Tesco (UK)

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Tesco is the UK's leading supermarket chain and narrowly overtook Carrefour in 2013 to become the world's #2 retailer, though performance since then has been dented significantly by a brutal price war in the UK and sliding sales in several other key markets. The original platform for Tesco's growth was established in the 1970s and 1980s when former managing director Ian MacLaurin fought a long and drawn-out battle with the store's founding family to drag the brand upmarket, before overseeing a range of innovative schemes during the 1990s. It leapfrogged domestic arch-rival Sainsbury's in 1995 to become Britain's biggest food retailer, and continued to steadily extend its lead while also broadening its footprint considerably with an aggressive move into non-food merchandise. In 1999, the group went one step further, becoming the UK's most profitable retailer as well, after Marks & Spencer announced a dramatic fall in net earnings. It broke the £3bn profit barrier for the first time in 2008. After that, Tesco began looking mainly to the international market for further expansion. Most of its non-UK operations are concentrated in Eastern Europe and Asia; a bold attempt to break into the US market in 2007 ended in failure five years later, and that setback was followed by a series of reverses in other markets, leading to a change of CEO at the end of 2014.

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Adbrands Company Profiles provide a detailed analysis of the history and current operations of leading advertisers, agencies and brands worldwide, and include a critical summary which identifies key strengths and weaknesses. Adbrands Account Assignments tracks account management for the world's leading brands and companies, including details of which advertising agency handles which accounts in which countries for major markets. Subscribers may access the following website links:

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Tesco Hit (Poland) Tesco Lotus (Thailand)

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Adbrands Weekly Update 14th May 2015: Tesco is preparing to put its branded mobile phone operation, a joint venture with O2, up for sale. It is the largest private label MVNO service in the UK, and a deal could generate "millions of pounds". Tesco's share of profits from the service was reported to be around £100m last year. Though O2 would be the most obvious buyer, that deal is considered unlikely because O2 UK is itself in the process of being sold to Hutchison Whampoa. However a deal could appeal to TalkTalk, which has already acquired Tesco's Blinkbox streaming video service. Separately, there were reports that research giant Nielsen has expressed interest in bidding for Tesco's loyalty marketing division Dunnhumby, also up for sale. WPP is already thought to have put its hat into the ring for that auction. Also this week, Tesco announced the closure of its remaining Homeplus stores in the UK, an experimental sideline selling only non-foods products.

Adbrands Weekly Update 30th Apr 2015: Tesco took another step towards the possible sale of its CRM and data analytics division Dunnhumby, which provides data analytics services to several other retailers around the globe along similar lines to the hugely successful Tesco Clubcard programme in the UK. It has sold all its shares in its existing US subsidiary, a joint venture which manages the Plus Card programme for local giant Kroger's various supermarket banners. Kroger takes full control of that company, which has rebranded as 84.51 Degrees, but will continue to use Dunnhumby's analytics technology under license. Dunnhumby will retain a continuing presence in the US under its own name, and now has the freedom to work with other local retailers.  Separately, Tesco appointed Michelle McEttrick, former retail marketing officer at Barclays, for a newly created position as group brand director. McEttrick continues her long time association with former employer BBH, now Tesco's agency. She joined Barclays, another BBH client, in 2010 after serving as the bank's account manager at the agency. Also this week, Tesco confirmed plans to move its substantial media account to MediaCom after more than two decades at Initiative. That move seemed virtually inevitable once Tesco announced the pitch list, pitting the UK's biggest and best media agency against one of the weakest. The loss is a serious blow to Initiative: Tesco was its biggest client by far. 

Adbrands Weekly Update 23rd Apr 2015: The markets were expecting a bad set of results from supermarket giant Tesco, but the actual numbers were worse than even the most pessimistic predictions. A huge impairment charge resulted in net pretax losses for the year to February of £6.38bn, the biggest ever deficit reported by a UK retailer. Excluding writeoffs, underlying profit slumped 68% to £961m, on net revenues down 3% to just under £63.0bn. However, analysts were comparatively relaxed about the results, seeing the size of the £7bn impairment charge as new CEO "Drastic" Dave Lewis's way of clearing the decks for a turnaround. They were also encouraged by the first increase in like-for-like sales volumes for four years. Tesco's share price actually rose slightly following the announcement. The biggest write-off of £3.8bn was against the property value of existing UK stores, with another £925m for abandoned openings, and £630m against its operations in China. There were multiple other write-downs against stock and other subsidiary businesses. "It has been a very difficult year for Tesco," said Lewis. "The results we have published today reflect a deterioration in the market and, more significantly, an erosion of our competitiveness over recent years. We have faced into this reality, sought to draw a line under the past and begun to rebuild, and already we are beginning to see early encouraging signs from what we've done so far."
Adbrands Weekly Update 15th Jan 2015: According to Kantar Worldpanel, Sainsbury's enjoyed the best Christmas of the big four, despite a 0.7% decline in sales. However that was less than its main rivals, and enough to push Sainsbury's into the #2 spot in market share ahead of Asda (also down 1.6%, like Morrisons) for the first time in years. Tesco was down 1.2%. Waitrose, Aldi and Lidl all reported strong growth. Tesco's recently appointed CEO Dave Lewis announced a string of new developments to boost performance. The store pulled out of the streaming media market, selling its loss-making Blinkbox service to telecoms group TalkTalk for around £5m. The Blinkbox brand will be discontinued, and TalkTalk will migrate Tesco's 75,000 broadband customers into its existing service. Other changes include the closure of more than 40 existing Tesco stores, the cancellation of almost 50 new openings, a move from the current group HQ in Cheshunt, and the loss of several thousand jobs. 

Adbrands Weekly Update 15th Jan 2015: In a shock announcement this morning, Tesco said it has dropped Wieden & Kennedy as its UK agency, and will move its huge advertising account to Bartle Bogle Hegarty. There was no pitch, but Tesco CEO Dave Lewis has years of experience of working with BBH from his previous role at Unilever. For its part, BBH has resigned smaller supermarket chain Waitrose in order to take on the account. Tesco appointed Wieden & Kennedy in July 2012 after several years with Frank Lowe's Red Brick Road. BBH had handled Waitrose since 2011. 

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Free for all users | see full profile for current activities: Jack Cohen started selling cheap groceries from a market stall in London's East End in 1919. His first products were fish paste and sugar syrup, but in around 1924 he began to retail packet tea, supplied by wholesaler TE Stockwell. This he named Tesco, a brand created from an amalgamation of the names TE Stockwell and Cohen. The name stuck, and Jack Cohen opened his first Tesco shop in Edgware in 1929. Business boomed and a series of other shops were opened in and around London before the start of World War II. Cohen had become increasingly influenced by the sales philosophy of American retail groups, and he got his first opportunity to put them into practice after the war. The company went public in 1947, and Cohen moved to self-service shopping the following year. The Tesco philosophy, as conceived by Cohen, was "Pile it high and sell it cheap". (Another favourite slogan, first coined in his market trading days was "Always keep your hand over the money and be ready to run.") In 1956, he opened the first UK supermarket, broadening the product range to include fresh food and clothing.

The group grew rapidly through acquisition, swallowing other retail chains around the country. Another American import was Green Shield stamps, introduced in 1963. At the time, legislation forced all retailers to sell goods at the manufacturer's specified price. With no opportunity to discount, it was hard for any store to develop its customer base by competing on price. However, Green Shield stamps allowed customers to build up loyalty points, which could be redeemed for cash or against other goods. These proved popular with Tesco customers, and as the business got bigger, so did the stores. Tesco coined the term superstore in 1968 when it opened a 90,000 sq ft store in West Sussex, then the largest in Europe. Cohen was knighted the following year.

During the 1970s, Tesco found its development increasingly hampered by its generally down-market image, a legacy from the "pile it high" days, as well as by Cohen's autocratic, aggressive and often undisciplined leadership style. Ian MacLaurin, a former management trainee who had worked his way up to become the company's managing director, dubbed Cohen "Slasher Jack" in his autobiography, and described company board meetings as being "like a meeting of the Chicago mafia, with Jack in the role of Godfather". Nevertheless, the group slowly began to move upmarket, closing older city centre outlets in favour of out-of-town superstores. Tesco introduced the first supermarket forecourt petrol station in 1974, and slowly rolled out the concept nationally. Despite the move upscale, Tesco didn't abandon its reputation for keen prices - its "Operation Checkout" discounting promotion in 1977 increased the store's market share from 7% to 12% in just one year. That year also witnessed the first cracks in Cohen's steely control of the business, after MacLaurin and Cohen clashed over the issue of Green Shield stamps. Cohen saw them as the cornerstone of the business, but MacLaurin argued that they promoted a downmarket image for the store. To Cohen's dismay, Tesco's board of directors supported MacLaurin over the company's founder and the scheme was dropped.

The 1980s became a time of considerable transition for the group. Sir Jack Cohen died in 1979, and was replaced as chairman by his malleable son-in-law Leslie Porter. Within the company, MacLaurin began a complete overhaul of the business, gradually prising it away from Porter and the Cohen family in what became an increasingly bitter struggle. MacLaurin replaced Porter as chairman in 1985. His first challenge was a bid by Cohen's daughter Dame Shirley Porter to join the board, but she was rebuffed.

The 1990s saw a series of innovations which left Sainsbury's standing. The remaining city centre stores were given a complete overhaul, rebranded as Tesco Metro from 1992 onwards, while the petrol forecourt outlets were grouped under the Tesco Express brand. The Tesco Clubcard, introduced in 1995, was a brilliant innovation, replacing the old trading stamps concept with a more upmarket reward scheme which also allowed the store to track purchasing habits in extensive detail. It was rapidly adopted by other retailers, including Sainsbury's, which was also quick to copy Tesco's launch of a banking service in partnership with Royal Bank of Scotland in 1996. In 1997, Tesco was the first UK food retailer to offer an Internet-based home shopping service, and the Tesco Extra hypermarket format was launched for the biggest stores the same year. A year later MacLaurin retired as chairman. Following the lead of Dixons, the home shopping service was bundled into a free ISP service, Tesco.net, in 1999.

Over the following years, the group became increasingly active in the international market. An initial foray into the Republic of Ireland in 1979 was abandoned during the 1980s. In 1993, the group made another attempt to go abroad, acquiring 100 Catteau supermarkets in northern France for £158m. By 1995, the group had added a hypermarket in Paris and a wine shop in Calais, both under the Tesco name. However all were sold two years later. Eastern Europe proved more fruitful for the group. In 1994, Tesco bought a controlling share of the Global S Markt supermarket chain in Hungary, followed by Poland's Savia chain and other stores in 1995. Tesco entered the Czech Republic and Slovakia in 1996, spending £79m to buy American supermarket chain K-mart's stores there. In 1997, the group returned to Ireland, buying 109 stores from Associated British Foods for £630m to become the country's leading supermarket business. In 1998 the group acquired Lotus, the second largest retailing business in Thailand with 13 modern hypermarkets, and followed this in 1999 with a partnership deal with Samsung Corporation to develop hypermarkets in South Korea. In March 2000 the group announced plans to open 20 hypermarkets in Taiwan over the next five years. At the end of 2000 the group announced it had teamed up with Asian conglomerate Sime Darby to open 15 hypermarkets in Malaysia. 

Building on the success of its online operations, Tesco took a 35% stake in the online operations of US grocery retailer Safeway. The British company agreed to adapt its successful UK model for Safeway's GroceryWorks service. In 2001, the group acquired a controlling stake in The Nutri Centre, a specialist mail order retailer selling complementary medicine products. Later the group said it would take on UK high street clothing retailers Gap and Next, following negotiation of an exclusive licence to import Cherokee American clothing, already sold exclusively through Target stores in the US and Zellers in Canada. At the end of the year, the group announced that it would acquire British convenience store operator T&S Stores for around £530m in shares and debt. See full profile for current activities

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