Tesco boss apologises to suppliers for past mistakes

By Michael Stones contact

- Last updated on GMT

Related tags: Economics

Dave Lewis: said sorry to suppliers
Dave Lewis: said sorry to suppliers
Tesco boss Dave Lewis has said sorry to the retail giant’s suppliers, together with its customers and other stakeholders for “the bad choices of the past”, made in the relentless pursuit of unsustainable profit.

“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

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7 comments

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BAZ

Posted by Rowan,

I wonder how much of what is said in the media actually materializes at the business level here. In Australia Woolworths has admitted that it's pursuit of high profit margins (highest in the world) has taken focus away from the customer and damaged relations with suppliers, but little has changed at the negotiating table and customers continue to vote with their feet. The fact that Lewis has come from a supplier back ground gives me hope that there will be greater empathy for the suppliers point of view but time will tell.

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Does an apology bring back the jobs?

Posted by Alice Devine,

Tesco brought Long Benton Foods to their knees and contributed to their administration after point blank refusal to accept price increases leaving the company with 4% gross margin. Tesco then moved the business and increased their retail prices because they were forced to pay higher cost prices - but sadly the people of Long Benton who needed the work never benefited as the factory was forced to close. And still now, in 2015, there are businesses without a GSCOPs agreement despite asking

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Diserving

Posted by DM,

everything comes to those who deserve it. Tesco deserve to be broken as they have broken others.
Ignoring home production in favour of imports to drive a market down is not ethical

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