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Tesco chief calls for retailer-government parternships to tackle challenges

Dave Lewis Tesco boss

The rise of e-commerce was among the challenges for retailers – and nations – that Tesco CEO Dave Lewis raised during a speech today in London.

Saying that “increasingly the world is mobile first, “ Lewis said major online retailers report more than half of their UK transactions are completed on a smart device. “In the UK, digital retailing has doubled over the last five years to become a £10bn business.”

“As a business, we expect continued growth…the challenge for us is how to make our online business of tomorrow as profitable as our offline business yesterday,” he said.

But there are significant challenges the growth of digital  poses for the nation, too. “Digital operations have no real community footprint, far fewer employees and a far lower tax contribution.That should be a dilemma for the Exchequer. Without rebalancing to reflect digital business models the physical side of retail pays a higher and higher proportion of the total tax bill.

“Furthermore it will incentivise a swifter shift to infrastructure light, low employment business with little interaction with communities,” he said.
 

The growth of limited range retailers and convenience shopping

Lewis then went to talk about the rise of limited range retailers and of convenience shopping – in terms of physical shops – which he said have both affected profitability and growth. Limited range retailers have doubled since 2010 and the convenience channel is up 5% again this year.

“Our big stores are also seeing a high proportion of convenience shopping trips – 76% of Tesco convenience trips take place in our Extras or Superstores. But I don’t see this as a challenge per se – I see it as a shift in what customers want or need – and it’s our job to respond.   

“What I do see as a challenge is that whilst the customer was heading in one direction the industry was heading in the other…between 2007 and 2014 it added around 35 m sq ft,” Lewis said, going on to talk about the pain caused by having to close stores and halt construction on others.

 

The burden of higher structural costs when profits are at a low point

Lewis said the real challenge for the sector is that it is struggling with structural cost at a time of historically low profitability. While two years ago food inflation was running at 4%, now it’s -2.4%. That’s great news for customers but puts significant pressure on parts of the retail industry.

“In supermarkets profitability has sunk from 5% to 2% in five years and now we face significant new cost pressure. This is a potentially lethal cocktail,” Lewis said, going on to say that meanwhile property values have fallen but business rates are up. Tesco’s own business rates bill has climbed well over 35% in the last 5 years. “That’s an enormous pressure. Shops have closed. Businesses lost. Jobs sacrificed,” he said.

And on the UK’s National Living Wage, Lewis called for fuller debate, saying that while Tesco was supportive of the living wage when announced, “our concern, and the concern of many colleagues, is that there is pressure to increase base pay at the expense of benefits. We don’t think this is the answer.”

 Tesco boss Dave Lewis

Call for more government-industry consultation, collaboration

Lewis went on to discuss the need and – opportunity – for the retail industry and business to work closely with government on three issues.

“Firstly, I would encourage the industry and Government to sit down at the highest level and consult on the multiple policy changes that are affecting the industry, to share together the consequences of higher rates, the living wage and initiatives such as the apprenticeship levy,” he said.

Secondly, he called for partnership on employment, skills and training challenges.

And Lewis said health and food education is the third area with real potential for partnership and innovation.

“Millions of Britain’s shoppers are weekly Tesco customers.  We have more than 40 million transactions a week. And when we reformulate, we can remove billions of calories from their shopping trips.”

Tesco estimates it has helped save around 1,500 lives through joint efforts to reduce salt and its action on soft drinks means the average customer is now buying 20% less sugar in such drinks, examples of just some of Tesco’s health initiatives. “We make large scale contributions to heart health, cancer research and the fight against diabetes,” he said.

“I want to partner and innovate more on health. Not because I want to burnish Tesco’s image but because two thirds of supermarket shoppers want me to,” he said.

“We are uniquely placed to nudge millions of people every week towards healthier choices. Our customers want it and the government can benefit greatly from it… if we can meet in the middle ground. Nurturing growth – social value alongside economic value – in an era of extraordinary change needs a new level of collaboration.”

Lewis was speaking at the CBI conference. The CBI is the UK’s premier business lobbying organisation, providing a voice for employers at a national and international level.

Read the speech: http://www.tescoplc.com/index.asp?pageid=17&newsid=1242

Images: https://www.flickr.com/photos/tescomedia/albums

 

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UK’s second commercial apricot crop to be a bumper

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England’s second apricot crop is is set to be six times that of last year, thanks to near perfect growing conditions.

According to Tesco, early estimates are that English growers will produce about 200 tons – up from the 30 grown in England last year when the first English apricot crop became available.

In a press release, the the UK retailer said the first English apricots of the season went on sale on Monday and growers are reporting great quality fruit.

It also reported that last year British shoppers bought 33% more apricots than the previous year, according to Kantar data.

Tesco said careful breeding has made it possible to now grow apricots on a commercial basis in the UK, something which until a few years ago was very hard to do because of the climate.

Tesco’s English apricots are produced by one of the UK’s largest stone fruit growers, Nigel Bardsley, whose farm is based near Staplehurst, in Kent. He has 5,000 orange fleshed, French type apricot trees across 8 ha and produced his first commercial quantities – about 15 tons – last year. This year he anticipates up to 120 tons.

“We’ve had near perfect growing conditions so far this year with a cold winter to help let the trees rest; a mild spring to allow for good pollination and a warm, dry summer so far to boost growth. This combined with a unique large day/night temperature differentiation, has led to fantastic red blushed and incredibly sweet apricots,” Bardsley said.

source: Tesco
 

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Hopes sweeter variety will boost wilting cabbage sales in UK

A sweeter variety of homegrown cabbage is being trialled by Tesco.

A sweeter variety of homegrown cabbage is being trialled by Tesco.

The UK retailer said the cabbage – known as Sweet Summer Cabbage – is grown in Lincolnshire and was “naturally developed to re-generate interest in the vegetable.”

In a press release, Tesco said it has a light, sweeter and fresher taste than other cabbage varieties and is ideal for people who like making their own salads and coleslaw.

Tesco vegetable buyer Luke Shutler explains: “In recent years many greens have not only shed their ‘difficult’ image but have been re-appraised as superfoods because of their great nutritional value.

Broccoli was the first about 10 years ago but more recently, thanks to foodie culture and a greater awareness of what we eat, we have seen other greens such as spinach and even sprouts become more popular.

“Unfortunately that has not happened with cabbage, yet, and we think that demand is being held back because of a poor image that goes back to memories of school dinners and cabbage that was boiled to within an inch of its life.

“We have worked with TJ Clements, one of the UK’s biggest brassica producers, to come up with this sweet green variety that we believe will not only be a hit with children but with adults too.

“Regular varieties of cabbage have a slightly peppery, almost bitter flavour but the sweetness of the Summer Sweet can be tasted as soon as you take your first bite. “We are trialling it this summer and if demand is strong then we will have more next year.” Tesco said the cabbages will be sold in 250 stores.

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Cabbage sales down 6% in the UK

Tesco said Kantar data for the UK retail market shows demand for cabbage has fallen 6% in the last two years.

It said cabbage sales in Britain were at their highest in the 1950s when the vegetable was a seen as a relatively inexpensive way of eating nutritious food. But as Britain became more prosperous, the ‘meat and two veg diet’ began falling by the wayside and, with the introduction and influences of other cuisines and fast food culture, over the years there has been  has been a downturn in demand for cabbage.

A the time of publication, Summer Sweet Cabbage cost £1 each, compared to £0.45 for Tesco Everyday Value cabbage, £0.49 for Tesco Everyday Sweetheart cabbage, £0.52 for Tesco red cabbage, £0.55 for Tesco white cabbage, £0.80 for Tesco savoy cabbage and  £1.30 for Tesco organic seasonal cabbage, according to Tesco.com.

 

source: Tesco press release “Sweet Summer Cabbage launched to help image of ‘unloved’ green”

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The new purple asparagus variety Burgundine being trialled in UK

Sales of a new variety of asparagus that can also be eaten raw is being trialled by Tesco in the UK.

Tesco is trialling sales in in the UK of a new variety of asparagus – Burgundine – that can cooked or eaten raw.

In a press release, the supermarket chain said Burgundine is a purple and green cross and has been grown in Thornham, north Norfolk, specifically as a new salad crop. It could prove popular with office workers looking for a healthy lunchtime snack, it said.

The variety can be eaten raw after being washed because it contains slightly less lignim, the fibre element in asparagus. “The great thing about Burgundine asparagus is its versatility because it can be eaten both raw and also gently steamed or stir fried,” said Tesco produce buyer James Strathdee. “It is an eye-catching variety that is exceptionally sweet, juicy, crunchy and great for eating with dips and in salads.”

The British Asparagus season usually lasts from St George’s Day on April 21 until Midsummer’s Day on June 21, Tesco said. 

It said its finest Burgundine salad asparagus would on sale in 102 Tesco stores at £2 for 100g.

 

Source: Tesco press release

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Big ad spends help Aldi, Lidl grab more of UK market

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German discounters Aldi and Lidl now hold an 11% slice of UK grocery sales.

According to Nielsen figures for the 12 weeks to March 28, Aldi’s sales grew 17.9% year-on-year, to reach a 6.2% share of the grocery market, and Lidl’s sales rose 10.8%, for a 4.9% share – cementing their positions as the UK’s 5th and 7th biggest supermarkets, respectively.

Lidl biggest spender on TV & press ads

In the four weeks to March 28, Lidl spent the most on TV and press advertising (£5.9 million) – up 160%  on the same period last year – followed by Asda (£4.0 million) and Aldi (£3.5 million).

“Aldi and Lidl have become the fifth and seventh biggest supermarkets partly due to their large ongoing investment in advertising. Not only do they consistently spend the most in relation to each percentage of market share they hold, their advertising has changed the perceptions and expectations of UK shoppers,” Nielsen’s UK head of retailer and business insight Mike Watkins said.

Bad month for the Big Four

Over the same period, all of the big four supermarkets saw a decline in year-on-year grocery sales. Asda’s slipped 1.7%, Tesco’s 1.1% and Sainsbury’s and Morrisons 0.6% each.

However, Tesco remained in top ranking, with a share of 27.5%, followed by Sainsbury’s with 16%, Asda with 15.7% and Morrisons with 10.7%.

Outlook for next 3 months more positive

Watkins said the current trading environment is challenging for the supermarkets. “…people (are) spending less on groceries than they used to.”

“Consumer spend continues to be impacted by a combination of record-low food inflation and supermarkets’ competitive pricing policies – good news for shoppers but not retailers, whose margins are continually under pressure. However, the outlook for the next three months is more positive than we’ve seen for some considerable time,” he said.

Read the Nielsen press release.
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