Tesco v Carlsberg?

So Tesco are flexing their muscles again, after withdrawing many sugary soft drink brands, this time de-listing almost all Carlsberg products. What’s going on?

With its UK HQ close by, here in Northampton we feel a bit sorry for Carlsberg, the England FA’s official lager in the 2016 World Cup. Carlsberg are having a hard time with industrial action over pay whilst they are trying to recover from a failed incursion into Russia.

Is this the new Tesco’s ‘Project Reset’ doing what is best for the shopper? Or a penalty against Carlsberg for getting into bed with discounter Lidl? How does it play against the pending acquisition of SAB Miller by Anheuser-Busch Inbev (which will mean that they supply 1 in every 3 beers sold in the world).

Reducing choice of a much loved brand will upset many customers. Other major brands supply the discounters without penalty. Tesco’s move, however, would appear to be based on a hard-nosed rationalisation of its supplier base to offer more volume to fewer suppliers in exchange for everyday lower pricing.

Ironic, given a recent Carlsberg advert ‘If Carlsberg did supermarkets’ in which the shelves were all stacked with green tins of beer.

Tesco’s latest move highlights one of Porter’s Five Forces, which helps analyse power in the supply chain. In class many students think that the major brands like Heinz and Carlsberg have more power than multiple grocery retailers like Tesco. Not true. Power is with the retailer. Carlsberg probably certainly needs Tesco (to reach 3,500 points of sale in the UK, with 30% market share) more than Tesco needs Carlsberg.

Adrian Pryce – Senior Lecturer – Strategy, International Business & Cross Cultural Management