Tesco boss apologises to suppliers for past mistakes
“One of the greatest strengths of Tesco historically was its performance culture. But we bent it out of all shape – all in the pursuit of one particular goal [a profit margin of above 5.2%],” Lewis told the IGD’s Big Debate conference yesterday (October 6) in central London.
“By making that key performance indicator the most important thing for everybody in our organisation, consumers suffered, colleagues suffered and ultimately the brand suffered [through] chasing [an unrealistic] margin target. We made some bad choices.”
69 cases of potential challenges
Lewis added that an internal review of the retailer’s dealings with its suppliers begun last October had revealed 69 cases of potential challenges to the Groceries Supply Code of Practice, which had been shared with the Groceries Code Adjudicator Christine Tacon.
“These 69 cases were the unintended consequences of making poor choices against the wrong metric,” he told the audience.
“On behalf of myself and the team, the only thing we can say for the choices we made is sorry.” But Lewis went on to stress that those responsible for making the poor decisions had now left the business and a new management team was in place.
Lewis admitted past mistakes had damaged trust between the retailer and both its suppliers and customers. “But You can’t go back,” he said. “All you can do is draw a line and say it will be different and better tomorrow.”
Payment terms with suppliers
As part of that better tomorrow, Lewis pledged to rebuild the brand by putting customers first and improving payment terms with suppliers.
All the retailer’s actions should be guided by the test “Does it help serve British shoppers a little better every day?,” he said. Ensuring the answer was yes would be his “magnetic north”.
For Tesco suppliers, Lewis promised to build a new relationship of trust – free from a marginal cost negotiation starting point of the past. “We want to build a long term strategic partnership, not one based on marginal cost,” he said.
As part of that new relationship with suppliers, Lewis revealed new payment terms, which will result in suppliers owed less than £100,000 being paid within 14 days rather than the 45 days at present.
Meanwhile, Tesco today revealed a 55% slump in first-half underlying profit to £354M from £779M last year.
Tesco made 'bad choices'
“By making that key performance indicator the most important thing for everybody in our organisation, consumers suffered, colleagues suffered and ultimately the brand suffered [through] chasing [an unrealistic] margin target. We made some bad choices.”
- Dave Lewis, Tesco chief executive
