Richard Siddle: why we must all hope Tesco knows what it is doing

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It was somewhat ironic that the announcement of Tesco’s end of year results on Wednesday should be released on the same day the news bulletins were dominated by the funeral of Baroness Thatcher.

 

In many ways Tesco’s growth and success over the last 20 years is testament to many of the business enterprise and free market legislation that makes up part of the Thatcher legacy. As a retail business it has certainly done the grocer’s daughter proud.

 

But equally, like Thatcher’s reputation as a politician and Prime Minister, you would struggle to find a more divisive company than Tesco, a business that splits public opinion right down the middle.

 

If news of Tesco’s dramatic trading figures this week, including its worst ever pre-tax profit performance and a £2.4 billion worth of writedowns, passed you by this week, then I suggest you go back and study the detail.

 

When it comes to drinks retailing in the UK, knowing the inside leg measurement of Tesco’s wine and spirits strategy is fundamental to all of us, whatever sector of the market you are in.

 

After all Tesco sells one in four of bottles of wine in the UK and what it chooses to sell, at what price and in what format or range, will have a knock-on effect, whether we recognise it or not, on all other wine businesses in the country.

 

For that is how so many people in the UK come across the wines they want to buy.

 

So if Tesco’s sales get a nose bleed, there will be a lot more blood spilt further down the supply chain.

 

Despite Tesco’s alarming drop in profits this week, some retail analysts have welcomed its figures as an indication the tough measures taken by its chief executive, Philip Clarke, over the last year are beginning to take hold. Particularly the recognition it needs to re-invest and re-engage with its UK business and core British Tesco customer.

 

But the jury is still out on Clarke and whether he is able to stand up to the legacy left by his predecessor Sir Terry Leahy. That said it is clear that whilst Sir Terry received many plaudits during his long tenure at the head of Tesco he did not leave a garden full of roses when he stood down in 2011.

 

It was his decision, for example, to enter the US market with the Fresh & Easy chain, which Tesco is now looking to dispose of with a writedown of some £1.2 billion.

 

In so doing he also sent one of his trusty lieutenants, Tim Mason, who had worked alongside Sir Terry through their climb up the Tesco corporate ladder, to the other side of the world. Not only was Mason no longer part of the UK operation he was noticeably overlooked for the top job that he reportedly craved when Sir Terry stepped down.

 

As were a number of other senior career Tesco executives that had grown up in the business with Sir Terry. As a result Tesco lost the likes of its finance director, Andy Higginson, the head of its Asian business, David Potts, who had been at Tesco since the age of 16, and the steadying hand of the highly respected non-executive chairman, David Reid all in a matter of months.

 

When Lord MacLaurin left Tesco in 1997, passing control to the then Terry Leahy back in 1997, I can remember interviewing him for Checkout magazine, where I was working at the time, and asking what was his proudest achievement during his time as chief executive.

 

He was in no doubt. Succession planning. Hardly the most glamorous and headline grabbing answer I was looking for.

 

But for him putting in place the next generation of managers, directors and executives that could take the business forward in the way he felt it needed to go was his biggest achievement as a chief executive. Tesco’s super charged growth and success in the following years were as much a testament to what Lord MacLaurin had put in place, as they were down to the new management team.

 

The fall out from Sir Terry Leahy’s departure could not be more strikingly different. Tesco with Sir Terry Leahy knew where it was going, Tesco without Sir Terry Leahy feels like a very different beast. And a wounded one at that.

 

So let’s hope Philip Clarke knows what he is doing because the UK wine and spirits industry needs a strong, healthy, innovative and profitable Tesco to help drive the rest of the industry along.

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