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Global Grocers
Dr Amit Rangnekar
www.dramitrangnekar.com
Walmart
US 379 13
Americas, UK,
Asia
13
Carrefour
Fra 114
Tesco
UK
95
Metro
Ge
r
88
EU, Asia
Home
Depot
US
77
US, China
Kroger
US
70
US
Schwarz
Ge
r
69
EU
www.dramitrangnekar.com
CAGR
L5Y%
Tesco 2008
Founded
Employee
318,000
s
Business
Products
Status
Stores
3263
Sales/Net $ 95b, $ 4b
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Corporate strategy
Tesco targets all market segments
Own-brand products and private labels
Upmarket Finest, mid-range & low-price
Value
Encompass categories- F&B, home, clothing,
mobile, finance
1997 "The Tesco Way" to describe core values &
goals
Geographic & category expansion
Leverage image
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UK M&A Map
M&A
Target
Williamsons
1957
Harrow
1959
Irwins
1960
Charles
Phillips
1964
97
Victor Value
1968
206
Hillards
1987
40
William Low
1994
57
ABF Retail
1997
70
640m Ireland,Northern
Ireland-entry
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Co-operatives
912, 3b
Multiples
2604, 3b
Multiples
5322, 94b
Symbol Groups
14000, 1b
Independents
102, 0.5b
Independents
23108, 7b
Forecourts
8629, 3b
UK Competition
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% over
Jul 08
Tesco
6,351,531
31.6%
0.3%
Asda
3,410,431
17.0%
0.1%
Sainsbury's
3,175,543
15.9%
0.1%
Morrisons
2,233,137
11.1%
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0.2%
Competition
MS
%
Tesco
AsdaWalmart
Target
market
Products
Type
31.4 Middle
All
17.1 Lower
Economy
Supermarke
t
Supermarke
t
Morrisons
11.2 Lower
Economy
Supermarke
t
Somerfield
3.9
Lower
Economy
Supermarke
t
Waitrose
3.8
Up-market
Up-scale
Supermarke
t
Aldi
3.1
Price
focused
EDLP, limited
products
Discounters
UK Market Share
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UK Grocery shopping
Asda
Morriso
ns
Men
21
12
17
28
Women
21
12
21
28
Upper + Middle
18
27
30
Lower Middle
15
13
20
32
Skilled Working
Class
22
15
15
26
Working Class
32
13
11
25
Lowest
Subsistence
23
12
14
22
Leader
Sainsbur Tesco
ys
Promotion
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Private label
UK private label market 42b, strong growth, 52b
by 2011
Penetration 37% of consumer packaged goods
(personal care, f&b), 40% by 2011
Higher margins than branded products
1,000+ own-brands- Cherokee, Florence, Fred &
Healthy Living
400 Value products
Own brands 50% of total sales, leverage to increase
margins
Tescos UK non-food sales small but growing 7.6
@11%
Tobacco, household, white goods, clothing
&entertainment
Tesco market share only 8% in UKs non-food market
Proficient skills in sourcing, SCM & merchandising
www.dramitrangnekar.com
UK Store formats
No.
Area
(sqf)
% space
+/Stores
2007/8
175
12,123,00
0
40.87%
28
Tesco
424
12,903,00
0
43.49%
Tesco Metro
160
1,882,000
6.34%
Tesco Express
827
1,793,000
6.04%
92
One Stop
513
696,000
2.35%
Tesco
Homeplus
269,000
0.91%
Format
Tesco Extra
2,10
29,667,0
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Tesco Extra
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Extra
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Tesco Metro
1992
Focus- local
community of region,
Size- between Tesco
superstores & Tesco
Express stores
Location- city
centres, inner city,
high streets
Typical 12,000 sq ft
Rebranded High
street format Tesco
branches to Tesco
Metro- Tesco high
street sub brand
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Tesco Superstores
Standard large
supermarkets
Typical 30,000 sqft
Stock groceries,
smaller range of nonfood goods than Extra
Called "superstores"
for convenience, does
not appear on shops
Location- suburbs,
edges of large and
medium towns
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Tesco Express
Neighbourhood
convenience
Food + everyday
essentials
Focus- high-margin
products (lack of
economies of scale)
Location-busy city
centres, small shopping
precincts in residential
areas, small towns
Esso petrol stations
827 stores
Typical size 2,100 sq ft
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One Stop
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Tesco Homeplus
Non-food only venture
2005, Manchester and Aberdeen, now 11
stores
Full range except food, warehouse-style units in
retail parks
Rationale- only 20% customers have access to
Tesco Extra
Scaling all up to Extra not possible
High competition in non-food retailing
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Distribution
Similar sourcing like other large retailers
Suppliers to regional distribution centres to
stores
Factory gate pricing, to reduce costs
RFID technology
2006- transporting goods by rail
2007- transport wine from Liverpool to a
Manchester by canal, also using sea route
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Clubcard
1993- Tesco collected customer data and sent
targeted offers
1994 Chairman Lord Maclaurin It is scary that you
know more about my customers after 3 months than
I know after 30 years.
1995- Clubcard introduced, UKs largest, 14m
holders
Idea rejected by Sainsbury's, but reversed due to
Clubcard success
1pt / 1 spend in a Tesco outlet, credit card, mobile,
broadband, personal finance or redeemable coupons
Redeem- In store- 1pt=1p, 4p with clubcard deals
(holidays, trips, airmiles) + discount coupons / deals
Customer feedback & buying pattern insights helped
thwart bigger players
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Clubcard
CRM
Mass-customized magazines to customers, with
articles & ads related to Tesco products and third
party advertisements
Magazines contained promotional coupons &
Clubcard forms
Data collection to formulate strategies for cost
effective personalized services
1993- First Class Service for frequent/ high
value customers
1994- One on Front to reduce customers
check-out time
if >1 person in line, open closed counter to
handle 2nd in line
1994- Clubcard Loyalty Scheme.
CRM
Database of family purchases, patterns, preferences,
price points, packs, personal details- enabled
classification
Insights- need gaps, pricing, merchandising, promotion,
service, media effectiveness, customer management
(ARD)
Better service & customer xp ensured footfalls
maintained
4 categories: Premium, Standard, Potential &
Uncommitted
Dimensions- premium, value, convenience,
frozen/healthy/ fresh eating, and kids
Special privileges- Valet parking, personal store attention
Special cards for students and mothers
Personal shopping assistants for expectant mothers
Strategy- launch better & bigger stores, competitive
prices, increase product range, focus on remote shopping
services
Dedicated team of Price Checkers to benchmark
CRM
Every Customer Offered Help (ECOH)- trained
in offering help and living up to customer
expectations
Wave at 15 feet, nod at 10, smile at 5- greet &
offer help
2001- Customer Champions in stores for
employees
Collaborate with suppliers to develop Lean
Thinking
Ensure 99% stock availability
2003- diversifications- more reasons to buy
Me Time for women customers- free sessions
at leading health spas, luxury gyms & beauty
saloons, discounts on designers clothes,
perfumes and cosmetics.
2003- $60m to retain customers
Pricing
Brand Image
Tesco- good quality, trustworthy goods,
excellent value
Innovative ways of improving customer
shopping xp
Value through financial services
Strong brand equity
Enhancing customer retention rates
Enables quick entry into new markets, product
lines
Own labels
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Garden Centres
2007- M&A Dobbies Garden Centres, 53%,
156m
24 garden centres- 12 Scotland and 12 England
Dobbies name retained
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Personal Finance
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Telecom
ISP 1998, serious from 2003
ISP, mobile, home phone and VoIP businessesUK
Marketed via Tesco website and stores
2003- Tesco-O2, 50-50 JV- Tesco Mobile
2003- Tesco-Cable & Wireless JV- Tesco Home
Phone
Tesco uses O2 network & infrastructure, no
investment
99% population network / c 95% geographical
coverage
2006- Tesco-Freshtel (Aust) JV- Tesco Internet
Phone, VoIP
2004- 0.5m customers, 05- 1m, 06- 2m
2006 Tesco Ireland services
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Fuel
1997- Tesco JV with Esso (Exxonmobil ) for petrol
stations
Tesco to operate under Express format
Esso would operate forecourts and sell fuel via
Tesco store
2007- 600 Tesco/Esso stores across UK
Biofuels- petrol-bioethanol, diesel-biodiesel
blends- Greenergy
One of UKs largest independent petrol retailers
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Ireland
Korea
JV
Thailand
JV-
China
Czech
Rep
Hungary
Japan
Malaysia
JV
Poland
Slovakia
International presence
Country
Entry
Stores
Area
sqf
Turnover
Area
Area
Country
Entered
Stores
(sq
((m)
million)
ft)
Sales m 2005
Status
China
2004
56
5,008,000
552
Czech Rep
1996
108
4,633,000
807
France
1992
16,000
Hungary
1994
125
5,524,000
1,180
Ireland
1997
104
2,501,000
1,683 (07)
Japan
2003
144
426,000
287
Malaysia
2002
26
2,295,000
247
Poland
1995
334
7,523,000
1,135
Slovakia
1996
65
2,911,000
498
South Kor
ea
Thailand
1999
142
5,986,000
2,557
2nd
1998
532
9,122,000
1,326
Leader
Turkey
2003
79
1,946,000
256
US
2007
76
60,000
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Leader
Leader
International status
Ireland- Grocery leader, 26% share, home delivery
80% population
South Korea- Samsung JV, 2nd (Lotte), all formats,
investing $4b
China- Ramping up stores, products and formats
Malaysia- Tesco Extra, value- own brands,
electronics, & clothing
Poland- Own brands, full product range, petrol and
finance services
Slovakia- Tesco Express, emphasis on organic range
Thailand- 20m customers monthly, 97% local
source, diverse range
Czech Republic- Non-food expansion- petrol,
personal finance
France- "Vin Plus" outlet in Calais- wine, beer and
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spirits
Tesco US Rationale
Reduce UK over dependence 20% sales & profits
from overseas
L10Y- Iconic UK retailers Sainsbury, M&S shut shop
UK food retail market $212b @3%, US $562b @ 6%
1980 US 69% food $ at grocery stores, 2005- 47%
As discounters boomed (Wal-Mart, Kmart & $
stores), moved into food & compete on price
As niche high-end stores- food, health foods,
specialist shops proliferated with focus on quality &
service
Existing food retailers squeezed, hard to
differentiate brands
Low margins as fragmented structure ( US > UK),
unable to recoup from non foods- electronics &
clothes
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India strategy
Regulatory- Overseas companies only allowed
to open wholesale, licence or franchise
arrangements
Single brand retail 100% allowed
Invest $115m to open wholesale cash-andcarry in Mumbai
Supply to Tata Star Bazaar
Reported JV with Hero Honda group
If policy opens up, would open own retail
business
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Financials
Year end Sales(m)
PAT (m)
EPS (p)
2008
47,298
2,130
26.95
2007
46,600
1,899
22.36
2006
38,300
1,576
19.70
2005
33,974
1,366
17.44
2004
30,814
1,100
15.05
2003
26,337
946
13.54
2002
23,653
830
12.05
2001
20,988
767
11.29
2000
18,796
674
10.07
1999
17,158
606
9.14
1998
16,452
532
8.12
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In
10 years,
sales
tripled,
profits
grew
5 fold
Tesco Criticism
2006- Litigations on disrupting small local retailers &
stifling competition
2007- Tesco investigated for cartelling with
Safeway, Asda, Morrisons, Sainsburys & dairy companies
Price fixing of milk, butter and cheese
2007- Asda, Sainsburys, Safeway admitted- fined 116M
Tesco claimed innocence, under investigation
2007- Online operations from Switzerland, save VAT
Sell CDs, DVDs, electronic games online- Inquiry
2008- Promoted companies in Cayman Island to start UK
stores who would lease them back to Tesco
Saved 1b tax on profits from property & sales
2008 Deposited 1b in Swiss partnership, loaned money
to overseas Tesco stores, transfer profits back through
interest
Tesco defence- We have a duty to organise our affairs in
a tax-efficient manner, and we already pay a lot of tax
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SWOT
Strengths
Weaknesses
Market leadership
Strong online
presence
Brand equity
Opportunities
Threats
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Price
Low
High
Range
References
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References
Simms, Andrew (2007). Tescopoly: how one shop came out on top and why it
matters. London: Constable. ISBN 1845295110 .
Humby, Clive; Hunt, Terry & Phillips, Tim (2006). Scoring points: how Tesco
continues to win customer loyalty. London & Philadelphia: Kogan Page. ISBN
9780749447526.
Nash, Bethany (2006). Fair-Trade and the growth of ethical consumerism within the
mainstream: an investigation into the Tesco consumer. Leeds: University of Leeds.
ISBN 75272130. ^ a b c Rigby, Elizabeth (2006-11-11). "Eyes in the till", FT
Magazine, Financial Times, pp.16-22. Retrieved on 30 March 2007.
^ "About us". www.dunnhumby.com. dunnhumby Limited (2008). Retrieved on
2008-10-12.
^ Mesure, Susie (2003-10-10). "Loyalty card costs Tesco 1bn of profits - but is
worth every penny", The Independent. Retrieved on 30 March 2007.
^ Randall, Jeff (1996-06-23). "Sainsbury plays its loyalty card", Sunday Times,
Times Newspapers. Retrieved on 30 March 2007.
^ Rory Cellan-Jones (2007-06-18). "A journey into personal privacy", BBC News on
bbc.co.uk. Retrieved on 9 June 2008."Privacy campaigners are convinced that big
companies, from Google to Tesco, know too much about us - and are not careful
enough with our data....While call centre staff don't have access to your data,
details of all purchases on Clubcard are stored for up to two years."
[edit] External links
http://www.deloitte.com/dtt/press_release/0,1014,cid
%253D196099,00.htmlWal-Mart remains largest global retailer, according to
Deloitte surveyTesco Becomes 4th Largest Global Retailer, Overtakes Metro
http://www.independent.co.uk/news/business/news/tesco-prepared-to-press-theprice-button-1334363.html James Thompson Wednesday, 14 January 2009