Simon English: New boss Clarke should pull the plug on Tesco's costly American adventure
Friday 20 January 2012
Outlook: There was always a coals-to-Newcastle, fish-to-Iceland feel about Tesco's plan to crack the US supermarket industry. Just on the bare face of it, even if you'd never visited America, you might quickly reach the view, based on what you've read and seen, that these folk are not short of food.
Tesco's approach seemed cocky, hubristic, right from the start. They had done research, they said. There were huge gaps in the market. Tesco was going to show those Yanks how to run a proper food business. They'll thank us for it.
If they'd only but asked. On the basis of my own, reasonably rigorous research, I could have told them this: there is loads of food in America and nearly all of it is better than what you can get in Tesco.
If that sounds flippant, it's a semi-serious point. Walk into any local deli anywhere in America and order a sandwich. It'll be better than the UK equivalent. Much.
Pick any US restaurant you like outside of New York (let's try to be fair) and compare it to any UK restaurant outside London. The American one is better.
Supermarkets in America are better. The service you get is better. So is the food.
Even Kentucky Fried Chicken is better. You can get the chicken grilled and nicely wrapped to take on a picnic. It's way better.
The state of Tesco's American adventure rather got lost in last week's profit warning, and in the inevitable billions-wiped-off stories that seemingly must accompany any fall in a share price.
It turns out that Tesco is shutting another 12 stores in California, Nevada and Arizona on top of the 13 closed by the company in 2010 as it seeks to stem losses.
So far, Britain's biggest supermarket is reckoned to have chucked about £700m down the trash can seeking to establish Fresh & Easy – that's real money, even for Tesco.
It's increasingly tempting to conclude that Sir Terry Leahy ended his 14-year reign at the company precisely because he could see that his US plan wasn't going to work out, and figured that he'd rather see someone else take the blame.
It seems that those long stretches of food desert – areas without a proper supermarket – that Tesco had identified as fertile ground were without major food suppliers for good reason. No one lives there. At least, no one with any money.
Again, this also looks like the sort of information that could have been gleaned from a quick trip down the highway (the roads are also better, by the way).
Tesco doubtless employed expensive consultants before it embarked on its scheme, but if they did any actual research, they seemed to have missed some fairly basic points.
Will it give up? The temptation for the new chief executive, Philip Clarke, to do so must be strong. If he scraps the American arm quickly, he can let Sir Terry take the heat. Leave it much longer and he owns the problem.
With the company admitting it has lately lost its way in the UK and under pressure from City investors to put things right sharpish, cutting his US losses would at least leave him one less thing to worry about.
Tesco tries to be upbeat on the issue, insisting it is getting the American stores right.
It seems unlikely that Mr Clarke is entirely convinced that Tesco can crack it.
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