Tesco

Tesco PLC

Type	Public limited company
Traded as	LSE: TSCO ISEQ: TCO
Industry	Retailing
Founded	1919 (1919) Hackney, London, England
Founder	Jack Cohen
Headquarters	Tesco House Shire Park Kestrel Way Welwyn Garden City Hertfordshire AL7 1GA England
Number of locations	6,814 stores (As of January 2016)(http://www.tescoplc.com/index.asp?pageid=71) (see table below)
Area served	Worldwide
Key people	John Allan [1] (Non-Executive Chairman) Dave Lewis (Group CEO)
Products	Supermarket Hypermarket Superstore
Revenue	£62.284 billion (2015)[2]
Operating income	-£5.792 billion (2015)[2]
Net income	-£5.766 billion (2015)[2]
Total assets	£44.214 billion (2015)[2]
Total equity	£7.071 billion (2015)[2]
Number of employees	500,000+ (2015) [2]
Subsidiaries	Tesco Stores Ltd. Tesco Bank Tesco Mobile Tesco Ireland Dobbies Garden Centres Tesco Family Dining Ltd. Giraffe Restaurants Dunnhumby Homeplus Spenhill
Website	www.tesco.com

Tesco PLC is a British multinational grocery and general merchandise retailer headquartered in Welwyn Garden City, Hertfordshire, England, United Kingdom.^[3] It is the third largest retailer in the world measured by profits^[4][5] and second-largest retailer in the world measured by revenues. It has stores in 12 countries across Asia and Europe and is the grocery market leader in the UK (where it has a market share of around 28.4%), Ireland, Hungary,^[6] Malaysia, and Thailand.^[7][8]

Tesco was founded in 1919 by Jack Cohen as a group of market stalls.^[9] The Tesco name first appeared in 1924, after Cohen purchased a shipment of tea from T. E. Stockwell and combined those initials with the first two letters of his surname,^[10] and the first Tesco store opened in 1929 in Burnt Oak, Barnet. His business expanded rapidly, and by 1939 he had over 100 Tesco stores across the country.^[11]

Originally a UK grocery retailer, since the early 1990s Tesco has diversified geographically and into areas such as the retailing of books, clothing, electronics, furniture, toys, petrol and software; financial services; telecoms and internet services. The 1990s saw Tesco reposition itself; it moved from being a down-market high-volume low-cost retailer, to one which appeals across many social groups, by offering products ranging from its "Tesco Value" items (launched 1993^[9]) to its "Tesco Finest" range. This broadening of its appeal was successful, and saw the chain grow from 500 stores in the mid-1990s to 2,500 stores fifteen years later.^[12]

Tesco is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index. It had a market capitalization of approximately £18.1 billion as of 22 April 2015, the 28th-largest of any company with a primary listing on the London Stock Exchange.^[13]

History

Origins

Jack Cohen, the son of Jewish migrants from Poland, founded Tesco in 1919 when he began to sell war-surplus groceries from a stall at Well Street Market, Hackney, in the East End of London.^[10] The Tesco brand first appeared in 1924. The name came about after Jack Cohen bought a shipment of tea from Thomas Edward Stockwell. He made new labels using the first three letters of the supplier's name (TES), and the first two letters of his surname (CO), forming the word TESCO.^[10] The first Tesco store was opened in 1929 in Burnt Oak, Edgware, Middlesex. Tesco was floated on the London Stock Exchange in 1947 as Tesco Stores (Holdings) Limited.^[10] The first self-service store opened in St Albans in 1956 (which remained operational until 2010 before relocating to a larger premises on the same street, with a period as a Tesco Metro),^[14] and the first supermarket in Maldon in 1956.^[10] In 1961 Tesco Leicester made an appearance in the Guinness Book of Records as the largest store in Europe.^[9]

Expansion

During the 1950s and the 1960s Tesco grew organically, and also through acquisitions, until it owned more than 800 stores. The company purchased 70 Williamson's stores (1957), 200 Harrow Stores outlets (1959), 212 Irwins stores (1960, beating Express Dairies' Premier Supermarkets to the deal), 97 Charles Phillips stores (1964) and the Victor Value chain (1968) (sold to Bejam in 1986).^[15]

Jack Cohen's business motto was "pile it high and sell it cheap",^[16] to which he added an internal motto of "YCDBSOYA" (You Can't Do Business Sitting On Your Arse) which he used to motivate his sales force.^[16]

In May 1987, Tesco completed its hostile takeover of the Hillards chain of 40 supermarkets in the North of England for £220 million.^[17]

In 1994, the company took over the supermarket chain William Low, successfully fighting off Sainsbury's for control of the Dundee-based firm, which operated 57 stores. This paved the way for Tesco to expand its presence in Scotland, which was weaker than in England.

Tesco introduced a loyalty card, branded 'Clubcard', in 1995 and later an Internet shopping service. In 1996 the typeface of the logo was changed to the current version with stripe reflections underneath, whilst the corporate font used for store signage was changed from the familiar "typewriter" font that had been used since the 1970s. The same year saw the introduction of overseas operations.^[9] Terry Leahy assumed the role of Chief Executive on 21 February 1997, the appointment having been announced on 21 November 1995.^[18][19]

On 21 March 1997 Tesco announced the purchase of the retail arm of Associated British Foods, which consisted of the Quinnsworth, Stewarts and Crazy Prices chains in the Ireland and Northern Ireland, plus associated businesses, for £640 million.^[20] The deal was approved by the European Commission on 6 May 1997.^[21] This acquisition gave it both a major presence in (and marked a return to) the Republic of Ireland and a larger presence in Northern Ireland than Sainsbury's, which had begun its move into Northern Ireland in 1995.

The company was the subject of a letter bomb campaign lasting five months from August 2000 to February 2001 as a bomber calling himself "Sally" sent letter bombs to Tesco customers and demanded Clubcards modified to withdraw money from cash machines.^[22]

Diversification

In July 2001 Tesco became involved in internet grocery retailing in the USA when it obtained a 35% stake in GroceryWorks.^[23] In 2002 Tesco purchased 13 HIT hypermarkets in Poland. It also made a major move into the UK convenience store market with its purchase of T & S Stores, owner of 870 convenience stores in the One Stop, Dillons and Day & Nite chains in the UK.^[24]

In June 2003 Tesco purchased the C Two-Network in Japan.^[25] It also acquired a majority stake in Turkish supermarket chain Kipa.^[26] In January 2004 Tesco acquired Adminstore, owner of 45 Cullens, Europa, and Harts convenience stores, in and around London.^[27]

In Thailand, Tesco Lotus was a joint venture of the Charoen Pokphand Group and Tesco, but facing criticism over the growth of hypermarkets CP Group sold its Tesco Lotus shares in 2003. In late 2005 Tesco acquired the 21 remaining Safeway/BP stores after Morrisons dissolved the Safeway/BP partnership.^[28] In mid-2006 Tesco purchased an 80% stake in Casino's Leader Price supermarkets in Poland, which were then rebranded as small Tesco stores.^[29]

On 9 February 2006, Tesco announced that it planned to move into the United States by opening a chain of small format grocery stores in the Western states (Arizona, California and Nevada) in 2007 named Fresh & Easy.^[30] It had plans for rapid growth – after a pause in the second quarter of 2008, the opening program recommenced and over 200 stores were opened in Arizona, California, and Nevada by December 2012.

In 2010, Tesco started funding a small film studio intended to produce Tesco exclusive direct-to- films. The first film was released on 6 September called Paris Connections, based on a popular novel by Jackie Collins.^[31][32]

Restructuring

Tesco confirmed in April 2013 that it was pulling out of the US market (Fresh & Easy Stores), at a reported cost of £1.2 billion.^[33] In September 2013, Tesco announced they would sell the business to Ronald Burkle's Yucaipa Companies for an undisclosed amount.^[34] Tesco retained the Fresh & Easy brand in the UK - applying it instead to certain convenience food products.

In September 2013, Tesco launched its first-ever tablet computer, a seven-inch model called Hudl.^[35] The Tesco Hudl 2 has since been released.

On 1 September 2014, Dave Lewis (previously of Unilever) took over as CEO.^[36] In January 2015, Lewis announced plans to close the company's head office in Cheshunt in the near future, as well as 43 loss-making stores and the cancellation of 49 new large supermarkets which will not go ahead as originally intended.^[37] The store closures are expected to mean 2,000 staff are made redundant while a further £250m of cost-cutting measures are planned.^[38] Tesco also confirmed the sale of its Blinkbox on-demand video service and its fixed-line and broadband business to TalkTalk.^[39] Tesco sold the Blinkbox Music streaming service to Guvera on 26 January 2015,^[40] and confirmed it would close its Blinkbox Books service by the end of February 2015.^[41]

In April 2015, Tesco announced a £6.38bn loss, the worst results in its history.^[42]

UK operations

Tesco Stores Ltd. is the subsidiary of Tesco PLC in the United Kingdom. Tesco's UK operation is divided into six formats, differentiated by size and the range of products sold.^[2]

As of 2015, Tesco's UK store portfolio was as follows:^[43]

Format	Number	Total area (m²)	Total area (sq ft)	Mean area (m²)	Mean area (sq ft)	Percentage of space	+/- Stores 2014
Tesco Extra	250	1,636,023	17,610,000	6,624	71,296	42.85%	3
Tesco Superstores	479	1,310,862	14,110,000	2,761	29,274	34.33%	8
Tesco Metro	178	203,551	2,191,000	1,044	11,236	5.33%	13
Tesco Express	1,713	360,743	3,883,000	216	2,322	9.45%	22
One Stop	873	106,095	1,142,000	147	1,582	2.78%	27
Tesco Homeplus	0	48,588	523,000	4,049	43,583	1.27%	11
Dobbies	36	152,175	1,638,000	4,476	48,176	3.99%	1
Total	3,529	3,818,036	41,097,000	1,072	11,541	100%	32

Tesco Superstores

Tesco superstores are standard large supermarkets, stocking groceries and a much smaller range of non-food goods than Extra stores. The stores have always previously been branded as simply 'Tesco', but a new store in Liverpool was the first to use the format brand 'Tesco Superstore' above the door.^[44]

Tesco Metro

Tesco Metro stores are sized between Tesco superstores and Tesco Express stores, with stores averaging 1,000 square metres (11,000 sq ft). They are mainly located in city centres beside train stations, the inner city and on the high streets of towns. The first Tesco Metro opened in Neston in 1980. Since then most Tesco branches with a high street format, including those that opened before the Covent Garden branch, have been rebranded from Tesco to Tesco Metro. The Tesco store in Carlisle city centre was the final store to be rebranded.

Tesco Express

Tesco Express stores are neighbourhood convenience stores averaging 200 square metres (2,200 sq ft), stocking mainly food with an emphasis on higher-margin products such as sweets, crisps, chocolate, biscuits, fizzy drinks and processed food (due to small store size, and the necessity to maximize revenue per square foot) alongside everyday essentials. They are found in busy city centre districts, small shopping precincts in residential areas, small towns and villages and on Esso petrol station forecourts. The 1,000th Tesco Express site opened in July 2009. Tesco have now started building Tesco Express stores with only 'Assisted-Service' tills, in which the customer scans all their own shopping and packs it, with the support of supervising staff when required.

In 2010, it emerged that Tesco were operating Express pricing; i.e., charging more in their Express branches than in their regular branches. A spokesperson said that this was "because of the difference in costs of running the smaller stores".^[45]

Tesco Extra

Tesco Extra stores are larger, mainly out-of-town hypermarkets that stock nearly all of Tesco's product ranges, although some are in the heart of town centres and inner-city locations. The first Extra opened in 1997 in Pitsea. The largest store in England by floor space is Tesco Extra in Walkden, with 17,230 square metres (185,500 sq ft) of floorspace.^[46] The largest in Scotland is the Dundee, Kingsway Store and largest in Wales is at Parc Fforestfach, Swansea, which is 10,400 square metres (112,000 sq ft) constructed in 2003. The 200th Extra store was opened in October 2010 in Bishop Auckland.

Other large stores include Bar Hill, Cleethorpes, Coventry, Newcastle upon Tyne, Milton Keynes, Stockton-on-Tees, Slough and Watford are all in the 11,000 square metres (120,000 sq ft) range. Newer stores are usually on two floors, with the ground floor mainly for food and the first floor for clothing, electronics and entertainment. Some stores that did not have the second floor have been converted to this format in recent years. Most Tesco Extra stores have a café and as of October 2009, all stores have a Tesco Tech Support Team.

In common with other towns, such as Warrington,^[47] the recently opened St Helens store, which at 13,000 m² (140,000 sq ft) is one of the biggest in England, was developed on the same site as the town's new rugby league stadium.^[48]

One Stop

One Stop, which includes some of the smallest stores (smaller than a Tesco Express), is the only Tesco store format in the UK that does not include the word Tesco in its name. The brand, along with the original stores, formed part of the T&S Stores business but, unlike many that were converted to Tesco Express, these kept their old name. Subsequently, other stores bought by Tesco have been converted to the One Stop brand. Some have Tesco Personal Finance branded cash machines.

The business has attracted some controversy, as grocery prices in these shops, often situated in less well-off areas, can be higher than nearby Tesco branded stores, highlighted in The Times 22 March 2010: "Britain’s biggest supermarket uses its chain of 639 One Stop convenience stores – which many customers do not realise it owns – to charge up to 14 per cent more for goods than it does in Tesco-branded stores."

Tesco responded to the article stating "It is a separate business within the Tesco Group, with its own supply chain and distribution network. One Stop stores offer a different range to Express stores and its operating costs are different. One Stop’s price strategy is to match to its nearest competitor, Costcutter, and is frequently cheaper."^[49] They can usually be found in smaller communities across the United Kingdom.

Internet retailing

In the United Kingdom Tesco operates a homeshopping service through the Tesco.com website.

In May 1984, in Gateshead, England, the world's first recorded online home shopper, Mrs Jane Snowball, purchased groceries from her local Tesco store in the world's first recorded online shopping transaction from the home.^[50] Tesco has operated on the internet since 1994 and was the first retailer in the world to offer a robust home shopping service in 1996. Tesco.com was formally launched in 2000. Grocery sales are available within delivery range of selected stores, goods being hand-picked within each store, in contrast to the warehouse model followed by Ocado.

As of November 2006, Tesco was the only food retailer to make online shopping profitable.^[51]

Telecoms

Tesco operates a mobile phone business across the United Kingdom, Ireland, Slovakia, Hungary and the Czech Republic. It first launched in the UK in 2003 as a joint venture with O2 and operates as a mobile virtual network operator (MVNO) using the network of O2 with the exception of Hungary where the network of Vodafone Hungary is used. As a virtual operator, Tesco Mobile does not own or operate its own network infrastructure. By January 2011 Tesco announced it had over 2.5 million UK mobile customers.^[52]

Additionally, Tesco operates Tesco Phone Shops within its Extra stores, and by November 2009 had 100 shops trading within stores in the UK. It opened its first Phone Shop in Slovakia in April 2010. Tesco operates mobile phone, home phone and broadband businesses. These are available to residential consumers in several countries and are sold via the Tesco website and through Tesco stores.

Tesco also operated a home telephone and broadband business. Its broadband service launched in August 2004 to complement its existing internet service provider business, providing an ADSL-based service delivered via BT phone lines.^[53] In January 2015, Tesco sold its home telephone and broadband business, together with Blinkbox, to TalkTalk for around £5 million. Its customers are due to be transferred to TalkTalk during 2015.^[39]

Tesco Clubcard

Tesco launched its customer loyalty scheme, the Tesco Clubcard, in 1995. It has been cited as a pivotal development in Tesco's progress towards becoming the UK's largest supermarket chain and one that fundamentally changed the country's supermarket business.^[54] Tesco itself was cited in a Wall Street Journal article^[55] as using the intelligence from the Clubcard to thwart Wal-Mart's initiatives in the UK.

Cardholders can collect one Clubcard point for every £1 (or one point for €1 in Ireland and Slovakia or 1 point for 1zł in Poland) they spend in a Tesco store, or at Tesco.com, and 1 point per £2 on fuel (not in Slovakia). Customers can also collect points by paying with a Tesco Credit Card, or by using Tesco Mobile, Tesco Homephone, Tesco Broadband, selected Tesco Personal Finance products or through Clubcard partners, E.ON and Avis. Each point equates to 1p in store when redeemed or up to 3 times their value when used with clubcard deals (offers for holidays, day trips, etc.) Clubcard points (UK & IE) can also be converted to Avios, and Virgin Atlantic frequent flyer miles.^[56] Cardholders receive points statements four times a year, with their points converted into money-off vouchers, as well as other offer coupons. These can be spent in-store, online or on various Clubcard deals.

Petrol stations

Tesco first started selling petrol in 1974. Tesco sells 95, 97 and 99 RON (a fuel developed by Greenergy of which Tesco is a shareholder) petrol from forecourts at most superstore and Extra locations. Tesco have recently diversified into biofuels, offering petrol-bioethanol and diesel-biodiesel blends instead of pure petrol and diesel at their petrol stations, and now offering Greenergy 100% biodiesel at many stores in the southeast of the United Kingdom.

In 1998, Tesco and Esso (part of Exxonmobil) formed a business alliance that included several petrol filling stations on lease from Esso, with Tesco operating the attached stores under their Express format. In turn, Esso operates the forecourts and sells their fuel via the Tesco store.^[57] As of 2013, there were 200 joint Tesco Express/Esso sites in the UK.^[58]

Former operations

Tesco Homeplus

In May 2005 Tesco announced a trial non-food only format near Manchester and Aberdeen,^[59] and the first store opened in October 2005. The stores offered all of Tesco's ranges except food in warehouse-style units in retail parks. Tesco introduced the format as only 20% of its customers had access to a Tesco Extra, and the company was restricted in how many of its superstores it could convert into Extras and how quickly it could do so. Large units for non-food retailing are much more readily available.

The format was not Tesco's first non-food only venture in the UK. Until the late 1990s/early 2000s there were several non-food Tesco stores around the country including Scarborough and Yate. Although not in a warehouse style format, the stores were located on high streets and shopping centres, they stocked similar items to Homeplus stores. In both cases this was because another part of the shopping centre had a Tesco Superstore that stocked food items only.

By 2014, the number of Homeplus stores in the United Kingdom had reached 12; the newest store opened in Chester in July 2009. In 2012 it was reported that Tesco was looking to close the business to focus on groceries.^[60] On 28 January 2015, Tesco confirmed it would close six Homeplus stores on 15 March 2015,^[38] and the remaining six stores closed on 27 June 2015.^[61]

International operations

Tesco has expanded its operations outside the UK to 11 other countries in the world. The company pulled out of the USA in 2013, but continues to see growth elsewhere. Tesco's international expansion strategy has responded to the need to be sensitive to local expectations in other countries by entering into joint ventures with local partners, such Charoen Pokphand in Thailand to form Tesco Lotus, and by appointing a very high proportion of local personnel to management positions. It also makes small acquisitions as part of its strategy: for example, in its 2005/2006 financial year it made acquisitions in South Korea, one in Poland and one in Japan.^[62]

Ireland

Tesco Ireland controlled 28% of the grocery market as recently as 2012. Tesco Ireland was formed by the Tesco PLC 1997 takeover of the Irish retailing operations of Associated British Foods, namely Powers' Supermarkets Limited and its subsidiaries, trading as "Quinnsworth" and "Crazy Prices".

Subsidiaries

Tesco Bank

In the United Kingdom Tesco offers financial services through Tesco Bank, formerly a 50:50 joint venture with The Royal Bank of Scotland. Products on offer include credit cards, loans, mortgages, savings accounts and several types of insurance, including car, home, life and travel. They are promoted by leaflets in Tesco's stores and through its website. The business made a profit of £130 million for the 52 weeks to 24 February 2007, of which Tesco's share was £66 million. This move towards the financial sector diversified the Tesco brand and provides opportunities for growth outside of the retailing sector.

On 28 July 2008, Tesco announced that they would buy out the Royal Bank of Scotland's 50% stake in the company for £950 million.^[63] In October 2009, Tesco Personal Finance was rebranded as Tesco Bank.

Tesco Tech Support

Tesco acquired a small I.T. support company called The PC Guys in 2007,^[64] and were able to launch Tesco Tech Support in December 2008.^[65] Teams of Advisors were put into all Extra stores with the sole job role of answering technical questions on Tesco's range of electrical products. They also are responsible for advising customers on extended warranties, electrical returns and a range of finance options. Through their Customer Service Centre located in Cardiff in the United Kingdom, Tesco Tech Support provides UK and Ireland customers with technical support via telephony system on the electrical products sold in their stores.

Dobbies Garden Centres

Tesco announced its intention to purchase Dobbies Garden Centres for £155.6 million on 8 June 2007. Dobbies operates 28 garden centres, half in Scotland and half in England.^[66] The deal was confirmed as successful by the board of directors of Tesco on 17 August 2007 when the board announced that they had received 53.1% of shares (or 5,410,457 shares), which confirmed conditions set out in the offer made on 20 June 2007. Although the deal had been confirmed by Tesco the offer remained open to Dobbies shareholders until 20 August 2007.^[67] Tesco raised its holding to 65% in September^[68] and on 5 June 2008^[69] Tesco announced that it would be compulsorily acquiring Dobbies Garden Centres PLC. Dobbies continues to trade under its own brand, from its own head office in Melville, near Edinburgh.

Harris + Hoole

In 2012, Tesco invested in a new coffee shop chain, named Harris + Hoole after coffee-loving characters in Samuel Pepys' diary. Tesco own up to 49% of the company, which is run by Nick, Andrew and Laura Tolley who own the majority of shares.^[70]

In August 2014, it was announced that six of the chain's outlets would be closed, leaving 41 in operation.^[71]

In April 2015, Ethical Consumer ranked Harris + Hoole the lowest in an assessment of the social and environmental impacts of coffee shops. According to Ethical Consumer the company did not provide information on any ethical, environmental or supply chain policies, and used a direct trade model of sourcing from farmers which did not give the same kind of price support as Fairtrade. In response Harris + Hoole stated that their direct trade supplier sourced high quality coffee and aimed to create sustainable livelihoods for small scale farmers.^[72]

Tesco Family Dining Ltd

Tesco purchased the restaurant and cafe chain Giraffe in 2013 for £48.6 million.^[73] In 2014, it began to open restaurants within some of its stores.

Tesco Family Dining Ltd (TFDL) was set up in 2014 as part of a new department called 'new food experience', including Core Cafes, Girraffe, Decks and Euphorium bakeries. That year, Tesco reached an agreement to take the in-store cafes run by Compass Group and Elior back under its own control as to improve its dining offering.^[74]

Corporate affairs

Corporate strategy

According to Citigroup retail analyst David McCarthy, "[Tesco has] pulled off a trick that I'm not aware of any other retailer achieving. That is to appeal to all segments of the market".^[75] One plank of this strategy has been Tesco's use of its own-brand products,^[76] including the upmarket "Finest", mid-range Tesco brand and low-price "Value" encompassing several product categories such as food, beverage, home, clothing, Tesco Mobile and financial services.

Beginning in 1997 when Terry Leahy took over as CEO, Tesco began marketing itself using the phrase "The Tesco Way" to describe the company's core purposes, values, principles, and goals^[77] This phrase became the standard marketing speak for Tesco as it expanded domestically and internationally under Leahy's leadership, implying a shift by the company to focus on people, both customers and employees.^[78]

A core part of the Tesco expansion strategy^[79] has been its innovative use of technology.^[80] It was one of the first to build self-service tills and use cameras to reduce queues.^[81]

Financial performance

All figures below are for the Tesco's financial years, which run for 52 or 53 week periods to late February. Up to 27 February 2007 period end the numbers include non-UK and Ireland results for the year ended on 31 December 2006 in the accounting year. The figures in the table below include 52 weeks/12 months of turnover for both sides of the business as this provides the best comparative.

52/3 weeks ended	Turnover (£m)	Profit before tax (£m)	Profit for year (£m)	Basic earnings per share (p)
22 February 2014	70,894	3,054	2,259	32.05
23 February 2013	64,826	3,549	3,453	35.97
25 February 2012	64,539	3,985	2,814	34.98
26 February 2011	67,573	3,535	2,671	33.10
27 February 2010	62,537	3,176	2,336	31.66
28 February 2009	54,300	3,128	2,166	28.92
23 February 2008	47,298	2,803	2,130	26.95
24 February 2007	46,600	2,653	1,899	22.36
25 February 2006	38,300	2,210	1,576	19.70
26 February 2005	33,974	1,962	1,366	17.44
28 February 2004	30,814	1,600	1,100	15.05
22 February 2003	26,337	1,361	946	13.54
23 February 2002	23,653	1,201	830	12.05
24 February 2001	20,988	1,054	767	11.29
26 February 2000	18,796	933	674	10.07
27 February 1999	17,158	842	606	9.14
28 February 1998	16,452	760	532	8.12

Despite being in a recession, Tesco made record profits for a British retailer in the year to February 2010, during which its underlying pre-tax profits increased by 10.1% to £3.4 billion. Tesco now plans to create 16,000 new jobs, of which 9,000 will be in the UK.^[82] In 2011 the retailer reported its poorest six-monthly UK sales figures for 20 years, as a result of consumers' reduced non-food spending and a growth in budget rivals.^[83]

By 2014, Tesco appeared to have lost some of its appeal to customers.^[84] The share price lost 49 per cent of its value up to October as it struggled to fend off competition from rivals Aldi and Lidl.^[85] In October 2014, Tesco suspended 8 executives following its announcement the previous month that it had previously overstated its profits by £250 million. The misreporting resulted in almost £2.2 billion being wiped off the value of the company’s stock market value. The suspended executives included former commercial director Kevin Grace and UK managing director Chris Bush.^[86][87] The profit overstatement was subsequently revised upwards to £263 million following an investigation by the accountancy firm Deloitte and it was clarified that the inflated profit figure was the result of Tesco bringing forward rebates from suppliers. The Serious Fraud Office (SFO) confirmed on 29 October 2014 that it was carrying out a criminal investigation into the accounting irregularities but declined to give further details.^[88]

Market share

As of its 2006-year end Tesco was the fourth largest retailer in the world behind Wal-Mart, Carrefour and Home Depot. Tesco moved ahead of Home Depot during 2007, following the sale of Home Depot's professional supply division and a decline in the value of the US dollar against the British pound. METRO was only just behind and might move ahead again if the euro strengthens against the pound, but METRO's sales include many billions of wholesale turnover, and its retail turnover is much less than Tesco's.

According to Kantar Worldpanel, Tesco's share of the UK grocery market in the 12 weeks to 18 March 2012 was 30.2%, down from 30.6% in the 12 weeks to 18 March 2011.^[89]

Supermarket	Market share March 2012	+/- from March 2011
Tesco	30.2%	0.4%
Asda	17.9%	0.6%
Sainsbury's	16.6%	0.0%
Morrisons	12.3%	0.0%
The Co-operative Food	6.9%	0.4%

In terms of the wider UK retail market, Tesco sales account for around one pound in every ten spent in British shops.^[90] In 2007 it was reported that its share was even larger, with one pound in every seven spent going to Tesco.^[91] In 2006, Inverness was branded as "Tescotown",^[92][93] because well over 50p in every £1 spent on food is believed to be spent in its three Tesco stores.^[94] By 2014 competition from other retailers led to a fall in Tesco's market share to 28.7%; this was the lowest level in a decade.^[95]

Corporate social responsibility

Tesco has made a commitment to corporate social responsibility in the form of contributions of 1.87% in 2006 of its pre-tax profits to charities/local community organizations.^[96] This compares favourably with Marks & Spencer's 1.51% but not well with Sainsbury's 7.02%.^[97] Will Hutton, in his role as chief executive of The Work Foundation recently praised Tesco for leading the debate on corporate responsibility.^[98] However Intelligent Giving has criticized the company for directing all "staff giving" support to the company's Charity of the Year.^[99]

In 1992, Tesco started a "computers for schools scheme", offering computers in return for schools and hospitals getting vouchers from people who shopped at Tesco. Until 2004, £92 million of equipment went to these organizations. The scheme has been also implemented in Poland.^[100]

Starting during the 2005–06 football season, the company now sponsors the Tesco Cup, a football competition for young players throughout the UK.

In 2009 Tesco used the phrase, "Change for Good" as advertising, which is trade marked by Unicef for charity usage but not for commercial or retail use, which prompted the agency to say, "It is the first time in Unicef’s history that a commercial entity has purposely set out to capitalise on one of our campaigns and subsequently damage an income stream which several of our programmes for children are dependent on." They went on to call on the public "...who have children’s welfare at heart, to consider carefully who they support when making consumer choices."^[101][102]

Tesco's own labels for personal care and household products are cruelty-free – this means they are not tested on animals.^[103]

In June 2011, Tesco announced that it was working with 2degrees Network to create an online hub as part of its target to reduce its supply chain carbon footprint by 30% by 2020.^[104]

In September 2011 a Greenpeace report revealed that Tesco supermarkets in China were selling vegetables that contained illegal pesticides or at levels exceeding the legal limit. A green vegetable sample from Tesco turned up methamidophos and monocrotophos, the use of which has been prohibited in China since the beginning of 2007.^[105]

Advertising

Tesco have used many television adverts over the years. In July 2007 a DVD containing adverts from 1977–2007 was given to all members of staff. Early advertising stressed cheap prices and how to keep "The cost of living in check." In 1977 an advert was made where a till showed the prices to many items such as "baked beans 12¹/₂p".

A notable 1980s advert was "Checkout 82," which was made in 1982, where a till would have a receipt coming out of it with the prices on. This advert had synthpop music as the backing and people singing "Check it out, check it out".

Adverts in the early '90s had a man called David, portrayed by Dudley Moore, on the hunt for free-range chickens from France and discovering many goods from around the world to purchase for Tesco. Namely foods included deep-pan pizza, Italia grapes, tiramisu and Camembert and Stilton cheeses. Furthermore, adverts in the late '90s had Prunella Scales as Dotty Turnbull and Jane Horrocks as her long-suffering daughter Kate Neill, the former typically arguing about Tesco prices. In 2003, adverts showed items and shopping trolleys talking about Tesco. Late 2000s adverts have included many celebrities and celebrity voice-overs such as The Spice Girls and the voice of actors James Nesbitt and Jane Horrocks.^[106]

Tesco's main advertising slogan is "Every little helps". Its advertisements in print and on television mainly consist of product shots (or an appropriate image, such as a car when advertising petrol) against a white background, with a price or appropriate text (e.g., "Tesco Value") superimposed on a red circle. On television, voiceovers are provided by recognisable actors and presenters, such as Barbara Windsor, James Nesbitt, Jane Horrocks, Terry Wogan, Dawn French, Ray Winstone, Neil Morrissey, Martin Clunes, David Jason, David Tennant, Richard Aitken and Kathy Burke amongst others.

Tesco's in-store magazine is one of the largest-circulation magazines in the United Kingdom, with a circulation of 1.9 million as of 2013.^[107]

In November 2013, Tesco announced they would introduce face-scanning technology developed by Amscreen at all of their 450 UK petrol stations to target advertisements to individual customers.^[108][109]

Criticism

Criticism of Tesco includes allegations of stifling competition due to its undeveloped "land bank",^[110] and breaching planning laws.^[111]

Litigation

The Tesco supermarket chain is involved in litigation such as the Ward v Tesco Stores Ltd and Tesco Supermarkets Ltd v Nattrass cases. Tesco have been criticized for aggressively pursuing critics of the company in Thailand. Writer and former MP Jit Siratranont faced up to two years in jail and a £16.4 million libel damages claim for saying that Tesco was expanding aggressively at the expense of small local retailers. Tesco served him with writs for criminal defamation and civil libel. The Thai court dismissed the case, ruling that the criticism made by the defendant was 'in good faith by way of fair comment on any person or thing subjected to public criticism'.^[112]

In November 2007, Tesco sued a Thai academic and a former minister for civil libel and criminal defamation, insisting that the two pay £1.6 million and £16.4 million plus two years' imprisonment respectively. They have been alleged to have misstated that Tesco's Thai market amounts to 37% of its global revenues, amongst criticism of Tesco's propensity to put small retailers out of business.^[113]

In August 2013, Tesco was fined £300,000 after admitting that it misled customers over the pricing of "half price" strawberries.^[114]

Price-fixing

In 2007, Tesco was placed under investigation by the UK Office of Fair Trading (OFT) for acting as part of a cartel of five supermarkets (Safeway, Tesco, Asda, Morrisons and Sainsburys) and a number of dairy companies to fix the price of milk, butter and cheese. In December 2007, Asda, Sainsburys and the former Safeway admitted that they acted covertly against the interests of consumers while publicly claiming that they were supporting 5,000 farmers recovering from the foot-and-mouth crisis. They were fined a total of £116 million.^[115]

Corporate tax structure

In May 2007, it was revealed that Tesco had moved the head office of its online operations to Switzerland. This allows it to sell CDs, DVDs and electronic games through its web site without charging VAT.^[116] The operation had previously been run from Jersey, but had been closed by authorities who feared damage to the island's reputation.^[116] In June 2008, the government announced that it was closing a tax loophole being used by Tesco.^[117] The scheme, identified by British magazine Private Eye, utilizes offshore holding companies in Luxembourg and partnership agreements to reduce corporation tax liability by up to £50 million a year.^[117] Another scheme previously identified by Private Eye involved depositing £1 billion in a Swiss partnership, and then loaning out that money to overseas Tesco stores, so that profit can be transferred indirectly through interest payments. This scheme is still in operation and is estimated to be costing the UK exchequer up to £20 million a year in corporation tax.^[117] Tax expert Richard Murphy has provided an analysis of this avoidance structure.^[118]

Opposition to expansion

Tesco's expansion has not been without criticism and, in some cases, active opposition.

• In March 2007, residents in Bournville, Birmingham fought to maintain the historic alcohol free status of the area, in winning a court battle with Tesco, to prevent it selling alcohol in its local outlet. No shops are permitted to sell alcohol in the area and there are no pubs, bars or fast-food outlets in Bournville.^[119]
• Plans for a large Tesco store in St Albans, Hertfordshire, attracted widespread local opposition. This led to the formation of the "Stop St Albans Tesco Group". In June 2008, St Albans Council refused planning permission for the proposed store.^[120]
• In April 2011, longstanding opposition to a Tesco Express store in Cheltenham Road, Stokes Croft, Bristol, evolved into a violent clash between opponents and police. The recently opened storefront was heavily damaged, and police reported the seizure of petrol bombs.^[121] Opponents have suggested that the store would damage small shops and harm the character of the area.^[122]
• In July 2013, plans to shut down a small parade of shops on Luton Road in Harpenden, Hertfordshire were met by fierce opposition by local residents. Locals feared that the opening of a new Tesco Express store would bring a large increase in congestion on Luton Road and due to a lack of parking spaces would mean customers would leave their cars on the side of the road on Park Mount, which was already a very narrow and steep hill. Residents also feared an increased the number of youths buying alcohol up until closing time at 23:00. Other concerns were raised such as the noise and light pollution as well as the introduction of a large corporate company to a town which often supports small, independent businesses. The store eventually opened as planned in the summer of 2014.

Halal in UK stores

As of August 2012, around 27 UK Tesco superstores have halal meat counters.^[123] The meat sold is advertised as "stun-free", which puts the meat sold in contradiction of RSPCA standards on animal welfare.^[124] The sale of such meat would be illegal in the UK were it not for an exemption in the law granted to Jews and Muslims.^[125] Tesco has come under criticism for not selling stunned Halal in its stores and because stores with Halal counters do not always have non-Halal fresh meat counters as well - such as the Edgbaston store in Birmingham.

Horse meat found in burgers

In January 2013, the British media reported that horse meat had been found in some meat products sold by Tesco, along with other retailers, particularly burgers. David Cameron called this "unacceptable", with products showing 29.1% horse meat in the "Value" range burger, which were supposed to be beef.^[126][127] It was later revealed in February 2013 that some of Tesco's Everyday Value Spaghetti Bolognese contained 60% horse meat.^[128] Tesco withdrew 26 of its products in response, and announced that they were working with authorities and the supplier to investigate the cause of the contamination.^[129]

Slavery in Thailand

In 2014, The Guardian reported that Tesco is a client of Charoen Pokphand Foods. Over 6 months The Guardian traced the whole chain from slave ships in Asian waters to leading producers and retailers.^[130]

Sale of goods from Israel

Tesco has been targeted by protesters complaining the supermarket chain sells goods made in Israel, with most complaints being about products emanating from Israeli settlements in the West Bank. Protests generally occur when Israeli military operations are being carried out in the Gaza Strip or the West Bank. A protest at a store in Birmingham on 16 August 2014 resulted in a protester being arrested.^[131]

Mothballing of new stores

Tesco's financial crisis of 2014^[132] led to them reducing their capital expenditure on new stores, which led to the boarding up of new unopened stores in Chatteris, Cambridgeshire^[133] and Immingham, Lincolnshire.^[134] The controversial Chatteris mothballing caused local criticism after the £22m project had re-routed a river and built a controversial roundabout and underpass, whilst the much anticipated Immingham development demolished a local shopping centre and closed several local stores to enable its construction. The impending arrival of Tesco also contributed to the Co-operative to close their store in the town^[135] Tesco announcing the indefinite delay in their store opening left the town of around 15,000 inhabitants without a supermarket for an indefinite period, this despite the fact Tesco went ahead with the opening of stores in Little Lever,^[136] Dunfermline^[137] and Rotherham^[138] all of which have an existing supermarket within a couple of miles of the new stores. With the indefinite delay in opening, Immingham is now over 10 miles from the nearest supermarket in the nearest town of Grimsby (there are closer supermarkets in Kingston upon Hull, but these require paying the toll on the Humber Bridge). However, a branch of Aldi is due to open in the first quarter of 2016 close to the disused Tesco store at the site of the former Co-operative Food store in Immingham. Work commenced in November 2014.^[139]

Security

On July 17, 2015 Tesco disabled their online photo site as part of a precautionary security measure.^[140] This coincided with several other retailers, including CVS and Walmart Canada, had shut down similar services regarding a security breach at PNI Digital Media.^[141]

See also

• List of supermarket chains in the United Kingdom
• Tesco Town
• Tesco Venture Brands
• Walmart

References

Further reading

• MacLaurin, Sir Ian (1999). Tiger by the Tail: A Life in Business from Tesco to Test Cricket. London: Pan Books. ISBN 0-330-37371-4. 
• Simms, Andrew (2007). Tescopoly: How one shop came out on top and why it matters. London: Constable. ISBN 1-84529-511-0. 
• Humby, Clive; Hunt, Terry; Phillips, Tim (2006). Scoring points: How Tesco continues to win customer loyalty. London & Philadelphia: Kogan Page. ISBN 978-0-7494-4752-6. 
• Nash, Bethany (2006). Fair-Trade and the growth of ethical consumerism within the mainstream: an investigation into the Tesco consumer. Leeds: University of Leeds. OCLC 75272130. 
• Leahy, Terry (2012). Management in 10 Words. London: Random House. ISBN 1847940897. 

External links

Wikimedia Commons has media related to Tesco.

• Official website
• Corporate website

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