precaution” lest the same fate might befall their own supply chain. Only McDonald’s and Marks & Spencer have been able to stand aside, smugly waving a clean bill of health.

Their smugness is unwarranted. This disaster could so easily – in only slightly modified circumstances – have happened to them.

Some might argue that the horse-meat scandal is little more than a storm in a tea-cup, got up by the media. After all, no one died and no one is likely to: horse meat is eagerly consumed all over the globe, from Kazakstan to Argentina, as a tasty substitute for the tougher, stringier beef that can be bought for about the same price. Indeed, there’s not a little hypocrisy in this country about the cultural taboo surrounding horse meat. Until about 100 years ago, the Brits themselves were avid consumers of the stuff. Only more recently have we developed the refinement of conscience that prohibits national consumption, while allowing us to send up to 10,000 nags a year to specialist abattoirs, there to be despatched for the perverted pleasure of less civilised foreigners.

Alas, the ramifications of this affair go somewhat deeper. Imagine, for a moment, that instead of horse meat (and elements of pork), those eagle-eyed  inspectors at the Irish Food Standards Agency (FSAI) had found the minutest traces of human DNA. The uncontainable revulsion – far from affecting a few animal lovers, Muslims and Jews – would be universal. An official inquiry would, there and then, be instituted into how these three wise monkeys – the suppliers, the retailers and the regulator – had, through cavalier negligence and the unobstructed pursuit of greed, been allowed to corrupt the integrity of the food chain. Because, make no mistake, this little cock-up is all about money. The burgers most tainted were those from so-called “value” products where the cost of ingredients is at all times under pressure. Retailers want to satisfy their customers with the lowest possible prices consistent with food safety regulations. The suppliers – browbeaten by the retailers – seek low-cost substitutes (in this case from the less  punctilious Netherlands and Spain, where the consumption of horse meat is legal). And the UK regulator takes a passive, compliant attitude to anything that is outside its immediate remit (no conceivable threat to health, so why bother with DNA tests?), suggesting a “lite-touch” relationship that is too cosy with the industry it is supposed to govern.

It makes you wonder why the FSAI could be bothered with such tests, but the UK’s FSA could not. Or indeed, why the retailers didn’t carry out such DNA tests themselves. After all, it’s their brand reputation which is going through the mincer because they have not.


Advertising industry sheds crocodile tears over Steve Hilton’s departure

March 6, 2012

Few in the ad industry will lament the departure of Steve “Yoda” Hilton, David Cameron’s director of strategy. Indeed, such is the relief that he is going, some would willingly pack the diminutive “blue-sky” thinker’s bags, as he contemplates a year’s ‘sabbatical’ with his family in California. Politically speaking, California is the sunny side of Siberia.

Why good riddance? Well, the word that best sums up Hilton’s relationship with the ad industry is “renegade”.

Although Hilton’s association with Cameron and the Tory party predates the 1992 election campaign, most of his subsequent years were spent in the service of advertising, the career that actually earned him a living. Hilton quickly hooked up with Maurice Saatchi, who professed to see in young Steve a kind of son: “No one reminds me as much of me when young as Steve”, he is reputed to have said. And the admiration was mutual. Steve dutifully followed Maurice from Saatchi & Saatchi to breakaway M&C Saatchi as a kind of intellectual bag-carrier. Hilton’s ability to think “out of the box” or perhaps more accurately, “to get out of his box”, soon became apparent with his contribution to the 1997 election campaign. The “Demon Eyes” poster was certainly visually arresting and highly memorable, but trying to make the then-saintly Tony Blair into the Devil Incarnate probably did more to win votes for Labour than for the party originating it. This episode would seem to underline an abiding truth about Hilton’s career: that high intelligence and original thinking are no guarantee of common sense.

Never mind. After 13 years of hard Labour, which saw the 2002 ban on cigarette advertising followed in 2007 by severe TV restrictions on foods high in fat, salt and sugar, and much muttering about out-of-control drinks advertising, the ad industry seemed to have every reason to pop the corks when it emerged that one of their own was to become the man officially in charge of David Cameron’s brain.

How wrong they all were. Had they done their homework more carefully they would have found our man wasn’t the pragmatic trimmer everyone hoped he might be. A Steve Hilton blog post from as early as 2004, entitled “Will sexual marketing be the next consumer backlash?”, espoused some rather unfashionable, untraditionalist opinions on the matter of “the relentless drive by big businesses to sexualise small children, ageing them prematurely in the process”, while denouncing the “sexual predators of the advertising industry” for good measure.

Ring a bell? “The Bailey Report”, says one insider, “Appears to have taken its brief directly from Steve Hilton’s old blog.” Too right, and laudable though the principles informing Reg Bailey’s report are, what a nightmare they have proved to implement. The regulators have gone into puritanical overdrive, with a zeal reminiscent of the Salem witch trials. Practically any female flesh exposed in a public place (ie, on posters) is now regarded as a potential contaminant of young minds – as the recent case of the Advertising Standards Authority versus Marks & Spencer only too vividly reminded us.

However, the Bailey Report and its aftermath are a mooncast shadow when compared with Hilton’s other bequest to the ad industry. Fairly or not, Hilton’s blue-sky thinking is blamed for the ultimate destruction of the Central Office of Information. For which read a £540m-a-year ad industry gravy-train.

Pinning the blame on a single person for what may yet turn out to be a government-wide communications disaster zone might seem a little harsh. After all, there are plenty of available villains – if that’s what they are – from Francis Maude to half the cabinet office. And yet the suspicion lingers that Hilton somehow gave Maude the intellectual confidence to take an axe to the venerable institution in the first place, with his bizarre proposal for a spare and minimalist Ad Council to displace the heavily bureaucratic COI.


Why HSBC £40m fine over mis-selling scandal gives marketing a bad name

December 6, 2011

Chris Barraclough is right. While the marketing community obsesses about Marks & Spencer lingerie ads, Size Zero models, Twitter trending and the monetisation of Facebook, it is almost entirely oblivious to some criminality of Dickensian proportions tarnishing its name.

Criminality? We’re talking big banks here, and yet another “mis-selling” scandal, although in truth the scandal involves everything from new product development through to sales, marketing and marcoms. Not to mention some truly appalling internal supervision, with a hint  of News International about it.

Villain of the piece is HSBC, Britain’s biggest bank, which has just been fined £10.5m by financial services regulator the FSA and ordered to pay back £29.5m to old age pensioners it had systematically swindled out of their savings over a period of 5 years.

It’s a complex story with many, unflattering, angles. Here are a few of them, to give the flavour. The mis-selling involved an investment bond with a capital protection element. The snag was, you had to put the money away for about 5 years or incur a huge financial penalty. Many of the 2,485 victims were very old; one was 94 – the average age was 83. Obviously, a large number had a life-expectancy shorter than the term of the bond. Yet, they were easy prey, not necessarily on account of mental infirmity but because they were 1) capital rich (compared to most of the rest of the population) and 2) very fearful of the eventual cost of living in a halfway decent care home. Quite a few sold their houses to fund what they were told was the answer to their financial prayers; on average, they handed over £115,000 each. The average loss was £11,790 per customer, spookily adjacent to the £11,500 commission over 5 years received by advisors who had helped to sell the product. The FSA judged that 87% of sales were “inappropriate”.

HSBC is not solely culpable. It bought the rogue organisation responsible, Nursing Home Fees Agency, long after it had been set up in 1991 – presumably on the basis that NHFA was a nice little earner (as indeed it was). Then, too, NHFA came highly recommended. Help the Aged, the charity, was being paid commission for passing on names to the NHFA, while the Royal British Legion listed the company as a place to seek advice on how to pay for care fees. NHFA salesmen were also aided by a listing in the government’s financial advice website at Direct.gov.uk.

For all I know, malpractice may date back two decades. But that hardly exonerates HSBC, which took 4 years to wake up to something being rotten and then to report it. NHFA was only closed down in July of this year.

Horrendous though this mugging of pensioners may be, it would be nice to think of it as an isolated incident. No such luck.  In January 2011 Barclays was fined £7.7m and ordered to pay £60m compensation to thousands of elderly victims of a similar mis-selling scandal. In April, the banks finally lost a case in the high court, after years of procrastination over the payment protection insurance scandal – making them liable for billions of pounds of compensation. In May, the Bank of Scotland, a subsidiary of Lloyds Banking Group, was fined £3.5m and forced to pay £17m compensation to elderly customers after – guess what? – selling them risky investments.

How do they get away with it? Well, because they can. These fines may seem astronomical by my standards or yours, but they are a spit in the ocean compared with the Big Fours’ bottom lines. HSBC, for example, made interim profits of about £7bn this year. Banks also benefit from a culture of impunity. This is usually taken to mean stratospheric and wholly unjustified annual bonuses, or irresponsible, arcane, casino investments that eventually bring the house down. It is equally apparent they have a licence to plunder the needy and vulnerable with little fear of meaningful retribution.

For that state of affairs we too, as Barraclough implies in his blog post, are partly responsible. And marketers, obsessed with youth and cutting-edge technology, especially so. Finance, particularly retail finance such as pensions, investment bonds and mutual funds, is nit-pickingly complex and unsexy. It’s also, as often as not, about an unsexy sector – the over 50s – who happen to own most of the nation’s wealth. So we defer to the so-called experts. These experts don’t mind being boring, in fact they positively revel in it. And you can well see why.


Nation shocked to its marrow by sexy Marks & Spencer lingerie ad

November 30, 2011

Warning to all advertisers: the merest suggestion of female carnality in a public place will now be punished by a rap over the knuckles from the Advertising Standards Authority.

The regulator has holed a second high-profile brand below the waterline. Last week it was Unilever’s Lynx. This week it is – wait for it – Marks & Spencer.

M&S corrupting our youth? That bastion of frumpy, middle-class, Daily Mail-reading Middle England? Whatever is the world coming to? Next, they’ll be banning mince pies.

And yet, there it is in black and white, in the ASA’s official rescript: M&S is “socially irresponsible” because it has plied us with a “sexually overt” ad.

The ad in question is one of two which ran on bus-sides during September, featuring models sporting M&S’ most gossamer lingerie – and little else. To forestall complaints about gratuitous sexiness (unsuccessfully as it turned out), M&S decided to gloss the posters with a “filmic” finish – ie, it blurred them slightly. The ASA conceded that the context was relevant to the sector (how else do you display lingerie on a poster – on a washing line?). It also acknowledged that M&S had taken considerable care not to make the models’ poses too provocative. But it drew the line at one particular execution:

We considered that the pose of the woman kneeling on the bed was overtly sexual, as her legs were wide apart, her back arched and one arm above her head with the other touching her thigh. We also noted that the woman in this image wore stockings.

Shocking, a glimpse of stocking. You have been warned.

Mind you, it’s probably time someone brought M&S to book over its increasingly licentious conduct. Not a Christmas seems to go by these days without saturation scheduling of M&S’ most sexy models parading their underwear on our television screens.

If only M&S spent a little less money on its models and a little more on tarting up its far from glamorous interiors, perhaps we would all have less to complain about.


European Court ruling forces Google to mince its AdWords

September 22, 2011

The world of marketing may little note, but long find itself remembering, an obscure judgement handed down by the Court of Justice of the European Union today.

It concerns the endemic practice of buying someone else’s brand name (or, more specifically, trademark) as a search term and then having all resulting enquiries directed, heretofore quite legally, towards your own enterprise. The practice is enshrined in such services as Google AdWords.

A good example of the wheeze in action is Virgin Media. Tee’d up for a mega-marketing launch back in 2006, it was mortified to discover that its principal rival, BSkyB, had bought up all Google search references to the VM brand name and was redirecting any interest to Sky.

Marks & Spencer sought to pull off a similar stunt when it “bought” the Interflora AdWord search term in 2009, with the intention of substituting its own online flower shop every time an internet user searched for “interflora” on Google.

A bouquet of barbed wire for Google

Sadly for M&S, Interflora had a sense of humour loss and sued in the English law courts – which referred the matter to the supreme jurisdiction of the CJEU.

Well, the ruling has come in and it’s not going to be to M&S’s liking, or that of any other brand owner seeking to poach a rival’s name online. The court has decreed that buying your competitor’s name infringes trademark law on two counts: the ability to identify the origin of goods and services; and the right to preservation of a brand proprietor’s reputation. Crucially, it has ruled that proprietors of a trademark (let’s call them brand owners) can actually prevent a competitor using their name where they can prove free-riding or brand denigration is taking place. Which in practice will have a chilling effect on AdWord activity.

The ruling will cause widespread dismay, not least at Google – which has heavy investment in the practice. And all the more so because in a previous case, that of Google v Louis Vuitton (2010), the court had seemed to lean the other way. It said that Google, as intermediary, did nothing wrong in allowing AdWords to promote the practice of buying other people’s brand names, and that the existence of the service in no way infringed trademark law.

What it did not do was rule upon the legal responsibility of the search term purchaser, as opposed to the intermediary. In other words, the subsequent M&S case is a landmark judgement, which will now be handed back to the English courts for enforcement.

In the words of Kirsten Gilbert, partner at intellectual property specialist Marks & Clerk Solicitors: “Brand owners will be encouraged that their competitors no longer have a completely free rein over use of their trademark as a keyword. But, the practice of purchasing rivals’ trademarks as keywords is widespread, and marketers may now have to think of other creative ways to advertise their brands on the web.”

How two-edged the sword of justice is.


Bart Becht quits while he’s ahead

April 15, 2011

The Financial Times headline almost said it all: “Becht goes out with a bang as £2bn is wiped off Reckitt shares.” Bart Becht, chief executive of Reckitt Benckiser, has abruptly announced his departure from the household goods company he had steered to unprecedented success over the past 16 years. An instant £2bn personal valuation was his reward. A better launch-pad for a portfolio career would be hard to imagine, if that is what he has in mind.

But with the bouquet came a few brickbats as well. Could it be that arguably the most successful corporate businessman of his generation was also one of its most selfish? I’m not talking about the £90m “fat cat” cheque he received in 2009 for services rendered, but the manner in which he announced his departure.

Far from organising an orderly succession, Becht brutally declared he was going in September, leaving – by some accounts – the company rudderless. Or rather, in the hands of the no doubt competent, but almost unknown, Rakesh Kapoor. In so doing, he had arrogantly put his own interests ahead of those of shareholders, who had invested in the Becht marketing magic, mistakenly believing he would be there forever.

I’m afraid I don’t buy that argument in its entirety. All right, the announcement was a shock – Becht is only 54 and had given no previous indication of his desire to quit, from what we are told. But when you invest in personality, you also invest in that personality’s potency. The minute a successor is announced, the potency is diminished and the magic fades. Ask yourself why Elizabeth 1, a potent leader if ever there was one, never announced a successor until she was on her death-bed. Ask yourself why there is no successor in sight at WPP.

An interregnum, however defined, carries risks all of its own. Stakeholders (whether subjects or shareholders) worry about the competence of the successor, who can never be tried and tested enough. The barons/boardroom rivals become refractory and disloyal – why wasn’t one of them chosen? The former leader can’t quite bear the idea of stepping back and letting go: Sir Stuart Rose’s latterday conduct at Marks & Spencer springs to mind.

No, quit while you’re ahead. There’s a lot to be said for a clean, swift break. Shareholders will get over the shock in a surprisingly short time.


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