The Tesco challenge

Supermarket’s problems go deeper than leadership
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The Independent Online

It must have been particularly galling for the former Tesco chief executive Philip Clarke to have seen the announcement of his departure accompanied by a rise in the Tesco share price, and in a generally falling stock market at that. Even the accompanying profits warning wasn’t enough to dampen the spirit of Tesco investors as Mr Clarke wheeled his trolley, laden with his pay-off package worth up to £10m, to the checkout.

Galling indeed, and yet not all of Tesco’s problems can reasonably be attributed to poor leadership. For example, it was inevitable that the discount retailers Aldi and Lidl would find a special appeal during the longest squeeze on household income in living memory.

More surprising has been the way Waitrose and M&S stores have managed to survive and prosper as the preferred choice of those sections of the bourgeoisie that have managed to maintain their standard of living.In any case, in the “squeezed middle” of the trade, Tesco’s problems are probably not as deep-seated as those of Morrisons. And J Sainsbury, back from the brink, is hardly a darling of the stock market or of consumers.

The main interest in Tesco naturally lies in what happens next, and in particular whether Mr Clarke’s successor, Dave Lewis, chooses to take the discounters on at their own game, and follows Morrisons in declaring war on them.

If he were to do that, then we may well witness what can only be described as the supermarket price war to end all supermarket price wars. Short term, that will boost the purchasing power of household budgets; longer term the consequences may not be so positive.

 In any event, as the current market leader, Tesco will probably have most to lose. “Drastic Dave” – a sobriquet Mr Lewis has earned because of his cost-cutting record – certainly has a fight on his hands.