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, not least the Tesco Clubcard loyalty and reward scheme and a financial services division. 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. After that, the group began looking mainly to the international market for further expansion, but since 2016 it has been gradually reversing this strategy with the sale of several local businesses. It still has operations in the Czech Republic, Slovakia and Hungary but agreed in 2020 to sell its operations in Poland, as well as its remaining businesses in 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. New chief Dave Lewis, hired from Unilever, cut loose distracting sidelines and less profitable international operations, and successfully led a back-to-basics renovation of the UK business. In 2017, Tesco acquired wholesale giant Booker, one of the key suppliers to not only its own retail estate but also its rivals. The following year, the group took steps to meet discounters Aldi and Lidl head-on with its own low-cost chain, Jack's, though so far that strategy has yet to prove its value. In 2015, the group explored the sale of inhouse marketing and analytics specialist Dunnhumby, which manages its Clubcard scheme, and also works for other retailers. In the end, though, it kept hold of the business. Group revenues for the year to Mar 2019 were £63.9bn, with net profit of £1.3bn. The UK & Ireland together accounted for over 80% of revenues and two-thirds of operating profit. At Tesco's peak in 2011, it had over 31% of the local grocery sector. That figure had fallen to 27% by 2019, but the chain retains a 12-percentage-point lead over nearest rival Sainsbury's from a network of almost 3,800 stores. There are another 550 stores in the Czech Republic, Hungary and Slovakia, and 2,040 in Asia, mainly in Thailand. However, several other international markets have been exited over the past few years including the US, Japan, South Korea, Turkey and most recently Poland. In 2019, CEO Dave Lewis took investors by surprise with a plan to step down in summer 2020; his successor was Ken Murphy.
Capsule checked 30th October 2019
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Historical profile information for Tesco
Adbrands Daily Update 22nd Jun 2020: Tesco has called it quits in Poland after 25 years. It has agreed to sell its remaining 300 stores there and associated distribution and production facilities to Denmark's largest retailer Salling Group, which already operates in Poland under the Netto banner. A price of £181m was agreed. Subject to regulatory approval, the stores will rebrand as Netto, making that the third largest retailer in Poland under local giant Biedronka and Lidl.
Adbrands Daily Update 31st Mar 2020: UK supermarkets are one of the few market sectors enjoying boom trading under lockdown, although there are also significantly higher costs associated with managing staffing and the supply chain. According to latest figures from Kantar Worldpanel, grocery sales during March reached their highest ever level of £10.8bn in just four weeks, with all ten chains enjoying significant year-on-year lifts in till roll ranging from 4.6% at Morrisons to 17.6% at Lidl. As that range suggests, the rate of growth has been very mixed, with discounters Lidl and Aldi enjoying by far the biggest surges. Aldi achieved a new record market share of 8.2% while Lidl was at 6.1%. Market leader Tesco, on the other hand, also enjoyed a significant uplift in till roll and remains more than 10 points ahead of closest rival Sainsbury's, but its share of the market slipped to a new multi-year low of 26.8%. The convenience store sector has also done well out of the shopping surge, with some customers choosing to avoid the longer queues found at big supermarkets. However, these smaller outlets also face a greater risk of staffing shortages if infection rates grow. The Co-op has already closed ten of its 2,500 stores and is considering closure of 60 more. Chief executive Steve Murrells told ThisIsMoney "As lockdown really takes hold, there most definitely will be areas [where we have to close stores]. This could either be due to self-isolation of colleagues, or where customers just aren't using a store. What's critical is that we get replacement labour and help to keep other stores open and keep the country going through this."
Adbrands Daily Update 9th Dec 2019: Tesco is considering an exit from its operations in Asia following an approach from an unnamed buyer. In a short statement the group said it was examining strategic options including a possible sale, but warned that it was possible no deal would be agreed. Tesco has already divested several of its international subsidiaries, but retains operations in Central Europe as well as in Thailand and Malaysia. Thailand is the biggest of the Asian businesses, comprising 2,000 stores and hypermarkets, with a combined value of as much as $7bn. Tesco Malaysia has 74 stores, and is valued at up to $2bn.
Adbrands Daily Update 2nd Oct 2019: Tesco CEO Dave Lewis took investors and employees by surprise with the announcement that he will step down next summer after five years with the supermarket group. "I believe that the tenure of the CEO should be a finite one," he said in a prepared statement, "and that now is the right time to pass the baton. Our turnaround is complete, we have delivered all the metrics we set for ourselves." Separately, Lewis told the Financial Times that he needs to "recharge the batteries". He said the retail environment is "all consuming. The business never sleeps. It is 365 days, 24/7 - the operational intensity is very high." His successor has already been selected: Walgreens Boots Alliance's former chief commercial officer Ken Murphy.
Adbrands Daily Update 10th Apr 2019: Tesco reported solid performance for the year to Feb, helped significantly by the addition of wholesaler Booker. Revenues rose by 11% to £63.9bn, while pretax profits jumped 29% to almost £1.7bn. In the UK, Tesco's like-for-like sales were up by a little under 2%, but Booker jumped 11%. There were single-digit declines for group operations in Europe and Asia. "After four years we have met or are about to meet the vast majority of our turnaround goals," said CEO Dave Lewis. "I'm delighted with the broad-based improvement across the business. We have restored our competitiveness for customers and rebuilt a sustainable base of profitability."
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