Tesco looks to transform its supply chain

The retailer is going through radical change to meet consumers’ rapidly evolving needs, said Matt Atkinson, Tesco’s chief marketing officer, at the annual convention of grocery think tank IGD in London last month. With more demands on the supply chain, shoppers would be looking for sustainable production and “disruptive innovation”​ would be required to meet the challenges, he added.

“We are seeing more connection to UK food producers and food creators,”​ said Atkinson. “Couple that with increasing demands for food over the next 20 years and we need to innovate all the way back along that supply chain to create food in a more sustainable way.”​

‘Necessary to challenge’​

Atkinson said new technologies and new ways of co-operative working with suppliers would be necessary to challenge the status quo. “Our version of this is called ‘producer club’ a social community where we share our intellectual property with producers and farmers,” ​he said. “Our mission is to try and solve some of the problems​ [facing the food supply chain].”

Tesco’s decision to relaunch its premium ‘finest’ own-label food range marks its latest effort to differentiate itself from the rest of the pack. It also highlights the changing relationship that is likely between all multiple retailers and their own-label suppliers.

Tesco has for some time been losing out to its competitors. It is being squeezed at the bottom end of the market by hard discounters such as Aldi and Lidl and at the top by the growing success of the likes of upmarket retailer Waitrose.

150 new food stores​

Even Marks & Spencer (M&S) has announced plans to open 150 new food stores over the next three years. This will put further pressure on those trying to grow at the top end of the market. M&S has reportedly added 1,000 more products to its ranges so that it now offers 7,000 different items.

Clive Black and Darren Shirley, analysts with stockbroker Shore Capital, said: “The relaunch of finest follows a series of work that we believe is necessary, appropriate, well thought-through and largely executed in sound fashion in-store.”​

They said, when Philip Clarke took Tesco’s reins, he recognised that the UK was running “too hot”​ and, they suggested, it was too focused on cost reduction. Paradoxically, they said, during the deepest economic downturn in living memory Tesco lost market share to more premium retailers.

“The re-engineering exercise​ [of finest] has been extensive and looks at first sight to be encouraging, to our minds​,” they commented.