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. 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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Brands

Tesco Personal Finance Tesco Direct
Tesco Talk Tesco Mobile
One Stop Nutri Centre

Worldwide

Tesco Hit (Poland) Tesco Lotus (Thailand)

Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 13th Apr 2017: Tesco reported the first full-year growth in UK same-store sales since 2010, with food up 1.3% year-on-year, and total domestic sales by 0.9%. Similar performance in its European and Asia divisions resulted in a 4% lift in continuing group revenues to £49.9bn. Statutory revenues, including sales of fuel, were up slightly to £55.9bn. Group operating profit before exceptional items surged by almost 30%, led by a spectacular 60% recovery in the UK and Ireland. However, statutory pretax profit was dented by a £235m fine relating to the 2014 accounting scandal, falling 28% to £145m.

Adbrands Weekly Update 30th Mar 2017: Supermarket operator Tesco agreed to settle an investigation into its 2014 accounting fraud with a penalty of £129m, and will pay out up to another £85m to compensate shareholders. Managers of the group's UK-based business were found to have over-stated profits by as much as £325m by incorrectly accounting payments from suppliers for in-store promotions.

Adbrands Weekly Update 23rd Mar 2017: Ads of the Week "Family Dramas". Perhaps a psychologist could explain why there's something quite comforting about watching other people's domestic disasters. There but for the grace of God etc etc? Nice to see other people are as stupid as we can be? Tesco's mobile service is managed creatively not by BBH (and you know what we thought of *those* ads!) but by a new London outpost of The Community, the one-time Hispanic agency that is now a division of SapientRazorfish. This new spot is rather great. Been there, done that, got the rather stained and badly ironed t-shirt. 

Adbrands Weekly Update 2nd Feb 2017: UK supermarket giant Tesco agreed terms for the acquisition of leading wholesaler Booker for £3.7bn. If completed, the deal would create "the UK's leading food business" according to Tesco CEO Dave Lewis. Booker supplies a huge estate of around 125,000 independent convenience stores, but also, significantly, several major restaurant chains, giving Tesco a foothold in "out-of-home" eating. It also controls the Booker Wholesale and Makro cash and carry warehouses, as well as the Premier, Londis and Budgens symbol groups. "Tesco has made significant progress in turning around our UK retail business," said Lewis. "Wherever food is prepared and eaten - 'in home' or 'out of home' - we will meet this opportunity with the widest choice and best service available."

Adbrands Weekly Update 12th Jan 2017: Unlike their US counterparts, who mostly suffered a grim holiday trading season, several British physical retailers reported solid performance over Christmas and the New Year. Perhaps the biggest surprise was a rise in apparel sales at Marks & Spencer, for only the second time in 23 quarters. Like for like sales of general merchandise rose 2.3% in the quarter to December, compared to a 5.8% decline in the year-ago period. However M&S warned that the uplift may not hold in the current quarter because of sales and a late Easter. Sainsbury's claimed a "record" Christmas week, helped by the contribution from newly acquired Argos, and better than expected trading over the holiday period. Despite widespread price cuts, its like for like supermarket sales were up marginally, whereas a decline had been forecast. Tesco too was up, by almost 2%, and Morrisons reported its best Christmas for seven years, with a near-3% uplift in November and December. Aldi did even better with a claimed 15% increase in December alone.

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Background

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 a malgamation 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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