Tesco powers on to record figures, but the backlash gets under way

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The Independent Online

Tesco has become Britain's first retailer to break the £2bn profit barrier. While rivals of the country's biggest supermarket group have struggled to hit their sales targets in recent weeks, Tesco's profits and sales have soared.

Tesco has become Britain's first retailer to break the £2bn profit barrier. While rivals of the country's biggest supermarket group have struggled to hit their sales targets in recent weeks, Tesco's profits and sales have soared.

Tesco takes one in three pounds spent on groceries, but has been unfurling its blue, red and white banner across almost every area of its customers' lives.

But the results were criticised bycampaigners such as Friends of the Earth, which said the groups "unchecked growth" put shops and farmers out of business. A spokesman said: "The £2bn profits have been at the expense of farmers and other suppliers who have had to cope with falling prices, and small shops losing market share."

Sales of Tesco's non-food products helped its profits before tax to increase by one-fifth to £2.03bn. It clocked up £6bn in sales of non-food items - a 17 per cent rise on the previous year, giving it one pound in every eight spent on the high streets.

The man behind the store's rise is its chief executive, Sir Terry Leahy, dubbed "Terry Tesco" by the City for his unwavering focus on the company he has worked for since 1979. Sir Terry, whose big break at the company came when he championed the launch of its Clubcard loyalty scheme in the mid-1990s, ascribes his success to his mass-market mentality.

His approach is to make it as easy as possible for his customers to purchase products from the store. "Our customers have busy and stressful lives and they want simple choices," he said yesterday. This philosophy helped the group's like-for-like UK sales to soar by 9 per cent last year. It also lay behind the success of the group's push into non-food and financial services markets, and its overseas land-grab. (It has almost 600 international stores.)

For the first time last year, the group made as much money from these so-called new growth businesses as the entire company was making eight years ago, when it was focused solely on the UK.

The company's success was attributed to factors ranging from its fighting spirit inherited, from its founder, Jack Cohen, to its winning customer-based strategy, according to Richard Hyman, chairman of the retail consultancy Verdict Research.

"Tesco has been fantastically clever at satisfying the fragmenting needs of its market by segmenting its product offer and the stores through which it delivers that offer," he said.

"Tesco is innovative. Jack Cohen was a consummate opportunist. With Tesco as the undisputed number one retailer in Britain, opportunism is still at the heart of Tesco," he added.

But campaign group ActionAid showed how South African women who grow fruit for Tesco receive "poverty wages" of £32.50 or less a fortnight. The minimum wage in South Africa is £36 every two weeks.

Another contentious area is the cost of milk. About 40 dairy farms close every week, according to the pressure group Farm, prompting regular protests against Tesco from farmers calling for a greater share of milk's retail price.

A Friends of the Earth report in 2002 showed how less than half of Tesco's apples were from the UK. Meanwhile, the price that Tesco paid suppliers for bananas fell 30 per cent between 2002 and 2003.

Andrew Simms, at the New Economics Foundation, said: "The more Tesco makes, the more they can afford to cross-subsidise and unfairly compete against smaller players. In this particular winner- take-all economy, the losers are suppliers, small independent shops and ultimately consumers."

The residents of one commuter town - Gerrards Cross in Buckinghamshire - are so incensed at Tesco for building a superstore in the middle of the town that many have vowed to boycott the chain for good.

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