Tesco and the price of success

In the opinion of Lord McLaurin, former chairman of Tesco and father-in-law of its most dynamic present scion Tim Mason, the all-conquering supermarket brand has only one thing it need really fear: complacency.

Given the scale of its achievement over the past ten years, a degree of self-satisfaction would certainly be understandable.

For who is there left to compete with it? Accounting for over 30% of UK grocery sales, Tesco occupies an unchallengeable market dominance within what is already a formidable food retailing oligopoly – British supermarkets.

With every year that goes by, Tesco is intelligently exploiting that lead to expand into other, higher margin, areas that would have once been considered outside the jurisdiction of food retailing skills – anywhere, in fact, from financial services, to fashion, to high street electrical goods, health and pharmaceutical products, garden furniture and (coming soon, we hear) internet price comparison services. In fact it’s a tribute to Tesco, and the top team surrounding chief executive Sir Terry Leahy, that there is almost no mainstream consumer activity to which the brand could not be credibly applied. Even a low-cost airline (unlikely though such a brand extension may be) could have an immediate, identifiable brand resonance. Indeed Tesco, like Hoover, has entered the English language as a generic term: as in “Tesco law”.

A store of future problems
Herein, though, lies a store of future problems. The challenges facing the Tesco brand in the next ten years are going to be of a different order, and incomparably more difficult to surmount, than those of the last. Extrapolating past success into foreign markets, as Mason appears to be doing in the United States, will certainly be a precondition of future success, commercially speaking, but it won’t be a sufficient one to guarantee it.

This is because Tesco is no longer merely a business; it is an institution, an everyday presence in our lives, even in some respects a piece of public property. Its increasing ubiquity means an image earned so far through the hard graft of professional retailing skills must look further afield for its protection and enhancement.

We may, perhaps, detect a small recognition of the need for cultural change in the appointment of the new UK marketing director, Lance Batchelor. Batchelor is not the insider that many commentators had expected, given Tesco’s introverted culture. He hails from Vodafone, and before that Amazon and Procter & Gamble (MW, this week).

If only the issue of openness were confined to consumer marketing. The menacing hostile agenda beginning to beset Tesco is now formidable. It includes suspected abuse of market power, paying lip-service to healthy living and the global warming threat, a cavalier attitude to fair trade and laying waste to the character of our towns and villages.

The brush fires when they come are not always easy to put out. Only the other week, an exposÈ in the Guardian revealed the supermarket chains had connived in a form of wage slavery whereby Bangladeshi garment workers were putting in 80 hours a week for a little as 4p an hour. As it happens Wal-Mart/Asda was the biggest offender, closely followed by Primark. No matter that Tesco is only fifth in the value-clothes market, it managed to get its name into the headlines. The price of success.

And this is only one small example of what has become almost an industry in its own right: Tesco-bashing. Call it tall poppy syndrome if you like, revile the British tendency to cut symbols of success down to size whenever they show signs of hubris by all means. No matter, the problem won’t go away.

The Tesco-bashing industry
Tesco-bashing is becoming an industry almost in its own right. Since June 2005 we have had something called the Tescopoly Alliance, which represents the interests of numerous organisations intent on clipping the wings of the supermarket giant. These range from disgruntled farmers to suspicious trades unionists and hostile environmentalists – a potent cocktail with financial support from the Joseph Rowntree Reform Trust thrown in.

Recently, however, Tesco has achieved the dubious honour of having a best-selling book written about it, and it’s not a very flattering one either. This, too, is called Tescopoly – though the Alliance is keen to keep its distance from it – and its author is Andrew Simms, policy director and head of climate change programme at the New Economics Foundation, a think tank. It’s the one that has already fingered Tesco in the “Clone Town Britain” debate. Simms’ critique is much more wide-ranging than this however. He dismisses Tesco’s approach to corporate social responsibility and environmentalism as cosmetic, the fundamental problem being that Tesco’s low-cost food strategy in no way takes account of the true environmental cost of producing and selling its food. And he reminds Tesco and other supermarkets that they are in danger of losing their “social licence to operate” : the point at which public disapproval becomes so great that it gets in the way of making a decent profit.

That’s certainly something Tesco’s top team should not be complacent about.

Stuart Smith, Editor


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