Tesco looks to boost domestic business

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Tesco is to step up the expansion of its multi-channel operations in the UK and overseas and introduce a range of new brands, as new chief executive Philip Clarke strives to reinvigorate its domestic business.

Britain’s biggest supermarket chain by market share is introducing a series of new brands dubbed “venture brands”, which are owned by Tesco but not branded as Tesco.

The first three brands are ChokaBlok ice-cream, Lathams dog food and NutriCat cat food.

More new brands could follow, and Tesco is examining opportunities in the food and non-food arenas.

New brands are key to Mr Clarke’s strategic plans for Tesco. Speaking on the sidelines of an industry conference on Wednesday, he said the new brands would be launched in the UK, but also in central Europe.

He added that more new brands could follow, although “you will not see hundreds of them”.

Tesco already has a suite of exclusive discount brands, introduced in 2008 in an attempt to counter the rise of the so-called “hard discounters”, such as Aldi and Lidl. However, the new brands could be used to offer more upmarket products.

The group’s move also underlines the increasing emphasis on own-label products and those owned by supermarket chains, with Asda and J Sainsbury both revamping their core own label ranges, as they attempt to deliver value to customers, while protecting their margins.

“They are saying to the brands, ‘if you continue to put prices up, and encourage the consumer to trade down, then we are going to go to plan B, and plan B is own label’,” said Clive Black, analyst at Shore Capital.

One seasoned supermarket watcher said the new brands could “inject a bit of sparkle” into Tesco’s UK business. This has lagged rivals but has enjoyed a resurgence over recent weeks, with Tesco being the fastest-growing of the big four supermarkets in the four weeks to May 15, according to industry data.

Mr Clarke also announced that Tesco would double the number of UK stores where customers could order non-food items via the internet, and then collect them instore to 600. Next month, clothing would also be added to the so-called “Click and Collect” service, followed by groceries.

Tesco also plans to expand its online operations overseas. It will begin offering grocery home shopping in Prague this year and in Warsaw early next year. It also has plans for home shopping operations in Shanghai, Bangkok, Kuala Lumpur, Budapest and Bratislava. It already has home shopping services in Ireland and Korea, and added general merchandise and clothing to the service in Korea three months ago.

Mr Clarke said retail had entered a “new era” with the merging of physical stores and online operations. He also rejected suggestions that Tesco had grown too large.

He said in a debate about whether Tesco was too big or not “I have my own view: we are not”.

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