The Full English – The Decline of the Middle-Class Brand

I referenced a Nil’s Pratley opinion piece in the Guardian on Tesco’s new budget store, Jack’s, last weekend. I’m returning to it as the comments are worth a look on their own. In amongst them is this pearl of wisdom.

What Aldi/Lidl are doing well is taping into the change in incomes and what “middle class” means now and that, basically, people aren’t really middle class.

We have a much smaller genuine middle class (2 holidays a year, 1 skiing, then 2 weeks in the sun over seas, new cars that they own, large house with minimal debts…) than we used to have and now there’s really just a much larger upper working/lower middle class who like to think that they can live the life but know that they really cant so actually need shops like Aldi and Lidl so that they can buy wine (as they can’t afford to from Majestic or whomever where it’s bought by the case, as a real middle class person would) and meat that they can claim is fancy still (not from a proper butcher, like real middle class would) to pretend that they are living well, but at a cheap price. (1)

Spelling errors aside, this observation is interesting. Is the middle class ‘brand’ sliding down as a consequence of aspirational executive types? I’ve noticed this amongst car manufacturers in my little hobby. The old executive companies; Mercedes, Audi, BMW etc, now produce small bland euro-boxes starting at very reasonable prices on solid finance deals. One argument is that this is a consequence of EU directives dictating all manufacturers reach a certain efficiency target. Others would say it’s good business sense, as the aspirational lower middle classes want ‘the brand’ and therefore will pay slightly more for a comparative bland euroboxcar with a three-pointed star than one from a Korean microwave manufacturer. That’ll be the (demise of) Daewoo (2, 3)?

Extend this line of logic out to supermarkets, and Aldi/ Lidl allows people to feel they lead a middle-class lifestyle; the food is more affordable so a bottle of wine, halloumi, olives and smashed avocado on toast dahling is less of a luxury item. The treats associated with middle class life can be every day. And to be fair, I’ve seen Bentleys being filled up with the weekly shop at Aldi, because you don’t stay rich buying Waitrose essential vermicelli nests (4, 5).

So if the lower middle-class have decided that Lidl and Aldi’s budget kale smoothies are a taste of the good life, where are the upper middle-class off to? The trendy local deli and the Riverford food box, or the organic inner-city farming co-operative (I regret nothing)? The hotly anticipated pop-up keralan-fusion van? Some other half-cooked, over-spiced ‘superfood’ containing slop cooked by an unwashed fake-prison-tattoo-sporting manbun-topped ‘entrepreneur’?

It seems they’re actually off to buy something of quality. Because that’s what they’ve always done. That’s what brands used to mean. There’s an excellent anecdote about the demise of Rover from when they were owned by BMW in the 90s. When BMW built seriously well-engineered cars (the same ones that can now be found drifting round empty retail car parks at night). The story goes that engineers were discussing a part at a meeting in Germany, and the question around the table was “How can we make this better?”. Those same engineers came back to Rover in Birmingham and were asked “How can we make this cheaper?”.

And now everyone is asking, “How can we make this cheaper?”, to squeeze every inch of profit from the ‘Brand’. But that’s not sustainable, because cheaper quite often means poorer quality, and engineered obsolescence and throwaway white-goods don’t fit with the fashionable sustainable movement. See the rise in repair cafe’s as an example (6). Miele may not be in every home on the rabbit-hutch new estates with financed-Mercs on the drive and 0%-interest Samsung american fridge-freezer in the kitchen, but it maintains it’s market share because it sells solid products. And you can buy spare parts and have them repaired. And they last 10 years.

How the hell does this relate to Jack’s? Lidl and Aldi buck the trend. They’re not focused on brand, they’re focused on reasonable quality for a value price. Tesco bosses also have to learn that lesson, and not sell Jack’s as a budget brand. Brands are dead. Long-live quality without a badge.

Have a great weekend,

The Shrink

Side Orders
Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading:

The Windup Girl by Paolo Bacigalupi – Fantastic world building in this dystopian Hugo & Nebula award winner.

Religio Medici by Sir Thomas Browne – the theological and psychological reflections of a C17th doctor.

Enchiridion by Epictetus – Bedside reading for a bad day

References:

  1. https://www.theguardian.com/business/nils-pratley-on-finance/2018/sep/19/aldi-and-lidl-wont-be-scared-by-tescos-new-discount-jacks#comment-120594908
  2. https://worldview.stratfor.com/article/daewoo-motors-demise
  3. https://www.economist.com/business/1999/08/19/the-death-of-daewoo
  4. https://www.buzzfeed.com/floperry/sesame-and-poppy-seed-thins
  5. https://thetab.com/uk/2017/08/10/a-definitive-list-of-the-most-un-essential-items-from-the-waitrose-essential-range-45294
  6. https://www.theguardian.com/world/2018/mar/15/can-we-fix-it-the-repair-cafes-waging-war-on-throwaway-culture
  7. https://www.bbc.co.uk/news/business-45714224
  8. https://www.theguardian.com/technology/2018/oct/04/elon-musk-sec-twitter
  9. https://www.bbc.co.uk/news/business-45744552
  10. https://www.bbc.co.uk/news/business-45757437
  11. https://www.theguardian.com/business/2018/oct/05/uk-house-prices-fell-sharply-in-september-amid-brexit-wariness
  12. https://www.theguardian.com/business/2018/oct/05/man-who-got-swagger-back-for-aston-martin-is-ready-for-long-game-stock-market
  13. https://www.theguardian.com/business/2018/oct/05/unilever-scraps-plan-move-london-rotterdam-uk-netherlands
  14. https://www.youtube.com/watch?v=GxLw_wHOMGY
  15. http://quietlysaving.co.uk/2018/09/30/september-2018-plus-other-update/
  16. https://simplelivingsomerset.wordpress.com/2018/09/27/fire-in-the-news-liar-liar-pants-on-fire/
  17. https://theescapeartist.me/2018/10/02/wired-for-financial-independence-an-immigrants-story/
  18. http://monevator.com/weekend-reading-financial-independence-against-the-odds/
  19. http://monevator.com/the-slow-and-steady-passive-portfolio-update-q3-2018/
  20. https://www.ukvalueinvestor.com/2018/09/are-investors-overpaying-for-diageo.html/
  21. https://awealthofcommonsense.com/2018/09/what-if-stocks-dont-crash/
  22. https://www.morningstar.com/articles/883860/so-much-for-the-bond-bubble.html
  23. https://youngfiguy.com/mrs-yfg-anxiety-and-working-in-law/
  24. https://youngfiguy.com/unknowable/
  25. https://youngfiguy.com/mrs-yfg-7-things-ive-stopped-caring-about/
  26. http://www.msziyou.com/budgeting-by-values/
  27. http://www.msziyou.com/why-i-give-a-fck-about-the-news/
  28. http://www.msziyou.com/net-worth-updates-september-2018/
  29. http://www.realmensow.co.uk/?p=4707
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8 thoughts on “The Full English – The Decline of the Middle-Class Brand

  1. Hi, I fully agree, you really are a deep thinker on this; I saw past myself in the mirror there, the easiest person to lie to is yourself; I thought I was just being ‘savvy’ shopping mostly at Lidl, but realised it also uncomfortably reflects declining income and hence general security year after year.

    I also checked out (in the business news) the whole Jacks thing and figured that with so few stores it’s more a gimmick than even a serious pilot experiment, giving more away about the established entities’ bewilderment at how to respond to the streamlined, nimble, intelligent upstarts.

    Your point does then suggests a wider decline in national prosperity that is re-defining expectations and classes, socio-economic tectonic plates are shifting quite quickly.

    Liked by 1 person

    1. Hi FI Warrior,
      I blame my A-level in Geography.
      You’ve hit the nail on the head, a decline in earnings has pushed more people to keep an eye on their finances. People shop at Aldi and Lidl to attempt to keep their (perceived) quality of life on a lower budget, via their consumer purchases. The previously £8 bottle of wine on a Friday night is now £6 from Lidl. They’re now savvy shoppers still living the middle-class life. But if Lidl pulled out and prices went up could they afford it every week? As buying power shrinks pressure grows on brands to chop prices, so quality declines. Previously high-end brands follow the market downwards. What constitutes middle-class is changing, and public perception is catching up. If we suddenly get a burst of inflation on food and bills, will the lifestyle remain?
      Thanks for reading,
      The Shrink

      Like

      1. Hey, it’s funny, it’s probably driving them mad in the boardroom at Tesco how to fight back against this incessant simple-retailer-model threat, yet you teased out the signal from the wall of noise in no time.

        Sadly for me I worked for a corporate for over a decade, so can attest to how decisions are made which explain to the uninformed how such powerful people (you would think had to be smart to get there) can get it so very wrong. A groupthink of directors scoff bland-but-free snacks around a beautiful table for hours enjoying the sound of their own voices, amplified by the echo-chamber that is the world they so lovingly crafted for themselves. They creatively imagine what ‘ordinary people’ beyond their air-con, canapes and leather world should think and want, then how they can get it to them most profitably. At no point do they actually talk to these people, from their PA’s to the cleaners, because, well, wtf do they know? They feel their opinions are worthless, (even though only they can really know what they buy with their own disposable income) otherwise why would they be lower socioeconomically than said directors?

        Unencumbered by the arrogance of the establishment, the newcomers however, simply note what people want and what they can afford from what they buy and find a way to make it happen; it’s commonsense; but only to those in the same world. The dinosaurs will eventually decline into irrelevance like House of Fraser due to this hubris, or eventually hire a normal person in desperation, who turns it around and is hailed as a genius for implementing what the cleaner could have told them way back then would work.

        One day at Lidl it was packed, so I asked the guy on the till what was different & was told ”It’s the end of the month”, which shocked me, because I didn’t realise how many middle-class looking people are walking a financial tightrope. (I live in an average area) People have a budget limit, even if that’s what debt they can get up to, so you’re right, as the economy continues to wilt with austerity alone, a point will come when substitution will no longer be possible and they will start to do without. The next day, without wine and crisps, I will start to get healthy again 🙂

        Liked by 1 person

  2. Interesting thoughts FIREShrink. Those noodles don’t look too bad value for money – though I think I’ll stick to my slightly cheaper Lidl ones.

    Agree with you on the brand thing. It’s interesting, but I’ve still yet to see somebody truly get why Lidl and Aldi are kicking arse (maybe I’m oblivious though). It doesn’t really come down to brand, or the best offers or even being the cheapest on all products. It’s lots of quite boring little reasons that when aggregated give them a big advantage on ‘the big shops’. It’s similar to why, if you can still find them, local butchers and greengrocers are often better value for money than the likes of Tesco.

    Liked by 1 person

    1. Hi YFG,
      It’s definitely a complex nut to crack, and when most of these companies probably have million-pound analytic divisions working on it I doubt I will sat with a coffee at my desk in my spare time.
      I agree it’s probably a combination of multiple factors. For me, I like to shop 2-3 times a week to keep up on fresh stuff and to replenish when things run out. I’m not particularly interested in having six types of one item, I just want to get in and get out in 20 minutes. I also want the middle-class basics (hummus, halloumi, olives) and Aldi are definitely cheaper there.
      I think to an extent the big companies have been getting too high off their own supply. They operate on a maxim of offering massive choice all in one warehouse, with loss-leaders and consumer psychology tricks like BOGOF offers. Are people getting fed up of this noise and just want to buy what whey need?
      Thing is, I’m not sure discount brands like Jack’s are the right solution.
      Thanks for your continued support,
      The Shrink

      P.S.
      The facts on your blogroll are correct 😉

      Like

    2. Luckily I still have my reply, not sure why it didn’t post the first time.

      Tesco used to be the cheapest place to get everything, and they did sell everything, the Amazon of physical retail. But when Amazon became a threat, all retailers suddenly found they had too much floor space and couldn’t compete on price. Sale and lease back of property didn’t help with keeping prices under control.

      Aldi and Lidl are unencumbered by that history, they have smaller outlets and a limited product range and they can focus on quality and value. They sell decent products, they are just unknown European brands. Tesco has lost its way, just like M&S did and Sainsbury before it. Its capitalism working, and now Amazon plans a chain of physical shops to facilitate the ease of picking up internet purchases.

      I shop at Waitrose, I like the fresh meat and veg products. We do out big branded shop at Asda online (washing powder, tea bags, juice, ketchup etc) and its delivered, its much cheaper than Waitrose (10-15%).

      People are crazy these days, effectively leasing a new car, new phone etc, all subsidized by cheap interest rates. I see people doing a weekly shop at Tesco Express at the petrol station. It is so expensive there and yet they have no clue because they aren’t looking at the price. They want convenience. However I don’t care about them, most people aren’t that interest in money, they just live for the here and now.

      Kerry

      Liked by 2 people

  3. The closest Aldi near me is a small one so I can’t do a full weekly shop there due to limited choice. That said, I’ve noticed that Tesco isn’t as expensive as it used to be, so I’m happy to do my main shop there.

    The Jacks thing is a mystery, like you say, too few stores really to make any sort of impact so wonder if it’s all just an elaborate PR exercise or experiment?

    Anyway, as usual, thanks for the shout out!

    I read The Windup Girl some years ago and enjoyed it.

    Liked by 1 person

  4. Heya Weenie,
    Likewise I shop in Aldi and Lidl, topping up at a Tesco Extra monthly. I don’t really understand where Tesco are going with Jack’s, but maybe when one comes to my little city I’ll try it out.
    Seriously enjoying The Windup Girl, very atmospheric, nearly finished in five days!
    Looking forward to your next post,
    The Shrink

    Liked by 1 person

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