Reformed ‘villain’: Tesco simplifies supply chains

Shore Capital analyst Clive Black predicted that the big four supermarkets would make their supply chains simpler in the future during a speech at Eversheds’ food and drink conference in London. 

“Tesco was clearly the villain in complicating its supply chains. That is being deconstructed and simplified. We see that across the board,”​ Black told the conference yesterday (October 15).

‘Simplified supply chains’​

Looking ahead, he said: “We are going to see a reduction in promotional participation. We are going to see more straightforward pricing. We are also going to see simplified supply chains.”​

His comments came just over a week after Tesco boss Dave Lewis apologised for past mistakes​ and announced standardised payment terms​ for suppliers.

Tesco also revealed a new price match guarantee​ for branded products this week, but Black remained sceptical of supermarkets' price matching tactics. 

‘Trusted the pricing’ ​

He said: “Superstores thought they were reassuring their customers and the customers thought ‘I don’t trust you’. Customers went to places where they trusted the pricing.”​

Despite the continuing price war and rivalry with discounters Aldi and Lidl, Black said he believed that the big four supermarkets would unquestionably survive but the question was how.

“The jury is still out on Tesco. I don’t see any of them failing but Tesco is such a big organisation to change. I think the management would like to be a bit further on than it is​,” he said.

Across the sector, Black said supermarkets would have to make their superstores more efficient. “The next few years are going to be a real grind where they become more profitable working with what they have got,”​ he said.

Food supply chains first came under intense scrutiny during the horsemeat scandal of 2013​.