Profit of £2bn, but there are two sides to the success story

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In Sir Terry Leahy's eight-year tenure as chief executive of Tesco, he has transformed what was a rather dog-eared supermarket chain into one of the world's leading retailers, leaving once-superior rivals such as J Sainsbury and Marks & Spencer in his wake.

Sir Terry Leahy, Chief Executive, Tesco

In Sir Terry Leahy's eight-year tenure as chief executive of Tesco, he has transformed what was a rather dog-eared supermarket chain into one of the world's leading retailers, leaving once-superior rivals such as J Sainsbury and Marks & Spencer in his wake.

But, unlike some of his more polished counterparts in British retailing, his start in life was not promising.

Sir Terry, 48, was brought up on a tough Liverpool council estate, the son of a ship's carpenter who was invalided out of the war before becoming a greyhound trainer on Merseyside. He won a scholarship to St Edward's College, a local grammar school, and did a management science degree at the University of Manchester Institute of Science and Technology.

After a short spell at the Co-op, he joined Tesco in the marketing department and began his rapid passage through the Tesco hierarchy helped by Lord MacLaurin, the sports-mad former chairman of the supermarket group who was an important mentor for the aspiring executive.

The crucial point for Sir Terry in the Tesco story was a Damascene moment in the mid-1990s when the board realised it had been trying too hard to emulate Sainsbury's and had lost sight of its own customers.

Sir Terry says his background has helped him as a retailer. After he took over as chief executive in 1997, Tesco stopped trying to be like Sainsbury's and embarked on its own strategy of delivering value for money to consumers through larger, more efficient stores.

He rejects those who criticise Tesco's giant hypermarkets, claiming the UK enjoys a good balance between traditional town centres and out-of-town convenience.

Damian Reece, City Editor

Michael Hart, Tenant Farmer

It's the busiest time of the year for Michael Hart, a tenant farmer on the hills outside Mevagissey in Cornwall. Yesterday he led his 130 cattle out to their summer pasture. He's also working flat-out lambing his 120 ewes which means spending the nights out in the cold.

The announcement in London that Tesco's profits had topped £2bn could have come from another planet for Mr Hart, who has been supplying the supermarket chain with beef and lamb for several years.

His entire annual beef production of 45 fattened suckler cows will fly off the Tesco shelves in just 14 minutes. While he sells it for between £500 to £625 per animal, by the time his meat has been butchered, packaged and sold, the price paid by the customer has doubled.

When it comes to his lambs, an entire year's labours are sold at Tesco every 12 minutes. Lamb fetches £3.40 per kilo at the farm gate. At Tesco it makes anything up to £11 a kilo.

With margins like this, such profits are unsurprising, said Mr Hart. But for the farmer it is a different story. Last year he managed to break even - the first time in nearly a decade - but he is still forced to take on outside work to help make ends meet for his wife Amanda and their daughter Samantha, 16, who unsurprisingly wants to be a vet rather than a farmer.

Unlike most in his position, Mr Hart is prepared to speak out, despite fears that critical producers will be dropped. "Tesco has driven down the price of meat, vegetables, everything because they have such a huge share of the market. It is a monopoly position. If they don't like me they can simply go and find someone else who will supply them at the price they want."

Sometimes Tesco tries to shave fractions of a penny off prices they pay suppliers, he said.

Jonathan Brown

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