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Coordinates: 51°42′18.89″N 0°1′36.37″W / 51.7052472°N 0.0267694°W / 51.7052472; -0.0267694

Tesco
Type Public (LSE: TSCO)
Founded 1919 in East London by Jack Cohen
Headquarters Cheshunt, United Kingdom
Key people David Reid (Chairman),
Sir Terry Leahy (Chief Executive)
Industry Diversified Retail
Products Groceries, Consumer goods, financial services, telecoms
Revenue £59.4 billion (February 2009)[1]
Operating income £3.128 billion (February 2009)[1]
Employees 440,000 (2008)[2]
Stores: 3,729[2]
Subsidiaries Tesco Stores Limited
Tesco Ireland Limited
Tesco Bank (100%)[3]
Website www.tesco.com

Tesco plc is a British international grocery and general merchandising retail chain. It is the largest British retailer by both global sales and domestic market share, with profits exceeding £3 billion, and the third largest global retailer based on revenue, behind Wal-Mart and Carrefour.

Contents

History

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Formation

First Tesco self service, St Albans, England

Jack Cohen founded Tesco in 1919 when he began to sell surplus groceries from a stall in the East End of London.[4] The Tesco brand first appeared in 1924. The name came about after Jack Cohen bought a shipment of tea from T.E. Stockwell. He made new labels using the first three letters of the supplier's name (TES), and the first two letters of his surname (CO), forming the word TESCO.[5] The first Tesco store was opened in 1929 in Burnt Oak, Edgware, Middlesex. Tesco was floated on the London Stock Exchange in 1947 as Tesco Stores (Holdings) Limited.[4] The first self-service store opened in St Albans in 1951 (still operational in 2009 as a Metro),[6] and the first supermarket in Maldon in 1956.[4]

During the 1950s and the 1960s Tesco grew organically, and also through acquisitions, until it owned more than 800 stores. The company purchased 70 Williamsons stores (1957), 200 Harrow Stores outlets (1959), 212 Irwins stores (1960), 97 Charles Phillips stores (1964) and the Victor Value chain (1968) (sold to Bejam in 1986).[7]

Originally specialising in food and drink, it has diversified into areas such as clothing, consumer electronics, financial services, telecoms, home, health and car insurance, dental plans, retailing and renting DVDs,[8] CDs, music downloads, Internet services and software.

YCDBSOYA

Jack Cohen's business motto was "pile it high and sell it cheap",[9] although this was quickly replaced with the saying "You Can't Do Business Sitting On Your Arse" (or variously "Ass").[9] He was known to distribute items bearing the acronym "YCDBSOYA" to his sales force.[10]

1980s

In May 1987 Tesco completed its hostile takeover of the Hillards chain of 40 supermarkets in the North of England for £220 million.[11]

1990s

Tesco at Seacroft, Leeds. This was built as a redevelopment of the 1960s Seacroft Civic Centre.

In 1994 the company took over the supermarket chain William Low, successfully fighting off Sainsbury's for control of the Dundee-based firm which operated 57 stores. This paved the way for Tesco to expand its presence in Scotland, which was weaker than in England. In 2006 Inverness was branded as "Tescotown",[12][13] because well over 50p in every £1 spent on food is believed to be spent in its three Tesco stores.[14]

Tesco introduced a loyalty card, branded 'Clubcard', in 1995 and later an Internet shopping service. As of November 2006 Tesco was the only food retailer to make online shopping profitable.[15] In 1996 the typeface of the logo was changed to the current version with stripe reflections underneath. Terry Leahy assumed the role of Chief Executive on 21 February 1997, the appointment having been announced on 21 November 1995.[16][17]

On 21 March 1997 Tesco announced the purchase of the retail arm of Associated British Foods which consisted of the Quinnsworth, Stewarts and Crazy Prices chains in the Republic of Ireland and Northern Ireland, plus associated businesses, for £640 million.[18] The deal was approved by the European Commission on 6 May 1997.[19] This acquisition gave it both a major presence in (and marked a return to) the Republic of Ireland and a larger presence in Northern Ireland than Sainsbury's, which had begun its move into the province in 1995.

In 1997 Tesco and Esso (part of Exxonmobil) forged a business alliance that included several petrol filling stations on lease from Esso, with Tesco operating the attached stores under the Express format. In turn Esso would operate the forecourts and sell their fuel via the Tesco store. Ten years later over 600 Tesco/Esso stores can now be found across the UK.

2000s

Trolley shelter
A new Tesco Extra store under construction in June 2007 in Shrewsbury, Shropshire. This store has since been completed.
Tesco in Skipton, North Yorkshire being redeveloped in 2009

In July 2001 Tesco became involved in Internet grocery retailing in the USA when it obtained a 35% stake in GroceryWorks.[20] In 2002 Tesco purchased 13 HIT hypermarkets in Poland. It also made a major move into the UK convenience store market with its purchase of T & S Stores, owner of 870 convenience stores in the One Stop, Dillons and Day & Nite chains in the UK.[21]

In October 2003 the company launched a UK telecoms division, comprising mobile and home phone services, to complement its existing Internet service provider business. In June 2003 Tesco purchased the C Two-Network in Japan.[22] It also acquired a majority stake in Turkish supermarket chain Kipa.[23] In January 2004 Tesco acquired Adminstore, owner of 45 Cullens, Europa, and Harts convenience stores, in and around London.[24] In August 2004, it also launched a broadband service. In Thailand Tesco Lotus was a joint venture of the Charoen Pokphand Group and Tesco but facing criticism over the growth of hypermarkets. CP Group sold its Tesco Lotus shares in 2003. In late 2005 Tesco acquired the 21 remaining Safeway/BP stores after Morrisons dissolved the Safeway/BP partnership.[25] In mid 2006 Tesco purchased an 80% stake in Casino's Leader Price supermarkets in Poland. They will be rebranded into small Tesco stores.[26]

On 14 July 2007, fourteen Tesco stores across the UK were temporarily closed after a 'bomb scare' and a criminal investigation launched after threats were made.[27] A 'suspect device' was found in one store on 16 July 2007 causing the store and surrounding area to be sealed off while the Army Explosive Ordnance Disposal unit disposed of the package.[28]

In 2007, Tesco took part in a joint venture with O2 to form the Tesco Mobile mobile virtual network operator in Ireland.

In 2007 Tesco was placed under investigation by the UK Office of Fair Trading (OFT) for acting as part of a cartel of five supermarkets (Safeway, Tesco, Asda, Morrisons and Sainsburys) and a number of dairy companies to fix the price of milk, butter and cheese. In December 2007 Asda, Sainsburys and the former Safeway admitted that they acted covertly against the interests of consumers while publicly claiming that they were supporting 5,000 farmers recovering from the foot-and-mouth crisis. They were fined a total of £116 million. Tesco, which maintains that it was not a part of the cartel, is still under investigation by the OFT.

A two-part television ad campaign celebrating Christmas with the Spice Girls aired in 2007. They have reportedly been paid £5 million (US$10 million).

In April 2009, Tesco announced that it had created a super tomato that "doesn't leak". The tomato is grown in Holland and is meant to be a better tomato for sandwiches since, being less juicy, they won't make sandwiches as soggy as regular tomatoes do.[29]

Corporate strategy

According to Citigroup retail analyst David McCarthy, "[Tesco has] pulled off a trick that I'm not aware of any other retailer achieving. That is to appeal to all segments of the market".[30] One plank of this strategy has been Tesco's use of its own-brand products,[31] including the upmarket "Finest", mid-range Tesco brand and low-price "Value" encompassing several product categories such as food, beverage, home, clothing, Tesco Mobile and financial services.

Beginning in 1997 when Terry Leahy took over as CEO, Tesco began marketing itself using the phrase "The Tesco Way" to describe the company's core purposes, values, principles, and goals[32] This phrase became the standard marketing speak for Tesco as it expanded domestically and internationally under Leahy's leadership, implying a shift by the company to focus on people, both customers and employees.[33]

A core part of the Tesco expansion strategy [34] has been its innovative use of technology.[35] It was one of the first to build self-service till and use cameras to reduce queues.[36]

In order to protect its brand image, and given its expansion plans in Thailand, Tesco has recently been employing a policy of launching defamation proceedings. In November 2007, Tesco sued a Thai academic and a former minister for civil libel and criminal defamation. Tesco is insisting that the two pay £1.6 million and £16.4 million plus two years' imprisonment respectively. They have been alleged to have misstated that Tesco's Thai market amounts to 37% of its global revenues, amongst criticism of Tesco's propensity to put small retailers out of business.[37]

Tesco's main advertising slogan is "Every little helps". Its advertisements in print and on television mainly consist of product shots (or an appropriate image, such as a car when advertising petrol) against a white background, with a price or appropriate text (e.g., "Tesco Value") superimposed on a red circle. On television, voiceovers are provided by recognisable actors and presenters, such as Barbara Windsor, James Nesbitt, Jane Horrocks, Terry Wogan, Dawn French, Ray Winstone, Neil Morrissey, Martin Clunes, David Jason and Kathy Burke among others.

Corporate tax structure

In May 2007, it was revealed that Tesco had moved the head office of its online operations to the tax haven of Switzerland. This allows it to sell CDs, DVDs and electronic games through its web site without charging VAT.[38] The operation had previously been run out of the tax haven of Jersey, but had been closed by authorities who feared damage to the Island's reputation.[38]

In June 2008, the government announced that it was closing a tax loophole being used by Tesco.[39] The scheme, identified by British magazine Private Eye, utilises offshore holding companies in Luxembourg and partnership agreements to avoid a corporation tax liability of up to £50 million a year.[39] Another scheme previously identified by Private Eye involved depositing £1 billion in a Swiss partnership, and then loaning out that money to overseas Tesco stores, so that profit can be transferred indirectly through interest payments. This scheme is still in operation and is estimated to be costing the UK exchequer up to £20 million a year in corporation tax.[39] Tax expert Richard Murphy has provided an analysis of this avoidance structure.[40]

Legal action against the Guardian newspaper

In February 2008 a six month investigation by The Guardian claimed that Tesco had developed a complex taxation structure involving offshore bank accounts in the tax haven of the Cayman Islands.[41] Tesco was in the process of selling its UK stores, worth an estimated £6 billion, to Cayman Island based companies set up by Tesco. These companies then lease the stores back to Tesco. At the time, The Guardian claimed that this arrangement would enable Tesco to avoid an estimated £1 billion tax on profits from the property sales, and also to avoid paying any tax on continuing operation of the stores, as the rate of corporation tax in the Cayman Islands is zero. Tesco defended its tax arrangements, saying it had a legal duty to its shareholders to organise its affairs in a tax-efficient manner and pointing out that the company already pays significant amounts of tax, including VAT, excise duty and fuel duty on behalf of its customers, PAYE and national insurance contributions on behalf of its employees and corporation tax on its profits.

Following these revelations, several MPs called for an inquiry into Tesco's tax avoidance schemes.[42]

Tesco issued a writ for libel against the Guardian five weeks later. Tesco denied that it had avoided paying £1 billion corporation tax but for legal reasons refused to answer further questions or to clarify the purpose of the tax structure they had created. Further investigations by The Guardian discovered that the tax structures were aimed at avoiding Stamp Duty Land Tax, and not corporation tax as originally thought. SDLT is leveled at 4%, and corporate tax at around 30%, so the figure of £1 billion tax avoided by Tesco has been revised to an estimated £90-£100 million.[43] According to The Guardian, "Tesco has been involved in a game of cat and mouse with HM Revenue & Customs since 2003. On three occasions when the government has closed a loophole to prevent avoidance, Tesco has taken advantage of ingenious schemes to get around it. Tesco still has 36 stores wrapped up in UK limited partnerships - with Cayman Islands registered partners - which were established in 2006 before the latest loophole was closed."[43]

In September 2008, Tesco dropped the legal action after The Guardian apologised for its story, acknowledging "These damaging allegations were unfounded and should not have been published. All profits generated by this sale and leaseback arrangement were earned by UK tax-resident companies and have been or will be included in Tesco's UK tax returns. The use of Cayman Island companies in the scheme was for legitimate stamp duty savings purposes."[44] Costs were paid by the newspaper with undisclosed damages being paid to charity.[44]

The Guardian's parent company, Guardian Media Group, used a similar offshore arrangement to avoid tax during its takeover of Emap.[45]

Corporate social responsibility

Tesco has made a commitment to corporate social responsibility, in the form of contributions of 1.87% in 2006 of its pre-tax profits to charities/local community organisations.[46] This compares favourably with Marks & Spencer's 1.51% but not well with Sainsbury's 7.02%. Will Hutton, in his role as chief executive of The Work Foundation recently praised Tesco for leading the debate on corporate responsibility.[47] However Intelligent Giving has criticised the company for directing all "staff giving" support to the company's Charity of the Year.[48]

In 1992 Tesco started a "computers for schools scheme", offering computers in return for schools and hospitals getting vouchers from people who shopped at Tesco. Until 2004, £92 million of equipment went to these organisations. The scheme has been also implemented in Poland.[49]

Starting during the 2005/2006 football season the company now sponsors the Tesco Cup, a football competition for young players throughout the UK. The cup now runs a boy's competition at Under 13 level and two girl's cups at Under 14 level and Under 16 level. Over 40,000 boys alone took part in the 2007/08 competitions.

In 2009 Tesco used “Change for Good” as advertising, which is trade marked by Unicef for charity usage but is not trademarked for commercial or retail use which prompted the agency to say "it is the first time in Unicef’s history that a commercial entity has purposely set out to capitalise on one of our campaigns and subsequently damage an income stream which several of our programmes for children are dependent on”.They went on to call on the public “who have children’s welfare at heart, to consider carefully who they support when making consumer choices”.[50][51]

UK operations

Stores

Tesco's UK stores are divided into six formats, differentiated by size and the range of products sold. These are shown below;

Tesco Extra

Tesco Extra, Southport, England

Tesco Extra stores are larger, mainly out-of-town hypermarkets that stock nearly all of Tesco's product ranges. The first Extra opened in 1997 in Pitsea Essex. The 100th store opened on 29 November 2004 in Stafford. The number of these is now being increased by about 20 a year, mainly by conversions from the second category. The largest store by floor space is the Tesco Extra in Kingston Park, Newcastle upon Tyne with floorspace of 11,055 m2 (119,000 sq ft).[52] Newer Tesco Extra stores are usually on two floors, with the ground floor for mainly food and the first floor for clothing, electronics and entertainment. Older stores have all sales on one floor and a cafe on a large upper balcony.

Tesco Superstores

Tesco superstores are standard large supermarkets, stocking groceries and a much smaller range of non-food goods than Extra stores. The stores have always previously been branded as simply 'Tesco', however a new store in Liverpool is the first to use the format brand 'Tesco Superstore' above the door.[53]

Tesco Metro in Leeds city centre.

Tesco Metro

Tesco Metro stores are sized between Tesco superstores and Tesco Express stores. They are mainly located in city centres, the inner city and on the high streets of small towns. The first Tesco Metro was opened in Covent Garden, London in 1992. Since then all Tesco branches that have a high street format including those which opened before the Covent Garden branch have been subsequently rebranded from Tesco to Tesco Metro. The Tesco store in Devizes was the last store to finish rebranding, in September 2006. The store had not been renovated for over 20 years.

Tesco Express

Tesco Express, Hilperton Road, Trowbridge, Wiltshire

Tesco Express stores are neighbourhood convenience shops, stocking mainly food with an emphasis on higher-margin products (due to small store size, and the necessity to maximise revenue per square foot) alongside everyday essentials. They are found in busy city centre districts, small shopping precincts in residential areas, small towns and on Esso petrol station forecourts. The 1000th Tesco Express site opened in July 2009. Tesco have now started building Tesco Express stores with no staff tills, only having 'Self-Service' tills in which the customer scans all their own shopping and packs it.

One Stop

One Stop stores are the only category which does not include the word Tesco in its name. These are the smallest stores. They were part of the T&S Stores business but, unlike many which have been converted to Tesco Express, these will keep their old name. However, some have Tesco Personal Finance branded cash machines.

Tesco Homeplus

One Stop, Trowbridge, Wiltshire (with private accommodation above)
History

Tesco Homeplus is not Tesco's first non-food only venture in the UK. Until the late 1990s/early 2000s there were several non-food Tesco stores around the country including Scarborough and Yate. Although not in a warehouse style format, the stores were located on high streets and shopping centres, they did stock similar items to Homeplus stores. In both cases this was because in another part of the shopping centre was a Tesco Superstore which stocked food items only.

In May 2005 Tesco announced a trial non-food only format near Manchester and Aberdeen,[54] and the first store opened in October 2005:

A further 5 stores opened before it stopped being a trial, and there is now a plan to open many more stores.

Current

Stores offer all of Tesco's ranges except food in warehouse-style units in retail parks. Tesco is using this format because only 20% of its customers have access to a Tesco Extra, and the company is restricted in how many of its superstores it can convert into Extras and how quickly it can do so. Large units for non-food retailing are much more readily available.

There are currently 12 Homeplus stores nationwide. The newest Homeplus store opened in Chester in July 2009.

Future

2 more are due to open in the first half of '09 at sites around the country. All of these will feature the Order and Collect desk where customers can purchase and collect most items straightaway.

Store facts

As of 28 February 2009, at the end of its 2008/09 financial year, Tesco's UK store portfolio was as follows.[55]

Format Number Total
area (m²)
Total
area (sq ft)
Mean
area (m²)
Mean
area (sq ft)
Percentage
of space
+/- Stores
2008/9
Tesco Extra 177 1,172,622 12,622,000 6,625 71,310 40.35% 11
Tesco Superstores 448 1,247,967 13,433,000 2,786 29,984 42.94% 13
Tesco Metro 174 188,129 2,025,000 1,081 11,638 6.47% 10
Tesco Express 1001 197,419 2,125,000 205 2,211 6.79% 125
One Stop 512 62,430 672,000 126 1,357 2.15% 5
Tesco Homeplus 10 37,904 408,000 3,790 40,800 1.30% 3
Total 2,306 2,906,471 30,877,000 1,309 14,087 100% 167

Distribution

In common with most other large retailers, Tesco draws goods from suppliers into regional distribution centres, for preparation and onward delivery to stores. Tesco is extending this logistic practice to cover collection from suppliers (factory gate pricing) and the input to suppliers, in a drive to reduce costs and improve reliability.[56] RFID technology is taking an increasing role in the distribution process.[57]

Road

In 2007 Tesco was facing national disruption to its distribution network after a dispute with drivers at its distribution depot in Livingston, Scotland.[58] In response to fears over increasing road congestion, fuel prices, and concern over its carbon footprint, Tesco is switching some of its supply chain to alternative modes, detailed below.

Rail

Tesco has been transporting goods by rail since 2006 using its distribution partner the Eddie Stobart Group.[59] Volumes are set to increase in 2007 with new routes.[60]

Canal

In October 2007 Tesco started using the Manchester Ship Canal to transport wine from Liverpool to a Manchester distribution facility. Combined with sea transport from the south coast where the wine was previously offloaded, this new mode replaces road journeys from the south coast to Manchester.[61]

Other businesses

Garden centres

Tesco announced its intention to purchase Dobbies Garden Centres for £155.6 million on 8 June 2007. Dobbies operates 24 garden centres, half in Scotland and half in England.[62] The deal was confirmed as successful by the board of directors of Tesco on 17 August 2007 when the board announced that they had received 53.1% of shares (or 5,410,457 shares) which confirmed conditions set out in the offer made on 20 June 2007. Although the deal had been confirmed by Tesco the offer remained open to Dobbies shareholders until 20 August 2007.[63] Tesco raised its holding to 65% in September[64] and on 5 June 2008[65] Tesco announced that it would be compulsorily acquiring Dobbies Garden Centres plc. Dobbies continues to trade under its own brand, from its own head office in Melville, near Edinburgh.

Banking

Tesco has a banking arm called Tesco Bank, formerly a 50:50 joint venture with the Royal Bank of Scotland. Products on offer include credit cards, loans, mortgages, savings accounts and several types of insurance, including car, home, life and travel. They are promoted by leaflets in Tesco's stores and through its website. The business made a profit of £130 million for the 52 weeks to 24 February 2007, of which Tesco's share was £66 million. This move towards the financial sector diversified the Tesco brand and provides opportunities for growth outside of the retailing sector.

On 28 July 2008 Tesco announced that they were buying out the Royal Bank of Scotland's 50% stake in the company for £950 million.[66][67] In October 2009 the name of Tesco Personal Finance was changed to Tesco Bank.

Technika

There is a brand of electronic products produced for Tesco, called Technika.

Telecoms

Tesco operates ISP, mobile phone, home phone and VoIP businesses. These are available to UK residential consumers and marketed via the Tesco website and through Tesco stores.

Though it launched its ISP service in 1998, the firm did not get serious about telecoms until 2003. It has not purchased or built a telecoms network, but instead has pursued a strategy of pairing its marketing strength with the expertise of existing telecoms. In autumn 2003, Tesco Mobile was launched as a joint venture with O2, and Tesco Home Phone created in partnership with Cable & Wireless. In November 2009 Tesco announced over 2 million UK customers are using this service. In August 2004 Tesco broadband, an ADSL-based service delivered via BT phone lines, was launched in partnership with NTL. In November 2009 Tesco announced a new partnership with Cable & Wireless, and a fresh focus on this business area. In January 2006, Tesco Internet Phone, a Voice over Internet Protocol, VoIP, service was launched in conjunction with Freshtel, Australia.[68]

In November 2009 Tesco announced it now has 100 Phone Shops embedded within larger Tesco Extra stores, and stated an intention to open up to 500 such shops across the UK in the medium term.

Tesco Mobile

Fuel

Tesco supermarket petrol pump at night

Tesco first started selling petrol in 1974. Tesco sells 95, 97 and 99 RON (a fuel developed by Greenergy of which Tesco is a shareholder) petrol on a retail basis from forecourts at most superstore and Express locations. Tesco have recently diversified into biofuels, offering petrol-bioethanol and diesel-biodiesel blends instead of pure petrol and diesel at their petrol stations, and now offering Greenergy 100% biodiesel at many stores in the southeast of the United Kingdom.

On 28 February 2007 motorists in South East England reported that their cars were breaking down. This was due to petrol sold by Tesco and others being contaminated with silicon,[69] Tesco has been criticised with claims that they had been alerted to the problem as early as 12 February 2007. On 6 March, Tesco offered to pay for any damage caused by the faulty petrol, after printing full page apologies in many national newspapers.[70]

Tech Support

Tesco Tech Support logo

Tesco acquired a small I.T. support company called The PC Guys in 2008, and were able to launch Tesco Tech Support in December of that year.[71] Teams of Advisors were put into many of the larger Extra stores with the sole job role of answering technical questions on Tesco's range of electrical products. They also are responsible for advising customers on extended warranties and a range of payment plans on all electrical goods over a certain amount.

Tesco Clubcard

Of the major supermarkets in the UK, only Tesco, The Co-operative, Iceland and Sainsbury's offer a loyalty card-scheme to customers. Customers can collect two Clubcard points for every £1 (or one point for €1 in Ireland and Slovakia) they spend in a Tesco store, or Tesco.com, and 1 point per £1 in petrol station (exc esso) (excl. Slovakia´s petrol). Customers can also collect points by paying with a Tesco Credit Card, or by using Tesco Mobile, Tesco Homephone, Tesco Broadband, selected Tesco Personal Finance products or through Clubcard partners, E.ON and Avis. Each point equates to 1p in store when redeemed or 4p when used with clubcard deals (offers for holidays, day trips, etc). Clubcard points (UK & IE) can also be converted to Airmiles. Clubcard points are also converted into coupons which can be redeemed for extra points or cash totals.

Holders receive quarterly Clubcard statements offering discount coupons which can be spent in-store, online or on various Clubcard deals.

Tesco was cited in a Wall Street Journal article[72] as using the intelligence from the Clubcard to thwart Wal-Mart's initiatives in the UK.

Internet operations

Tesco operates a grocery homeshopping service, as well as providing consumer goods, telecommunications and financial services online.

In May 1984, in Gateshead, England, the world's first recorded online home shopper, Mrs Jane Snowball, purchased groceries from her local Tesco store in the world's first recorded online shopping transaction from the home.[73]

Tesco has operated on the internet since 1994 and was the first retailer in the world to offer a robust home shopping service in 1996. Tesco.com was formally launched in 2000. It also has online operations in the Republic of Ireland and South Korea. Grocery sales are available within delivery range of selected stores, goods being hand-picked within each store, in contrast to the warehouse model followed by Ocado. In 2003, tesco.com's CEO at the time, John Browett, received the Wharton Infosys Business Transformation Award for the innovative processes he used to support this online grocery service.

On 1 October 2006, Tesco announced that it will be selling six own-brand budget software packages for under £20 each, including office and security suites, in a partnership with software firm Formjet.[74] As Formjet is exclusive distributor for Panda Software and Ability Plus Software, packages from these companies are likely to feature.

Tesco offers an internet-based DVD rental service, which is operated by LOVEFiLM and a music download service.

International operations

Countries in which Tesco operates.

Tesco's international expansion strategy has responded to the need to be sensitive to local expectations in other countries by entering into joint ventures with local partners, such as Samsung Group in South Korea (Samsung-Tesco Home plus), and Charoen Pokphand in Thailand (Tesco Lotus), appointing a very high proportion of local personnel to management positions. It also makes small acquisitions as part of its strategy for example, in its 2005/2006 financial year it made acquisitions in South Korea, one in Poland and one in Japan.[75]

In late 2004 the amount of floorspace Tesco operated outside the United Kingdom surpassed the amount it had in its home market for the first time, although the United Kingdom still accounted for more than 75% of group revenue due to lower sales per unit area outside the UK.

In September 2005 Tesco announced that it was selling its operations in Taiwan to Carrefour and purchasing Carrefour's stores in the Czech Republic and Slovakia. Both companies stated that they were concentrating their efforts in countries where they had strong market positions.

The following table shows the number of stores, total store size in area and sales for Tesco's international operations. The store numbers and floor area figures are as at 23 February 2008 but the turnover figures are for the year ended 31 December 2005, except for the Republic of Ireland data, which is at 24 February 2007, like the UK figures. This information is taken from the 2007 final broker packPDF (94.2 KB). The information in the table was taken from Tesco Preliminary Results 2008/09 Additional Information.[76]

Country Entered Stores Area (m²) Area (sq ft) Turnover (£ million)
People's Republic of China China 2004 79 543,947 5,855,000 800
Croatia Croatia 2010 under construction under construction
Czech Republic Czech Republic 1996 113 349,408 3,761,000 1,265
France France 1992 1 1,400 16,000
Hungary Hungary 1994 149 568,473 6,119,000 1,774
Republic of Ireland Republic of Ireland 1997 116 276,014 2,971,000 2,380
Indonesia Indonesia 1977 192 (Closed 1999, Opened 2007) 234,46576 54654
Japan Japan 2003 144 40,877 440,000 408
Malaysia Malaysia 2002 36 235,137 2,531,000 584
Poland Poland 1995 319 698,910 7,523,000 1,135
Slovakia Slovakia 1996 70 270,441 2,911,000 498
South Korea South Korea 1999 347 934,512 10,059,000 2,557
Thailand Thailand 1998 639 999,358 10,757,000 1,326
Turkey Turkey 2003 99 207,452 2,233,000 256
United States United States 2007 115 106,838 (est.) 1,150,000 (est.)
Total 2,420 5,232,767 56,326,000 10,528 (exc. USA)

Ireland

Tesco operated in the Irish grocery market in the early eighties, however sold its operations there in March 1986.[77]

Tesco re-entered the Irish market in 1997 after the purchase of Power Supermarkets Ltd. It now operates from 101 stores across Ireland. Like Tesco stores in the UK, these offer a home delivery shopping service available to 80% of the Irish population as well as petrol, mobile telephone, personal finance, flower delivery service and a weight-loss programme.[78] Also available is Tesco's loyalty programme, the Clubcard.

Tesco is now the grocery market leader in the Republic of Ireland, with a reported November 2005 share of 26.3%.[79] Tesco Ireland also claims to be the largest purchaser of Irish food with an estimated €1.5 billion annually.[80]

South Korea

Tesco launched its South Korean operations in 1999 and partnered with Samsung, currently Tesco holds 94% of the shares in the venture.[81] It operates both hypermarkets and its express format as well as a home delivery shopping service. It is the second largest retailer in South Korea, just behind Shinsegae Group.[81]

On 14 May 2008, Tesco agreed to purchase 36 hypermarkets with a combination of food and non-food products from E-Land for $1.9 billion (£976 million) in its biggest single acquisition, making Tesco the second largest in the country. The majority of the E-Land stores formerly belonged to French retailer Carrefour before 2006 and most of the stores will be converted to Tesco Homeplus outlets. Tesco's South Korean discount store chain, Home Plus, currently has 66 outlets.[82][83]

United States

A Fresh & Easy store in Summerlin, Nevada, United States

In February 2006, Tesco announced its intention to move into the United States market, opening a chain of grocery convenience stores on the West Coast (Arizona, California and Nevada) in 2007 named Fresh & Easy.[84] The company established its U.S. headquarters in El Segundo, California at 2120 Park Place. The first store opened in November 2007 with 100 more expected in the first year. They plan to open a new one every two-and-a-half days in the United States, to mimic the successful expansion of pharmacy chains such as Walgreens in the U.S.

The first Tesco Fresh & Easy Neighborhood Markets opened in Hemet (Riverside County), Anaheim (Orange County), Arcadia (Los Angeles County), West Covina (Los Angeles County) and Upland (San Bernardino County), California in 2007.

Fresh & Easy operates 135 stores in the United States.

Other

China

Tesco entered China by acquiring a 50% stake in the Hymall chain (brand ceased in 2007) from Ting Hsin of Taiwan in September 2004. In December 2006 it raised its stake to 90% in a £180 million deal.[85] Most of Tesco China's stores are based around Shanghai, but according to Tesco it plans to equip the business to expand more quickly and in different areas. Tesco has been increasing its own brand products into the Chinese market as well as introducing the Tesco Express format.[86]

Czech Republic

A Tesco store in Hradec Králové, Czech Republic

Tesco opened its first store in the Czech Republic in 1996 and now has over 84 stores, with further planned.[87] Tesco opened its first stores in the Czech Republic by buying US corporation Kmart's operations in the country and converting them into Tesco stores. Tesco is also keen to expand non-food items and has already opened petrol stations and offers personal finance services in the Czech Republic.[88]

France

Tesco have a "Vin Plus" outlet in Calais, France, selling wine, beer and spirits.[89]

Hungary

Tesco launched in Hungary in 1995 after purchasing KMart's operations in the area. It also opened its first hypermarket in Hungary in the same year. Tesco operates through 101 stores in Hungary with further openings planned.[87] Tesco offers its value, standard, healthy living and finest range in its stores. Tesco Hungary also offers a clothing line and personal finance services.[90]

India

Tesco recently announced plans to invest an initial £60 million ($115 million) to open a wholesale cash-and-carry business based in Mumbai, India. Tesco's new wholesale operation will also supply the Tata Star Bazaar stores. Overseas companies are only allowed to open wholesale, licence or franchise arrangements. If the legislation were to change, Tesco announced they would open their own consumer retail business.[91][92][93]

Indonesia

Tesco launched in Indonesia in 1977, opened oultet in Menteng Prada.

Isle of Man

Tesco has a large purpose built store and car park in Douglas on the Isle of Man, behind the harbour in Douglas. There are plans to rebuild the store to almost double the floor space, including a mezzanine level and to replace the open car parking area with a 2 storey car park. Tesco also runs a home delivery service across the island.

Japan

Tesco Japan first began operations in 2003. It was brought about by a buy-out of C Two stores for £139 million in July 2003 and later Fre'c in April 2004.[94] Tesco has adopted an approach which focuses on small corner shops operating similarly to its Express format rather than opening hypermarkets. It has also launched its range of software in Japan.[87]

Malaysia

Tesco opened its first store in Malaysia in May 2002 with the opening of its first hypermarket in Puchong, Selangor. Tesco Malaysia currently operates 32 Tesco and Tesco Extra stores. Total store by state in Malaysia is Selangor with 11 store, Kuala Lumpur 3 store, Perak 5 store, Johor 4 store, Penang and Kedah 3 store, Melaka, Negeri Sembilan and Kelantan 1 store. Tesco partnered with local conglomerate Sime Darby Berhad which holds 30% of the shares.[95] Tesco also acquired Makro, a local wholesaler which was rebranded Tesco Extra and provides products for local retailers. Tesco Malaysia offers a value range, own branded range, electronic goods, the loyalty clubcard and clothing. Tesco Malaysia's clubcard introduced Green ClubCard Points in 2007 making Tesco Malaysia to be the first Tesco international business to introduce the scheme (Green ClubCard Points).[96]

The Netherlands

Tesco has no stores in The Netherlands but has market shares in Holland's largest supermarket chain Albert Heijn.

Pakistan

Tesco, along with delegates from other supermarkets and retailers recently held talks with a Pakistani trade ambassador at an invites only meeting in Manchester.[97][98] The company announced plans to open stores in wealthy suburbs of the capital city Islamabad and the second city Karachi.[99] These new stores will be wholesale cash-and-carry businesses. They will compete with Makro and Carrefour who already operate in Pakistan and have done so for many years.[100] Tesco have not yet ruled out plans to open stores in an Express format, though this format would cater more towards the country's growing middle class.

Poland

A Tesco Hypermarket in Prokocim, Poland

Tesco entered the Polish market in 1995. It currently operates from 334 stores and has plans to open even more.[87] Tesco Poland offers the value, healthy living and own branded line of products as well as regional produce, petrol, personal finance services and on-line photo processing. Tesco Poland is keen to promote its green credentials.[101]

Slovakia

Tesco Slovakia opened in 1996 as part of Tesco's international expansion aims. It now operates from 48 stores and has plans to introduce Tesco Express like local stores.[87] Tesco Slovakia has recently put great emphasis on organic products. However, Tesco Slovakia caused controversy amongst the Slovak government when it was found to have come foul of food safety laws in 2006.[102]

Thailand

Tesco entered Thailand in 1998 and operates through 380 stores as part of a joint venture with Charoen Pokphand and named the operation Tesco Lotus. This partnership was dissolved in 2003 when Charoen Pokphand sold its shares to Tesco. Tesco Lotus sells a diverse range of products from value food products to electronics to personal finance services. The company is keen to promote its green values and has partnered with the UNEP. Tesco Lotus claims to serve 20 million customers every month and that 97% of its goods are sourced from Thailand.[103]

Turkey

Tesco entered Turkey in 2003 and uses the trading name "Kipa". Tesco remains focused on building infrastructure in Turkey to complete its expansion plans and has already introduced the Tesco Express format into Turkey. There are plans to increase the rate of expansion as basic infrastructure is built.[87]

Former markets

In September 2005, Tesco sold its stores in Taiwan to Carrefour.

Although Tesco currently owns one store in France, it previously owned a French chain called Catteau between 1992 and 1997.

Financial performance

Tesco is listed on the London Stock Exchange under the symbol TSCO. It also has a secondary listing on the Irish Stock Exchange with the name TESCO PLC.

All figures below are for the Tesco's financial years, which run for 52 or 53 week periods to late February. Up to the 27 February 2007 period end the numbers include non-UK and Ireland results for the year ended on 31 December 2006 in the accounting year. The figures in the table below include 52 weeks/12 months of turnover for both sides of the business as this provides the best comparative.

52/3 weeks ended Turnover (£m) Profit before tax (£m) Profit for year (£m) Basic earnings per share (p)
28 February 2009 54,300 3,128 3,090 28.92
23 February 2008 47,298 2,803 2,130 26.95
24 February 2007 46,600 2,653 1,899 22.36
25 February 2006 38,300 2,210 1,576 19.70
26 February 2005 33,974 1,962 1,366 17.44
28 February 2004 30,814 1,600 1,100 15.05
22 February 2003 26,337 1,361 946 13.54
23 February 2002 23,653 1,201 830 12.05
24 February 2001 20,988 1,054 767 11.29
26 February 2000 18,796 933 674 10.07
27 February 1999 17,158 842 606 9.14
28 February 1998 16,452 760 532 8.12

As of its 2006 year end Tesco was the fourth largest retailer in the world behind Wal-Mart, Carrefour and Home Depot. Tesco moved ahead of Home Depot during 2007, following the sale of Home Depot's professional supply division and a decline in the value of the U.S. dollar against the British Pound. METRO was only just behind and might move ahead again if the euro strengthens against the pound, but METRO's sales include many billions of wholesale turnover, and its retail turnover is much less than Tesco's.

At 24 February 2007 Tesco operated 1,988 stores in the UK (2.581 million m², 27.7  million square feet) and 1,275 outside the UK (3.75 million m², 40.4 million square feet).

UK market share

Graph Showing UK Market Share of Tesco

According to TNS Worldpanel,[104] Tesco's share of the UK grocery market in the 12 weeks to 30 November 2008 was 30.9%, up 4.3% on 12 weeks to 2 December 2007. Across all categories, over £1 in every £7 (14.3%) of UK retail sales is spent at Tesco. Tesco also operates overseas, and non-UK revenue for the year to 24 February 2007 was up 18% on 25 February 2006.

Supermarket Consumer
Spend (£000s)
Market Share
November 2008
+/- from
\December 2007 2008
Tesco 6,351,531 30.9% 4.3%
Asda 3,410,431 16.8% 7.8%
Sainsbury's 3,175,543 16% 6.1%
Morrisons 2,233,137 11.8% 10.3%

Tesco litigation

As with any large corporation, Tesco is involved in litigation, usually from claims of personal injury from customers, claims of unfair dismissal from staff, and other commercial matters. Two notable cases were Ward v Tesco Stores Ltd, which set a precedent in so called 'trip and slip' injury claims against retailers; and Tesco Supermarkets Ltd v Nattrass, which reached the House of Lords, and became a leading case regarding the corporate liability of businesses for failures of their store managers (in a case of misleading advertising).

Criticism

Tesco have been criticised for aggressively pursuing critics of the company in Thailand. Writer and former MP Jit Siratranont is facing up to two years in jail and a £16.4 million libel damages claim for saying that Tesco was expanding aggressively at the expense of small local retailers. Tesco served him with writs for criminal defamation and civil libel.[105]

Criticism of Tesco includes allegations of stifling competition due to its undeveloped "land bank",[106] and breaching planning laws.[107]

In December 2006 The Grocer magazine published a study which named Tesco as having the slowest checkouts of the six major supermarkets. Somerfield had the shortest queues with an average wait of 4 min 23 seconds. In order of least time spent at the checkout, the other major supermarkets were Waitrose, Sainsbury's, Asda, Morrisons.[108]

The Grocer also named ASDA as the cheapest UK supermarket (based on 33 items). Tesco was second and Sainsbury's and Morrisons joint third.[108] Tesco price check tends to differ saying out of 7134 (compared to ASDA) products, (Survey carried out between 9 July 2007 and 11 July 2007) Tesco is cheaper: 1835 (compared to 1251 the previous week), Tesco is more expensive: 975 (compared to 984 the previous week) and Tesco is the same price: 4324 (compared to 4996 the previous week).[109]

Tesco received criticism for bureaucratic and inflexible parking systems in its Bloomfield store in Dublin, Ireland.[110]

Tesco continues to advertise on Fox News's controversial Glenn Beck Show despite 60 major US companies, and a number of UK companies, pulling their advertisements. The cancellations were largely a consequence of Beck's accusation that Barack Obama was racist and had a "deep-seated hatred for white people". In contrast, Waitrose has already ceased advertising on the show.[111]

Opposition to Tesco expansion

Tesco's expansion has not been without criticism and, in some cases, active opposition.

  • A 2006 article on the thisismoney website quoted various criticisms of the company's expansion and dominance of the UK supermarket scene.[112]
  • In 2007 residents in the Hall Green area of Birmingham made their opposition strongly evident when Tesco announced plans to open a store in the Robin Hood area of the suburb. The Local Liberal Democrat councillor was actively involved in the opposition to the store opening on the grounds it would affect local businesses and therefore the consumer choice in the area. Tesco was given planning permission to open the store in April 2008 and plans were set up by residents to boycott the store and continue to use local outlets. Since opening Tesco's deliveries have caused major traffic problems in the area and Birmingham City Council have announced plans to put a loading ban into force between 7:00am and 10:00am to relieve congestion.[113]
  • In 2008, opposition to a proposed expansion in Coventry was reported in the Coventry Telegraph.[114]
  • In 2007 residents of Cambridge organised a campaign, "No Mill Road Tesco", with the aim of preventing Tesco from opening a store on Cambridge's Mill Road, a street running just to the south of the centre of Cambridge which is a lively, cosmopolitan area home to many independent shops, delicatessens, cafes and curry houses.[115] In March 2008, Tesco's application was refused by the council. Tesco appealed, but lost the appeal in November 2008.[116] The planning inspector dismissed the appeal on the grounds of highway safety.[117] In mid-2008, while waiting for the appeal to be heard, Tesco applied for planning permission for an air conditioning and refrigeration plant, which was also rejected by the council.[118] Tesco eventually opened a restricted size store with no external refrigeration plant or alcohol license in August 2009.[119]
  • In March 2007 residents in Bournville, Birmingham fought to maintain the historic alcohol free status of the area, in winning a court battle with Tesco, to prevent it selling alcohol in its local outlet. No shops are permitted to sell alcohol in the area and there are no pubs, bars or fast-food outlets in Bournville.[120]
  • Plans for a large Tesco store in St Albans, Hertfordshire, attracted widespread local opposition. This led to the formation of the "Stop St Albans Tesco Group". In June 2008, St Albans Council refused planning permission for the proposed store.[121]
  • In 2008, Tesco faced opposition to plans to build a new store in Tonypandy, South Wales. Local business protested against the plans and Tesco was later refused planning permission by the local council.[122] Tesco later said they would appeal to the Welsh assembly, However the result of this has not emerged.
  • In 2009, Tesco received planning permission to build a Tesco Express store on Hope Street, Liverpool despite there being a total of eight other Tesco stores (In Express, Metro and Superstore formats) within less than or equivalent to a mile from its proposed location.[123] This initiated a campaign in the local area[124] and a large Facebook group movement to prevent the construction going ahead.[125] Tesco withdrew the plans on 3 September 2009 due to widespread opposition and condemnation from local people.

However the expansion of Tesco is not opposed by everyone. Plans for a new Tesco store in Immingham, North East Lincolnshire were warmly received by the local council[126] and by members of the public.[127]

Further reading

  • MacLaurin, Sir Ian (1999). Tiger by the Tail: A Life in Business from Tesco to Test Cricket. London: Pan Books. ISBN 0330373714. 
  • Simms, Andrew (2007). Tescopoly: how one shop came out on top and why it matters. London: Constable. ISBN 1845295110. 
  • Humby, Clive; Hunt, Terry & Phillips, Tim (2006). Scoring points : how Tesco continues to win customer loyalty. London & Philadelphia: Kogan Page. ISBN 9780749447526. 
  • Nash, Bethany (2006). Fair-Trade and the growth of ethical consumerism within the mainstream : an investigation into the Tesco consumer. Leeds: University of Leeds. ISBN 75272130. 

See also

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  98. ^ Trade tsar on NW mission Manchester Evening News, 17 March 2009
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  100. ^ Makro Pakistan
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  104. ^ Snapshot of the market - november 2008
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  113. ^ Michael Wilkes » 2009 » January
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  115. ^ No Mill Road Tesco
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  117. ^ Appeal Decisions: Inquiry held on 30 September – 3 October 2008
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External links

Official
Critical sites

Simple English

[[File:|thumb|250px|A self-service Tesco in St Albans, Hertfordshire, England.]] Tesco is a supermarket chain. They started in the United Kingdom, and are currently based there. They now have supermarkets in other countries around the world. Tesco originally only sold food, but they now sell other things like mobile phones, DVDs and videos, clothing, and books. They are also an Internet Service Provider in the United Kingdom. Tesco are the biggest supermarket in the UK and Ireland and also are the third largest retailer in the world. Tesco sell thousands of products that can be changed and of quality. Tesco is also a PLC, a public limited company.


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