Portraits of Dave Lewis CEO of Tesco. Pictures by Richard Cannon on Thursday 27th February 2020
© Richard Cannon

This article is part of the FT/ArcelorMittal Boldness in Business awards, recognising companies and individuals with novel answers to everyday needs. 

In June 2015, more than 10,000 people poured into an indoor arena in Birmingham, in England’s West Midlands. They had not come to see a show or a pop concert — they were there to grill their bosses.

“The scale of it was mind-blowing — it was like [television talent show] The X Factor,” says Emma Simpson, the BBC business correspondent who moderated the event. “The entire Tesco executive team were perched on bar stools, facing outwards in a circle. I walked round with an iPad, asking questions from the audience. Nothing was off limits.” 

By that time, the problems facing the UK supermarket group were numerous and well known. The company that had come to dominate its sector to such a degree that some business commentators referred to it as a “Tescopoly” had warned on profits in late 2012. 

Early the following year, it emerged that some beefburgers on sale in its stores contained horsemeat. Trading continued to worsen throughout the year as German-owned chains Aldi and Lidl lured customers away with their bargain prices and increasingly mid-market ranges. 

By the middle of 2014, investors had heard enough and the board fired chief executive Philip Clarke, who had spent his entire career at the grocer. Dave Lewis, the man chosen to replace him, had never worked in retail before. 

Deanna Oppenheimer, Tesco’s longest-serving non-executive director, says the decision was not as unexpected as it appeared at the time. Tesco had plenty of strong retail executives already and the new finance director, Alan Stewart, had been poached from clothing and grocery chain Marks and Spencer. 

Lewis had spent almost three decades at consumer goods group Unilever and had executive responsibility for Tesco as a client. He had joined the Anglo-Dutch group in 1987 after graduating in business studies from Trent Polytechnic in Nottingham and moved rapidly up its ranks. Stints in Belgium, Indonesia and Latin America fostered a reputation as a troubleshooter and a clever marketer, particularly for his pioneering use of ordinary women rather than supermodels in a 2004 campaign for Dove toiletries. 

But the priority at Tesco was not new campaigns or product launches, it was righting a listing ship. The company had been managed to profit targets and as its sales growth faltered, hitting those targets had required it to become increasingly reliant on “back margin” — payments from suppliers for, say, enhanced store presence or inclusion in promotional mailshots. 

Billions of pounds were wiped off Tesco’s stock market value, while customers increasingly did not trust the brand. Relations with suppliers were, in the words of one former insider, “toxic”. 

Lewis’s first actions were simple: looking and listening. “I got to understand what the problems were by walking into shops and talking to colleagues,” he says. “I invited colleagues to write or email me what they thought I should be thinking about and I spent an entire Sunday reading all of their responses.” 

Portraits of Dave Lewis CEO of Tesco. Pictures by Richard Cannon on Thursday 27th February 2020
Dave Lewis led the purchase of wholesaler Booker, reset Tesco’s relationship with its suppliers, and prioritised cutting food waste © Richard Cannon

Others were made to listen too. “In one of his first board meetings he had name badges made up, like the ones the staff in the stores have, and he told us we were all going to the shop floor,” says Oppenheimer. “He was not an outsider who came in and said, ‘This is how we must do it’. Instead it was more, ‘Tell me what I need to know.’ ” 

Then it was time to put ideas into practice. “Early on we had to decide: are we going to grow in food or non-food?” says Lewis. “We decided food played to our scale and reach.” That might sound an obvious conclusion for the UK’s biggest supermarket. But in practice, it involved unpicking much of the expansion of the previous five years. 

Assets such as restaurants, coffee shops and garden centres — acquired either to increase Tesco’s reach or to fill space in its increasingly unproductive stores — were sold off. A store expansion programme was halted and 43 branches (out of a UK total of about 4,000) were closed. Savings were ploughed back into improved customer service. One of the things Lewis is proudest of is that Tesco’s store headcount is barely changed from 2014, despite the reduction in locations. 

Lewis also reset Tesco’s relationship with its suppliers, largely by empowering existing teams to make better decisions. “The directive from Dave was that suppliers and Tesco should imagine they were all one company and work out together the most efficient supply chain,” says John Shropshire, chairman of fruit and vegetable supplier G’s Fresh. One such decision was that Spanish-grown vegetables should be packed on site rather than in the UK, therefore giving produce an extra day of shelf life. 

Re-engaging staff — the group employs over a third of a million people in the UK alone — was important to getting Tesco back on track. Here, according to current and former employees, Lewis’s ability to strip things back to simple concepts was vital. “In January 2015, he unveiled the turnround plan. He did a presentation to the City and then another one for the staff,” says one person who worked with him. “It was just 10 or so really simple slides. The impact was amazing. People came away saying things like, ‘Oh my God, I never knew we had so much debt’.” 

The Birmingham assembly was also part of the process. So too was candour about the often-difficult decisions that needed taking on store closures and the pension scheme. 

“Quite a lot of these things are rooted in common sense, but sometimes people shy away from the reality to soften things,” says Lewis. “I made a promise to colleagues when I started that they would always hear [bad news] from me first. People want you be straight and honest, and justify the decision you’ve taken. You’ve got to front up and be there.” 

LONDON, ENGLAND - AUGUST 05: Members of the public walk past a Tesco Metro store on August 05, 2019 in London, England. The supermarket chain has announced it to cut around 4,500 members of staff, mostly from the 153 'Metro' stores across the UK.

His response to an accounting scandal was typical of this approach. Shortly before he joined the company, Tesco admitted it had misstated its profits by prematurely booking back-margin payments in its accounts. It reached a deferred prosecution agreement with the Serious Fraud Office, at a cost of more than £200m. Three executives left Tesco as a result but were acquitted at a subsequent criminal trial — prompting complaints that the company had hung the men out to dry. 

Lewis is unrepentant. “We paid [the fine] because we were guilty,” he says. The acquittal of the executives at trial did not alter the fact that their conduct had fallen short, he adds. “Internal and external counsel reviewed the performance of key individuals,” says Lewis. “That group came to me with a very clear view that those people had not discharged their duties in line with the terms of their employment contracts. Full stop.” 

As trading stabilised, Tesco could focus on other priorities. One was sustainability, long an area of interest to Lewis. “Tesco was a pioneer in reporting and measuring food waste,” says Peter Freedman, managing director of the Consumer Goods Forum, a global industry network (Lewis is on the organisation’s board). “It’s embarrassing and painful to do that because it’s a big number in terms of tonnes, even if it is a tiny proportion of what they sell.” 

Another priority was the acquisition of Booker, a UK wholesaler that supplied corner shops and the catering industry. Some felt Tesco’s recovery was not yet entrenched enough for it to embark on such corporate activity, but Lewis thought he had “to be able to walk and chew gum”. 

“Fixing the business we had today was, of course, very important but me and some others were thinking about the future,” he says. Booker generated cost savings and raised its exposure to the “food on the go” market, even though some think Lewis was fortunate to get the transaction past the UK’s competition regulator. 

His key brand innovation at Tesco came in 2016 when the company unveiled its so-called “farm brands” — names for fresh produce lines that borrowed from the discounters’ playbook and invoked a bygone era of locally produced food (Willow Farms chicken, Suntrail Farms fruit, and so on). They replaced Tesco’s bland-looking Value range of low-end products. 

“Value had become a synonym for cheap,” says Lewis. “Things had moved on and we needed to make a more relevant and motivating offer. Customers know there is no farm in the world that can supply the whole of Tesco. But brands are a promise of consistency at a price point.” The range generated sales of more than £500m in its first year, and rival Sainsbury’s is now overhauling its Basics range in similar fashion.

Lewis has had a busy start to 2020, despite intending to step down as chief executive later this year. First he announced plans to sell Tesco’s south-east Asian operations to a Thai conglomerate for $10.6bn, having already sold its South Korean business in 2015.

He is now co-ordinating the supermarket’s response to mitigate the spike in demand caused by the coronavirus pandemic. Tesco is hiring up to 20,000 temporary workers and has introduced measures against panic buying.

Lewis is reluctant to compare his methods or achievements to those of others in the sector. He insists, however, that listening to customers and employees — in many cases they are the same people — is vital. 

“I knew when I joined I could never hope to be as good a retailer as the people who already worked there. So I told them, ‘You carry on being best retailers and I’ll try and be a good retail CEO’.”

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