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 Cover Story - March/April 2008  |
Sir Terry Leahy:
Upon receiving word of his induction into the 2008 Class of the Private Label Hall of Fame, Leahy issued this statement about the importance of own-label products to Tesco. “The diverse range of high quality own-label products we have developed is an integral part of our offer in each and every market in which we operate. Our own label products are known and trusted by customers around the world, and consistently deliver innovation, value and quality. Shoppers return time and again to our products as they know they are getting the Tesco promise behind the label.” Tesco’s Wheelhouse As this writer noted in his P.O.V. column in the PL November-December 2006 issue: “We talk about Every Little Helps a lot, but it’s not just a catchphrase or marketing slogan, it represents everything we stand for,” says Leahy in Tesco’s 2006 Annual Review. “For our people and our customers, it’s how we run our businesses from China to Chorley.” Since the mid-1970s, Tesco has transformed itself from a discount grocer based on the “Pile it high, sell it cheap” slogan of its founder Jack Cohen into a world-class retailer that sells everything from fair trade groceries, organic clothing, mobile phones, computer software, and personal finance. Nearly half of its total sales come from own-brand consumer products and services. Says Leahy: “By setting out in all these new directions we ran the risk of losing our way. So, we have relied on Every Little Helps more and more over the years, to act as a common philosophy to bind us all together.” The Steering Wheel
Tesco pilots all of its businesses around the world using one master compass that it calls: “The Steering Wheel.” The wheel–as shown here–is divided into five segments that all come together around “Every Little Helps” at the center. Tesco’s steering wheel–which resembles a dartboard–encompasses these key targets of performance: • Customer • Community • Operations • People • Finance. “We measure our performance through the Steering Wheel, whether we work in distribution, the office or in stores,” says Leahy. “This helps maintain focus and balance in what counts to run each of our businesses successfully, be it wage costs or whether customers can get everything they want.” Inclusive Offer Tesco employs the term “inclusive offer” to describe its strategy to appeal to all segments of today’s diverse consumer market. Thus, it is not surprising that it has developed a three-tier own brand portfolio of Finest premium, Tesco national brand equivalent, and Value economy ranges to appeal to upper, middle, and low-income customers. This own-brand market basket is supplemented by a wide assortment of specialty brands for targeted consumer segments. One of its recent own-brand launches is the Tesco Collection of organic clothing by designer Katharine Hamnett introduced in late 2006. It is interesting to note that Tesco’s sales of organic goods are growing at a 20% annual rate. Indeed, it sells more organic products in Britain than anyone else. Tesco is known for paying attention to its customers and keeping track of their changing lifestyles. It has been widely reported that one of its most valuable asset in is regard, and one which is responsible for the success of its comprehensive range of private label lines, is the information mined from its Clubcard. This is generally considered one of the most successful loyalty programs in the world. Tesco’s Store Brands
Tesco’s three-tier private label portfolio and its several specialty brands include more than 12,000 items, as Len Lewis reports in the PL Nov-Dec 2006 cover story, “Tesco’s U.S. Gambit.” The largest store brand range is the mainstay Tesco label with about 8,000 SKUs that account for 75% of store brand sales. These are positioned against the national brands but designed to provide significantly higher margins. Tesco Value was launched in 1993 and was recently upgraded from a rather spartan two-color label to a more eye-catching one with pictures of the product. The 1,200-item line is purchased by as many as 85% of all Tesco shoppers. It still consists largely of basic items designed to compete against deep discounters such as Aldi and Lidl with prices that are 40-50% lower than national brands, according to estimates. Tesco Finest, also consisting of 250 items and represents its premium line and includes such high value-added items as chilled prepared meals. However, Tesco is not one to sit comfortably on its laurels and the success of its private label is also due to continual development of new sub-categories including: kids meals; Fair Trade products; a Free From line with products that are wheat and dairy free; Healthy Living for reduced fat, sugar and sodium products. The company has even launched a line of private label furniture and, in the UK, a line of whole grain products called Wholefoods. The company has kept labels other than Tesco in countries like Turkey and Japan where it’s entered partnerships with existing businesses. Sir Terry Leahy
“Uniquely, Tesco brings together the qualities of consumer champion, experience across a broad range of formats, and a world-class management team,” says Leahy in the PL Nov-Dec 2006 cover story on his company. By all accounts, Leahy is credited with transforming Tesco into a world-class retailer operating in 11 countries outside of the UK with more than $90 billion in annual sales, making it the third largest retailer worldwide, behind only Wal-Mart and Carrefour. The 52-year-old executive grew up in the working class part of Liverpool, attended the University of Manchester Institute of Science and Technology, and joined Tesco after graduating in 1979. He was appointed to the board in 1992 and became chief executive in 1997. Leahy credits his working class roots for his ability to understand consumers which is reflected in Tesco’s marketing slogan: “Every Little Helps.” These roots also have shaped his management style as being very much “hand-on.” Indeed, he along with the rest of top management spend at least one week per year working in a Tesco store stocking shelves, and waiting on customers. “If you want to know what work is like at Tesco, you don’t find it sitting in an office,” said Leahy during an interview with CNN in London in 2006. “You actually find out by going into the store and doing that work and I’m reminded how hard people work and how well they work. It’s good work and I learn a lot and I bring some ideas back here to the office.” It’s not surprising then that Tesco sends in a team of top executives in advance of entering a new market to study the lifestyle and tastes of the local population. In this regard, in advance of Tesco’s entrance into the U.S. market, 50 senior Tesco directors and researchers spent two weeks shopping, eating and “chilling out” with families in California, according to The Sunday Times of London. Says Leahy of his company’s U.S. venture: “This is a tremendously exciting move for Tesco which will add a new leg to our international expansion. “The United States is the largest economy in the world with strong forecast growth and a sophisticated retail market. It is a market we have researched extensively for many years and over the last year we have committed serious resources to developing a format that we believe will be really popular with American consumers.” 2007 Annual Review In his Chief Executive Statement in the Tesco 2007 Annual Review, Leahy sums up the company’s performance by saying: “Our focus remains on profitable growth–building on the solid foundations we have laid over the past 10 years. At the same time, we’re always looking to improve the way the owners of the business benefit from that growth. “As a company we are putting increasing focus on our work with communities and the environment. We’ve built our success on listening to customers and these things are growing in importance for them. That’s why I believe the battle to win their loyalty will increasingly be fought not just on value for money, range and convenience, but on being good neighbours, behaving responsibly, and seizing challenges such as climate change. “I think these will be positives for us. Customers want to do the right thing–they’re just not always sure how–whether it’s a healthier diet or consuming in a greener way. It’s a classic consumer need–and one which I believe Tesco is well placed to meet. That’s why we’ve made it part of the Tesco Steering Wheel. |
