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. Tesco broke the £3bn profit barrier for the first time in 2008. After that, the group 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, including the UK, 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:
|Tesco Personal Finance||Tesco Direct|
|Tesco Talk||Tesco Mobile|
|One Stop||Nutri Centre|
|Tesco Hit (Poland)||Tesco Lotus (Thailand)|
Adbrands Weekly Update 14th Apr 2016: UK supermarket Tesco was back in the black again after what CEO Dave Lewis billed as "a year of significant progress". However, he warned that the group was likely to fall short of consensus estimates for the current year because of continuing investment in the turnaround and a marketplace that is still "challenging, deflationary and uncertain". For the year to Feb 2016, net profit came in at a modest £129m. That was a big improvement from the previous year's whopping £5.8bn loss, but under the hood the progress was slightly less inspiring. That huge loss in ye 2015 was generated by over £6bn of exceptional items, mainly non-cash impairments. Excluding exceptional items from both years, the latest net profit of £353m was actually down from the prior period's £516m. Revenues from continuing operations for the most recent year were also down, by 4% to £54.4bn. That was partly the impact of lower fuel prices, and partly currencies: at constant rates the group claimed a 0.1% overall increase. However, that comparison also stripped out revenues from businesses sold, such as HomePlus Korea. Including those items, the year-on-year decline in revenues was more like 17% from ye 2015's stated topline of £63bn. Yet it was all definitely a move in the right direction. UK like-for-like sales rose just under 1% in the final quarter, while group LFLs were up by a more robust 1.6%. There are also moves to divest loss-making UK units like the Giraffe family restaurant business, Harris & Hoole coffee shops and Dobbies Garden Centres. It's not the end of Tesco's troubles by any means, but, you know what they say: "Every little helps"...
Adbrands Weekly Update 28th Jan 2016: The UK's supermarket watchdog GCA published its report on the underhand activities of leading retailer Tesco following its voluntary admission of accounting irregularities in the two years to Feb 2015. The results were damning. In order to hit their profit targets, Tesco's buyers routinely delayed millions of pounds in payments to suppliers or deducted sums arbitrarily to cover promotional activity or as a bonus for achieving pre-agreed volumes. In some cases, suppliers were over-billed or invoiced twice. In one case a supplier had to wait more than two years for a bill to be paid. Tesco's current CEO Dave Lewis accepted all the charges, which the group had already admitted, and apologised for what he acknowledged was "harmful and unsustainable" mistreatment of its suppliers. "But we've moved on," he said. The individuals responsible have been dismissed and all such practices have now been eliminated. Tesco cannot be fined by the GCA because these activities occurred before the watchdog's penalty system was introduced in April 2015. However, the retailer is under separate investigation by the Serious Fraud office, and may face a lawsuit from shareholders over the fall in value of their investments.
Adbrands Weekly Update 19th Nov 2015: Latest figures from Kantar Worldpanel for the UK grocery market, for 12 weeks to 8th Nov, show Tesco at its lowest market share for more than a decade, while Aldi and Lidl topped 10% combined for the first time. Tesco's share slipped to 27.9%, falling below 28% for the first time since the current pricing battle began three years ago. Sainsbury's charged into second place at 16.6%, overtaking Asda at 16.4%. It has overtaken Asda once or twice before, but never by as much as 0.2%. Of the two German discounters, Aldi was unchanged at 5.6%; this time it is Lidl that has been in the ascendant, hitting 4.4% for the first time, up from 3.7% this time last year.
Adbrands Weekly Update 22nd Oct 2015: Ads of the Week: "Inner Thoughts / Haggling". Here's a campaign we include because it's notable, not because we especially like it. The first major branding campaign for Tesco from new agency BBH debuted over the weekend during Downton Abbey (amid all that unexpected projectile gore - Alien comes to Downton! US viewers - just you wait!) Seriously though, these ads are a big disappointment, lacking charm or real humour and failing adequately to explain Tesco's new brand guarantee concept. What's the message? That stupid, vain people shop at Tesco? Come on BBH, you can do better than this. We far prefer the much smaller and less showy new ad from Irish agency Rothco for Tesco in Ireland. See it over on our Facebook page.
Adbrands Weekly Update 8th Oct 2015: British supermarket giant Tesco withdrew its CRM and analytics agency Dunnhumby from sale. Potential buyers had included a consortium bid led by WPP, but the offer was deemed insufficient. Tesco had been seeking a price of as much as £2bn, but bids received valued the business only at around £700m. Tesco CEO Dave Lewis told an investor conference, "Having looked at all those proposals – of which there were many – we came to the conclusion that the most value-creating option for Tesco shareholders was to retain [Dunnhumby] in the group. Data and its ability to help us build customer loyalty is a big part of the customer proposition from a Tesco point of view. We've always been proud of that business, so we are happy to retain it and we will invest in it and grow it ourselves going forward."
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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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