John Lewis Christmas ad: How the cost of living crisis changed the battle for best festive advert
It might barely be November, but the battle for the best Christmas advert is already in full flow, with John Lewis launching its festive offering today.
And while they might be a staple of our Christmas diet now – as much a tradition as pigs in blankets or carol singers – the hype around festive adverts wasn’t always such a big part of the calendar.
Today’s clip from John Lewis comes a week after Asda revealed their Christmas ad, which used classic footage from the 2003 film Elf, and hot on the heels of festive clips from Tesco, Argos, Morrisons and Aldi.
But with food bills rising, surging energy bills, mortgage hikes and reports of Britons cutting back ahead of the festive season, retailers have a difficult sales pitch to make this year.
A topic that is ‘so much bigger than Christmas’
John Lewis used their 90 seconds to shine a spotlight on an “often overlooked issue” – children in care.
The Beginner – set to a cover of Blink 182’s All the Small Things by US artist Mike Geier – shows a man as he struggles painfully to master skateboarding in the build-up to Christmas.
Viewers are left questioning the motive behind his perseverance until the final scene, when a social worker arrives with young teenager Ellie, who has arrived at her new foster home carrying her skateboard.
Kate Hardcastle, a consumer expert and chief executive of Insight with Passion, told Sky News: “Getting the tone of voice was really important for this year, and it was probably quite guessable it was going to be around corporate social responsibility because how can you do anything other else right now?
“But this is an incredibly fragile topic and needs handling with care.”
The ad was created with input from partner charities Action for Children and Who Cares? Scotland.
Alongside its longer-term work providing apprenticeship opportunities within the John Lewis Partnership for people leaving care, the retailer said it would make donations of Christmas decorations, food and gifts.
Ms Hardcastle said: “I would never say it missed the mark because the topic matters so much to me and I think any awareness is important.
“But I think the topic is much bigger than a Christmas advert and that’s because our care system support is needed 365 days a year, not just for Christmas.”
The ad is almost entirely devoid of product placement except for two brief glimpses of the retailer’s Lewis Bear toy.
But consumers can still purchase a number of products linked to the story including the £30 bear, £19 Lewis Bear pyjamas, a £5 Lewis Bear tote bag and a Rampage Skateboard for £34.99, with 25% of the sales going to the two affiliated charities.
The retail giant declined to reveal its budget for the ad.
How John Lewis changed the Christmas game
In the early 2000s, adverts were filled with as “many products as you could find” because “every frame costs money, so you want to show as much product as possible”, said Ms Hardcastle
This was seen with Marks and Spencer, who ruled the roost for years with their product-heavy offerings.
But in 2011, John Lewis changed the game with The Long Wait, a story of a young boy waiting desperately to give his mum a Christmas present.
Dr Hanlon told Sky News: “John Lewis did it differently. They told a story, rather than saying ‘here are the products, please buy these’.
“It is a classic marketing technique, it is telling a story, and it takes us back to that childhood notion of storytelling and it’s a comfortable place to be.”
And from there the battle for best Christmas advert, as it is know it today, began.
How to sell during a cost of living crisis
But as Christmas approaches this year, almost half (48%) of Brits have said they are planning to cut down on purchases – including festive activities and gifts – to save money, according to a report from Barclaycard.
Of these consumers, six in 10 will be spending less on gifts for family and friends, 44% will cut back on festive food and drink, including turkey and mulled wine, and two-fifths will curb their spending on Christmas parties and socialising.
Ms Hardcastle said John Lewis made the right choice picking a lower-priced toy as their feature product – the £35 skateboard.
She said: “This understands where people are right now. If they had put a £200 product on there, there would have been an immediate backlash of ‘how are people meant to afford this?'”
Brands ‘played it safe’
Matt Bourn, from the Advertising Association, said: “It is clear that advertisers and their agency and media partners are sensitive to the mood of the nation, the importance of being together, gifting and helping people to celebrate despite the geopolitical issues impacting us all.”
But Dr Hanlon said most of this year’s adverts “fell flat”, which indicates brands “don’t want to demonstrate they are spending millions on an ad when people are wearing extra jumpers and not putting the heating on”.
“I don’t think this year was meant to be a year for an iconic advert,” added Ms Hardcastle.
But she said she understands why brands have played it safe: “To have got it wrong this year, you would have been as villainous as the queue-jumping scandal.
“I think everyone just wants to say, let this Christmas be kind, let this Christmas be safe.
“And that’s how we feel about Christmas this year ourselves. No one’s telling you, they’re going to do some massive flash thing.
“Everyone’s saying we just going to keep it simple. We’re just going to go back to basics, getting the family together, with fewer presents, maybe a bit less food, and the currency of the adverts fits in with that.”
Pizza Hut’s biggest UK franchisee has begun approaching potential bidders as it scrambles to mitigate the looming impact of tax hikes announced in last month’s Budget.
Sky News has learnt that Heart With Smart (HWS), which operates roughly 140 Pizza Hut dine-in restaurants, has instructed advisers to find a buyer or raise tens of millions of pounds in external funding.
City sources said this weekend that the process, which is being handled by Interpath Advisory, had got under way in recent days and was expected to result in a transaction taking place in the next few months.
HWS, which was previously called Pizza Hut Restaurants, employs about 3,000 people, making it one of the most significant businesses in Britain’s casual dining industry.
It is owned by a combination of Pricoa and the company’s management, led by chief executive Jens Hofma.
They led a management buyout reportedly worth £100m in 2018, with the business having previously owned by Rutland Partners, a private equity firm.
One source suggested that as well as the talks with external third parties, it remained possible that a financing solution could be reached with its existing backers.
HWS licenses the Pizza Hut name from Yum! Brands, the American food giant which also owns KFC.
Insiders suggested that the increases to the national living wage and employers’ national insurance contributions (NICs) unveiled by Rachel Reeves would add approximately £4m to HWS’s annual costs – equivalent to more than half of last year’s earnings before interest, tax, depreciation and amortisation.
One added that the Pizza Hut restaurants’ operation needed additional funding to mitigate the impact of the Budget and put the business on a sustainable financial footing.
The consequences of a failure to find a buyer or new investment were unclear on Saturday, although the emergence of the process comes amid increasingly bleak warnings from across the hospitality industry.
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Last weekend, Sky News revealed that a letter co-ordinated by the trade body UK Hospitality and signed by scores of industry chiefs – including Mr Hofma – told the chancellor that left unaddressed, her Budget tax hikes would result in job losses and business closures within a year.
It also said that the scope for pubs and restaurants to pass on the tax rises in the form of higher prices was limited because of weaker consumer spending power.
That was followed by a similar letter drafted by the British Retail Consortium this week which also warned of rising unemployment across the industry, underlining the Budget backlash from large swathes of the UK economy.
Even before the Budget, hospitality operators were feeling significant pressure, with TGI Fridays collapsing into administration before being sold to a consortium of Breal Capital and Calveton.
Sky News recently revealed that Pizza Express had hired investment bankers to advise on a debt refinancing.
HWS operates all of Pizza Hut’s dine-in restaurants in Britain, but has no involvement with its large number of delivery outlets, which are run by individual franchisees.
Accounts filed at Companies House for HWS4 for the period from 5 December 2022 to 3 December 2023 show that it completed a restructuring of its debt under which its lenders agreed to suspend repayments of some of its borrowings until November next year.
The terms of the same facilities were also extended to September 2027, while it also signed a new 10-year Pizza Hut franchise agreement with Yum Brands which expires in 2032.
“Whilst market conditions have improved noticeably since 2022, consumers remain challenged by higher-than-average levels of inflation, high mortgage costs and slow growth in the economy,” the accounts said.
It added: “The costs of business remain challenging.”
Pizza Hut opened its first UK restaurant in the early 1970s and expanded rapidly over the following 15 years.
In 2020, the company announced that it was closing dozens of restaurants, with the loss of hundreds of jobs, through a company voluntary arrangement (CVA).
At that time, it operated more than 240 sites across the UK.
Mr Hofma and Interpath both declined to comment.
The UK economy grew by 0.1% between July and September, according to the Office for National Statistics (ONS).
However, despite the small positive GDP growth recorded in the third quarter, the economy shrank by 0.1% in September, dragging down overall growth for the quarter.
The growth was also slower than what had been expected by experts and a drop from the 0.5% growth between April and June, the ONS said.
Economists polled by Reuters and the Bank of England had forecast an expansion of 0.2%, slowing from the rapid growth seen over the first half of 2024 when the economy was rebounding from last year’s shallow recession.
And the metric that Labour has said it is most focused on – the GDP per capita, or the economic output divided by the number of people in the country – also fell by 0.1%.
Reacting to the figures, Chancellor of the Exchequer Rachel Reeves said: “Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers,” she said in response to the figures.
“At my budget, I took the difficult choices to fix the foundations and stabilise our public finances.
“Now we are going to deliver growth through investment and reform to create more jobs and more money in people’s pockets, get the NHS back on its feet, rebuild Britain and secure our borders in a decade of national renewal,” Ms Reeves added.
The sluggish services sector – which makes up the bulk of the British economy – was a particular drag on growth over the past three months. It expanded by 0.1%, cancelling out the 0.8% growth in the construction sector
The UK’s GDP for the the most recent quarter is lower than the 0.7% growth in the US and 0.4% in the Eurozone.
The figures have pushed the UK towards the bottom of the G7 growth table for the third quarter of the year.
It was expected to meet the same 0.2% growth figures reported in Germany and Japan – but fell below that after a slow September.
The pound remained stable following the news, hovering around $1.267. The FTSE 100, meanwhile, opened the day down by 0.4%.
The Bank of England last week predicted that Ms Reeves’s first budget as chancellor will increase inflation by up to half a percentage point over the next two years, contributing to a slower decline in interest rates than previously thought.
Announcing a widely anticipated 0.25 percentage point cut in the base rate to 4.75%, the Bank’s Monetary Policy Committee (MPC) forecast that inflation will return “sustainably” to its target of 2% in the first half of 2027, a year later than at its last meeting.
The Bank’s quarterly report found Ms Reeves’s £70bn package of tax and borrowing measures will place upward pressure on prices, as well as delivering a three-quarter point increase to GDP next year.
Business
Chancellor’s Mansion House speech vows to rip up red tape – saying post-financial crash rules went ‘too far’
Chancellor Rachel Reeves has criticised post-financial crash regulation, saying it has “gone too far” – setting a course for cutting red tape in her first speech to Britain’s most important gathering of financiers and business leaders.
Increased rules on lenders that followed the 2008 crisis have had “unintended consequences”, Ms Reeves will say in her Mansion House address to industry and the City of London’s lord mayor.
“The UK has been regulating for risk, but not regulating for growth,” she will say.
It cannot be taken for granted that the UK will remain a global financial centre, she is expected to add.
Money blog: Britain’s most affordable town revealed
It’s anticipated Ms Reeves will on Thursday announce “growth-focused remits” for financial regulators and next year publish the first strategy for financial services growth and competitiveness.
Rachel Reeves
Bank governor to point out ‘consequences’ of Brexit
Also at the Mansion House dinner the governor of the Bank of England Andrew Bailey will say the UK economy is bigger than we think because we’re not measuring it properly.
A new measure to be used by the Office for National Statistics (ONS) – which will include the value of data – will probably be “worth a per cent or two on GDP”. GDP is a key way of tracking economic growth and counts the value of everything produced.
Brexit has reduced the level of goods coming into the UK, Mr Bailey will also say, and the government must be alert to and welcome opportunities to rebuild relations.
Mr Bailey will caveat he takes no position on “Brexit per se” but does have to point out its consequences.
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Bailey: Inflation expected to rise
In what appears to be a reference to the debate around UK immigration policy, Mr Bailey will also say the UK’s ageing population means there are fewer workers, which should be included in the discussion.
The greying labour force “makes the productivity and investment issue all the more important”.
“I will also say this: when we think about broad policy on labour supply, the economic arguments must feature in the debate,” he’s due to add.
Keep up with all the latest news from the UK and around the world by following Sky News
The exact numbers of people at work are unknown in part due to fewer people answering the phone when the ONS call.
Mr Bailey described this as “a substantial problem”.
He will say: “I do struggle to explain when my fellow [central bank] governors ask me why the British are particularly bad at this. The Bank, alongside other users, including the Treasury, continue to engage with the ONS on efforts to tackle these problems and improve the quality of UK labour market data.”
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