Tesco plots own-label drive

11 May 2011

CHESHUNT, UK: Tesco, the retail giant, is planning to roll out a range of own-label brands in various categories which it hopes will carry global potential.

Philip Clarke, Tesco's chief executive, has unveiled a new corporate strategy, encompassing seven distinct elements, to guide its approach going forward.

"It is a change of gear, not a change of direction," he told Reuters.

One goal for Clarke is driving growth in the "core" UK market, where Tesco generates around 30% of grocery sales and 10% of retail expenditure.

"I think the UK can continue to grow its stores at least for three years broadly at the pace we have seen for the past five years," he predicted.

On a wider level, the company's aim is to become an "outstanding international retailer in stores and online" throughout the 15 countries it operates in, such as Japan, Turkey and the US.

The organisation wants to have a meaningful ecommerce presence in all of these nations by the end of the decade.

Other targets incorporate matching strengths in food across sectors from pharma to apparel, and placing local communities at the heart of its focus, including embracing a rigorous definition of sustainability.

An additional objective is boosting its portfolio of retail services, like finance and telecoms, and making them available internationally.

Equally, Tesco is seeking to evolve into "a creator of highly valued brands", building on lines like the F+F clothing label and Technika consumer electronics.

The firm's Go Cook stable of kitchen goods like saucepans and utensils, and Lighter Choices selection of healthy eating products, mark a first step here.

But Clarke intends to push harder in this area, pursuing a more nuanced model moving beyond its existing Value and Finest ranges, differentiated largely on price.

"As people develop their higher levels of disposable income, they want to treat themselves," said Clarke.

"They do not want to just buy Tesco Value shower gel. They want to have something sat in their bathroom that looks like it is a brand. So you create brands."

Among the perceived advantages of selling own-label properties are encouraging buyers to visit stores, and enhancing customer loyalty.

Having successfully introduced these goods in one market, it then becomes much simpler to quickly acquire scale worldwide.

"You develop it once, and you put it into many, many countries using your global supply chain," said Clarke.

A further aspect of Clarke's vision for Tesco is making the most effective use of the talent from units outside the UK to promote a truly multinational outlook.

The retailer has found gaining ground a particular challenge in the US, as its Fresh & Easy banner has faced considerable obstacles, not least because of the economic downturn.

While Fresh & Easy has fallen short of original expectations, receiving criticism from business mogul Warren Buffett in April.

Clarke rebuffed negativity surrounding the chain, which he anticipates will break even by 2012/13.

"I think lots of people are poking at the strategy," he said. "In the end we all know what matters is performance, and I have set some milestones and I think that is the right thing to do."

Data sourced from Reuters; additional content by Warc staff