Chris Blackhurst: Tesco, the friendly grocer, pins hope on image revamp
Midweek View: Make no mistake - the Leahy style belongs to the past
We looked at each other and agreed: it would never have happened in Tel’s day. On Monday, I was having breakfast with a long-time Tesco analyst. The news was dominated by the supermarket giant’s revelation that it had conducted a survey and discovered it generated almost 30,000 tonnes of unwanted food in the first six months of 2013.
I mentioned it to my pal and we both shook our heads. The idea that Tesco, under its former boss Sir Terry Leahy, would have indulged in such a survey was ridiculous. We could hear Sir Terry intoning in his Scouse drawl: “Too soft, a complete waste of time.”
His, don’t forget, was the Tesco where suppliers were invited to the company’s Hertfordshire headquarters for verbal duffing-ups; where the chief would openly boast of the company’s aggressive, expansionist policies; where the emphasis was on slaying the opposition and taking no prisoners. Going to a Tesco store towards the end of the Leahy regime was to experience a visual battering, as signs everywhere would proclaim how much cheaper the chain was compared with its rivals.
Those days have gone. Now Tesco branches are all cuddly and friendly, with the emphasis on goodness and well-being, the eye drawn to notices proclaiming the quality of its artisan bakery and butchery lines.
The revolution of the current chief executive Philip Clarke is under way. The headline-grabber was canning Sir Terry’s pet project in the US. But along with the spiking of Fresh & Easy, there has been a rapid clearout of senior management; the icy detachment that was Tesco’s attitude towards the world has vanished.
Mr Clarke beats himself and Tesco up. In one speech, remarkable for the chief of Tesco, he admitted to farmers that the chain had gone too far – that it was seeking a new, more equal relationship with them. He talks repeatedly of Tesco having listened to the public and recognising the widespread view that the group is all about what it can take out rather than what it can put back. From now on, he vows, Tesco will be seen as a force for positive change.
He is not alone; his message is relayed by his senior staff. The group corporate affairs director, Rebecca Shelley, describes how “scale can be used to achieve social good”.
She says: “There’s no doubt expectations of business have changed. The financial crisis and the global recession had a profound impact on consumers which continues today, even as the economic outlook improves. There’s a sharper appreciation for fairness, and business was one of the first to feel the impact. Is business good or bad, are their motives and values in line or at odds with the society they serve? Are they making a positive contribution in all they do? It goes far beyond the concern for corporate social responsibility. A business’s contribution and its values must be clear and unambiguous, and above all sincere.”
At Tesco’s annual general meeting, its former chairman and chief executive, Lord MacLaurin, weighed in. He said: “When you judge [Sir Terry’s] legacy, it’s very sad. This company is not going to be fixed overnight. It is a two or three-year job and I urge you [current chairman Sir Richard Broadbent] to give Philip Clarke and his team time to do this.”
Two things appear to have collided to force the revisionism. One was that Tesco was faltering. Its latest interims showed a 24 per cent fall in profits. The US was a disaster, while in the core UK market store openings had slowed (and become increasingly dogged by planning inquiries), non-food was creaking, and Sainsbury’s and Waitrose were in the ascendant in food. Eastern Europe and Asia, too, were suffering.
That coincided with negativity surrounding Tesco’s image. Here, Mr Clarke, Ms Shelley and co have absorbed the more inclusive mantra of corporatism – as portrayed in a new book, Everybody’s Business, by Jon Miller and Lucy Parker. After enduring years of hostility, say the authors, “companies are realising that lasting success comes from having a purpose broader than making a profit. They know that business should benefit customers, employees, suppliers, neighbours and the wider world, as well as shareholders. Enduring value comes from making business work for everyone.”
Tesco does not feature in the book’s case studies. Not yet. Perhaps it will, in the second edition. There’s no doubt, as Lord MacLaurin said, that the realignment will take time and it will not produce immediate results. Some impatient shareholders, notably Warren Buffett, have voted with their feet – the arch American investor reduced his stake by £300m.
But make no mistake: the Leahy style and his hold on Tesco belong to the past.
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