On 1 September, Tesco CEO Philip Clarke was forced to step down following the 29 August misrepresentation of the retailer’s earnings by £263m. By 22 September, four other executives had been suspended including finance director Carl Rogberg and Tesco found itself the subject of scrutiny on the part of the investment community, the media, the Serious Fraud Office, regulators and customers alike. Then, on 26 November, Tesco’s shareholders announced legal action to recoup lost profits.

The crisis is not one with an easy solution, nor will it be solved by a lawsuit, federal investigation or customer dissatisfaction – all of which are set to occur. Yet, the way Tesco’s media relations team manages its public relations and investor relations for the external audience is incredibly important over the coming months.

Paul Murricane, course director at media training firm Media Mentor, says, “Tesco didn’t move fast enough. The first anyone was aware of a problem was the issue of a profit warning – but it wasn’t accompanied by a clear plan to cut costs or boost sales or focus on core strengths. As Tesco’s former CEO of 14 years Sir Terry Leahy said at the time, “Tesco focused too much on what it isn’t, rather than remembering what it is.” And as a result their position in the centre, squeezed by brash discount newcomers Lidl and Aldi, and quality retailers like Waitrose, became a weakness not a strength.”

Murricane’s summary of the position Tesco was, and is still in, recalls some of the issues in the sector in general – customer satisfaction, culture problems internally, increased competition from the top and bottom of the price spectrum and falling reputation. In managing the immediate fallout from the financial reporting crisis, Tesco’s media relations team – which has declined to comment – has also had to combat any compounding of those issues. Gavin Megaw, director at Hanover Communications, says “Tesco’s problems didn’t start with the profit warning. They started many years before that. The reputations of organisations are rarely damaged by one event. Instead, they are severely damaged because an organisation has failed over many years to operationally live up to the high expectations set by their marketing. When this happens, a reputational gap has occurred between what they say and what they do; leading to mistrust and a break down in their brand. That is what has been happening at Tesco.”

The reputation issue – largely based in poor corporate culture and the departure from its core services that has diluted that culture – is augmented by the horsemeat scandal of 2013 in which Tesco was a main protagonist. Though its media relations response to the crisis last year was by all means excellent, the gradual degrading of its public goodwill has left Tesco’s media team with few reserves to draw upon. Murricane adds,“When journalists spot major problems in an organisation, they look for signs that the problem is systemic, and a sign that the whole organisation is vulnerable. And so it happened with Tesco." 

Media relations experts, when analysing Tesco’s response to the crisis point to specific instances over the past few months that highlight the deficiencies of Tesco’s external relations. Tom Maddocks, course director at Media Training Associates points to a moment after a press conference in which Channel 4 economics editor, Paul Mason documents the station’s attempt to interview Tesco’s CEO and chairman.  

In compelling footage, Mason asks chairman Richard Broadbent, “Why should anybody put up with this level of incompetence running a major company.” Broadbent responds by leaving the room, prompting the media handler to argue with Mason, averring that Tesco had allotted its interview time to others. In the midst of the heated discussion, newly-minted CEO Dave Lewis stepped in and promised Mason an interview. 

“The lesson to me is that the absolute key with a crisis like this is that you’ve got to be as open as possible and mostly, Dave Lewis has tried to be very open. The key lesson to me is that in this current environment that we live in where anybody can upload a video and it can go viral within hours very easily, those kind of videos of the behind the scenes negotiations would never have been seen before,” says Maddocks. He adds that digital has brought a new consideration into the role of media relations. No longer is what a company or spokesperson says to the press the only thing that will be seen externally. “Media training needs to take into account the interaction between traditional media and social media.”

Andrew Harvey, co-founder of media training consultancy HarveyLeach highlights an interview Lewis recently gave to the Mail on Sunday. He says, “As a statement of intent, it is hopelessly weak. The word ‘try’ or ‘trying’ is used three times in two sentences. It gives the impression of a struggle, a struggle which at the moment he is not winning. It is totally unconvincing. His messages need to be sharper, simpler, aimed straight at the customer.”

Lewis, for the most part has done what he was brought in to do: lead an ailing company through a difficult time financially and reputationally. Media relations, however, relies on specific training and reinforced behaviours, which some experts think were not available to Lewis.

However the PR campaign has been judged, though, one of the considerations regarding media relations in the modern age is the fact that digital has made corporate messaging available to every stakeholder audience. Investors, employees and shareholders alike can easily find and read or watch Tesco’s media response to the crisis. This messaging, which may differ from its investor relations messaging, can cause more problems for the company.

Indeed, the shareholder group that is filing suit alleges that Tesco made misleading statements to the investment community about its profits. Media lawyer and senior partner at corporate and commercial solicitors’ Johnsons and panellist at JAMS International, Paul Tweed who has worked with everyone from Britney Spears to companies under investigation, says, “The internet works in a flash so they have got to be able to [move quickly]. They’re taking a massive risk with their share price, their future trading ability and most of all their brand.” He adds that Tesco’s messaging should take the tone of a company that is trying to do what is best for its customers and shareholders. 

Since the financial issues came to light on 29 August, Tesco plc’s share price has dropped from £21.03 to £15.88 – not a huge amount, but a significant drop for a retailer like Tesco.

It’s problems, however, stem from more than just this one crisis. Most agree that media relations, while an effective reputation management tool, can only do so much to improve business practice. Maddocks says, “I think [the crisis] may have been compounded by the fact that maybe Tesco didn’t have that much credit in the bank in terms of public perception.”

The supermarket industry as a whole is suffering from competition from cheaper retailers, quality positioning and online convenience. Tesco, Sainsbury’s and Morrison’s – those in the general middle of the scale – are suffering the most.

On the reputation-building front, however, the Tesco media team and executive board can recover, say media relations experts. Roz Morris, MD of PR and media messaging specialists, TV News London Ltd, says “Huge companies are enormously resilient and can survive huge crises which would destroy smaller organisations, but it takes a lot of work over a long period. ‘Steady as she goes’ and reliable normal service for customers are real assets in making the crisis for executives seem to be all a far away bad dream that doesn’t directly affect the shopping and other services that they rely on Tesco to provide and deliver for them.”

Generally, consumer relations has been more successful as of late, as the Christmas period, Hudl 2 launch and customer engagement efforts have been dominating the messaging. Maddocks says, however, that the impending fraud investigation will limit Tesco’s communications abilities, particularly on the investor relations side of things. “They’ll just have to keep their heads down a bit and just manage the crisis until they’ve got more good news to say,” he adds.

Megaw stands by Tesco’s adaptable, innovative qualities as ones that will get it through the crisis. He says, “In this digital age, no PR professional can control the news and prevent damaging coverage, but we can all work to reduce the reputation gap, and deal effectively with threatening issues when they occur.”

Like spilt milk in the dairy aisle, the crisis and its impact on corporate reputation can be mopped up, it will just take a concerted effort from the media relations team and a coherent media strategy from Lewis.

Morris adds, “Tesco also has to back up all this normal service and listening to customers with a big clear new strategy that customers and investors can understand and buy into. Even if that strategy means selling off some land and stores to raise cash to be meaner and leaner."