Tesco News
Tesco has been given a month to improve how it treats suppliers following an investigation by the Groceries Code Adjudicator (GCA)
The GCA was concerned about three key issues: Tesco making unilateral deductions from suppliers, the length of time taken to pay money due to suppliers and, in some cases, an intentional delay in paying suppliers.
Over the course of her investigation, adjudicator Christine Tacon found delay in payments arising from data input errors, duplicate invoicing, reductions to maintain Tesco margin, as well as unilateral deductions resulting from forensic auditing, short deliveries and service level charges.
She said: “The sums were often significant and the length of time taken to repay them was too long. One supplier was owed a multi-million-pound sum as a result of price changes being incorrectly applied to Tesco systems over a long period. This was eventually paid back by Tesco more than two years after the incorrect charging had begun.”
Tacon advised Tesco to “hold off” making unilateral decisions from money owned for goods supplied, to give suppliers 30 days to challenge any proposed deductions and that the retailer correct any pricing errors within seven days of notification.
Tesco has been given four weeks to say how it plans to implement recommendations by the GCA, with regular reports demanded on its progress.
Concerns were also raised over payments for better positioning on the retailer’s shelves. Although no evidence of direct payments were found, Tacon is to launch a consultation into indirect methods of obtaining better positioning. “I am concerned that, as a result of these practices, the purpose of the Code may be circumvented to the detriment of smaller suppliers who cannot compete with payments for better positioning, category captaincy or to participate in range reviews,” said Tacon. “I have decided to launch a formal consultation with the sector, involving both retailers and suppliers, to help me reach a firm conclusion on whether these practices are acceptable.”
Dave Lewis, Tesco group chief executive officer, said: “In 2014 we undertook our own review into certain historic practices, which were both unsustainable and harmful to our suppliers. We shared these practices with the Adjudicator, and publicly apologised. I would like to apologise again. We are sorry.
“I am grateful to the Adjudicator for the professional manner in which the investigation has been conducted. We accept the report’s findings, which are consistent with our own investigation.
“Over the last year we have worked hard to make Tesco a very different company from the one described in the GCA report. The absolute focus on operating margin had damaging consequences for the business and our relationship with suppliers. This has now been fundamentally changed.
“In January 2015, we made material changes to our business that addressed the majority of the historic practices referred to in the report. We have changed the way we work by reorganising, refocusing and retraining our teams and we will continue to work in a way which is consistent with the recommendations.”
Retailer reports ‘strong’ Christmas trading although saw sales fall by 1.5% during the third quarter
Tesco saw like-for-like sales rise by 1.3% during the key six-week Christmas trading period thanks to low prices and a strong “seasonal offering”.
In contrast, like-for-like sales fell by 1.5% during the retailer’s Q3 (13 weeks to 28 November), which the retailer said was down to not repeating ‘£5 off £40’ national coupon campaigns from the previous year.
Chief executive Dave Lewis said more staff on shop floors boosted sales over Christmas, which also saw volumes rise by 3.5% and transactions increase by 3.4%. He hailed the Christmas results as a “significant improvement” on recent years.
“Our Christmas performance was strong, benefiting from lower prices on an outstanding range of products,” Lewis said. “Our customer service improved materially and our colleagues went the extra mile.
“Through our ongoing investment in lower, more stable prices, we were around five per cent cheaper than last year on the lines that mattered most to our customers at Christmas.”
Lewis said strong Christmas performance was evident across all formats and categories, including positive like-for-like sales growth in Tesco Extra.
International sales have continued to grow, he continued, including positive sales momentum in Europe and Asia, and the Thai business reaching its highest-ever market share.
“There is plenty more to do, but we are making good progress and are trading in line with profit expectations for the full year,” he added.
Retailer set to build 10,000 sq ft temporary store in carpark of flooded superstore, while Cumbria recovers from severe floods
Tesco is building a temporary store in the carpark of its flooded Carlisle superstore while the region continues to recover from devastating floods.
The retailer said work on the 10,000 sq ft temporary building should be completed by next Friday (18th December), local paper The News and Star reported, and will have standard store opening times.
All other Tesco stores across the county are open as normal, with the supermarket helping to provide free clean water and distribute ‘cages’ of supplies to those affected by floods. Cumbrian wholesaler A Stephenson has also been donating vegetable to the local town hall, which has been made into soup and offered to the community.
Tesco store director Shirley Turnbull told The News and Star: “I know that in the aftermath of something like this as the community starts to recover, it’s often simple things like somewhere to find basic supplies that can provide a little help.”
The news comes as Defra has released support packages of up to £20,000 for farmers who have been affected by Storm Desmond, to help restore damaged agricultural land.
Support funding is applicable for issues including restoring productive grassland or horticultural land, restoring farm vehicle access or repairing agricultural drainage.
Farming minster George Eustice also announced that the Rural Payments Agency will not carry out inspections in the flooded areas and increase flexibility when inspecting those affected.
He said: “We understand flooding can have serious consequences for farmers and we want to provide practical support to those affected by last weekend’s unprecedented rainfall in Cumbria and North Lancashire.
“The new Farming Recovery Fund will help to cover farmers’ short-term uninsured recovery costs, such as repairing damaged soils, tracks and flood channels. We will pay out on all eligible applications and we hope it will offer some relief at this challenging time.”
More rain is forecasted for the Cumbria and North Lancashire regions this weekend, with 13 flood warnings in place.
More than 60 cases of food collected as part of the Neighbourhood Food Collection initiative in Newmarket
A team from AMT Fruit mucked in with Tesco staff to collect food donations from customers for charity.
The AMT Fruit volunteers were on hand at Tesco Extra Newmarket collecting food donations from customers on Thursday and Friday in the first week of December.
Shoppers were extremely generous, and more than 60 cases of food were collected as part of the Neighbourhood Food Collection initiative.
Run by Tesco with partner charities FareShare and The Trussell Trust, the initiative, now in its seventh year, aims to provide at least five million meals to people in need this winter.
AMT Fruit, as part of Tescoʼs drive to reduce food waste, has been working with FareShare on an ongoing basis, supplying surplus stock of citrus, grapes and melons to their many charities supported across the UK.
This surplus food is combined with the food donated during the Neighbourhood Food Collection and redistributed to charities and community projects who transform it into nutritious meals for their beneficiaries.
Last year, FareShare redistributed enough food for 16.6 million meals to 2,135 charities and community projects.
Supermarket giant set to pump £6 million into the development of the artisan business, which has seen losses increase after a rapid expansion
Tesco’s artisan coffee business Harris + Hoole has seen its pre-tax loss double, following a rapid expansion of the business.
The trendy chain opened 22 new shops in the most recent financial year, taking the total number of stores it has to 45.
The business posted a pre-tax loss of £25.6 million in the year ending 1 March 2015, compared to £12.8m for the year ending the 23rd of February 2014, accounts held at Companies House reveal.
The accounts also reveal that the business is set to need £6m of further funding from Tesco up to the end of 2017 in order to meet its financial obligations.
Speaking in the report accompanying the accounts, the directors noted: “The UK coffee market is highly competitive and already served by a number of international, national and local competitors.”
Tesco has reportedly so far committed to continue to provide financial support for at least another 12 months, and has said it intends to support up to £7.5m of funding, according to the Daily Telegraph.
The supermarket is also not seeking the repayment of its existing £48m loan to Harris + Hoole, and the interest it is owed by the business for the next year.
Tesco’s former chief executive Philip Clarke identified the business’ investment in Harris + Hoole as an opportunity to drive footfall into its Tesco Extra stores, as well as it providing an opportunity to tap into the growing casual dining scene.
The man previously in charge of Tesco’s collection of in-store restaurants and coffee shops, Michael Holmes, was ousted in March as part of new CEO Dave Lewis’ personnel clearout.
Tesco is to stop selling lamb products in mixed origin packs following a meeting with the National Farmers’ Union (NFU).
From February of next year, the retailer will only supply packs of lamb that clearly state which country the product is from. Tesco had previously come under fire from farmers over the number of product facings they dedicated to produce from non-British countries.
The meeting involved the NFU, NFU Scotland, NFU Cymru, and Ulster Farmers’ Union, as well as the retailer and its processor representative, with the aim of highlighting the role Tesco has to play in supporting the British lamb sector.
A joint statement from the four farming unions said: “The meeting involved robust, but useful discussions where all parties agreed that there was a real benefit in continuing conversations to develop greater transparency in the lamb supply chain.
“At this meeting Tesco has confirmed that at the end of February 2016, it will not be selling lamb products in mixed origin packs. The unions welcome this move as it will allow customers to make an informed decision in the origin of the product that they are buying.”
A spokesperson for Tesco said: “We have a long history in supporting UK agriculture and continue to have an open conversation with the NFU and processors on the crucial roles we all have in supporting the lamb industry. We updated them on our plans, which included the single source labelling of products like mince.”
The Jaffa Juniors tour, which launched in April 2015 in tandem with the Tesco Eat Happy scheme, has worked with 5,000 children
An initiative launched by citrus specialist Jaffa in conjunction with the Tesco Eat Happy Project is celebrating after reaching a rather significant milestone in its educational program.
The Jaffa Juniors tour, which launched in April 2015, has put its 5,000th child through the scheme as it undertook lessons at Grimsargh St Michael’s Church of England School in Preston, Lancashire.
Roy Van Grevenbroek, of Jaffa, said: “The Jaffa Juniors tour was launched because as a brand we recognise the importance of education to children of where their food comes from and how it is made..
“The tour was launched in conjunction with the Tesco Eat Happy project and is a great way of interacting with kids on a 1-2-1 and group basis and getting over the importance of fresh produce in our everyday diets.”
The lessons are aimed at Key Stage 1 and 2 children covering infant schools nationwide, and were developed in conjunction with education resource specialists TTS.
Van Grevenbroek added: “It is important that we educate from an early age to build the recognition through teens and into early adulthood.
“The tour has been successful in doing just that and is a testament to both the support given by the Tesco Eat Happy project and the schools themselves for being open to this outside interaction. As a brand we have made an ongoing commitment to the program which will extend into 2016 and beyond.”
The Jaffa brand was formed over 50 years ago in Israel. The brand is imported by Israeli grower/exporter Mehadrin, and distributed to Tesco stores in the UK via AMT.
Underlying profits for the first half of its financial year were £354 million, 55% down on the same period last year
Tesco has endured a further fall in profits.
Underlying profits for the first half of its financial year were £354 million, 55% down on the same period last year.
Its pre-tax profit was £74m, compared with a loss of £19m for the same period a year ago.
UK like-for-like sales were down 1.1% in the second quarter, an improvement from the first quarter’s fall of 1.5%. International sales were up 1%
In February, Tesco reported the worst results in its history, with a record statutory pre-tax loss of £6.4bn for the year to the end of February 2015.
Chief executive Dave Lewis said: “In the UK, we continue to improve all aspects of our offer for customers, resulting in volume growth which is allowing us to create a virtuous circle of investment.
“Our transformation programme in Europe has accelerated growth and reduced operating expenses, and in Asia, we have increased market share in challenging economic conditions.”
The supermarket is still under a criminal investigation by the Serious Fraud Office (SFO) after it admitted overstating its profits by £263m nearly a year ago.
Tesco’s Q2 results, David Gray, retail analyst at Planet Retail, said: “As expected, the numbers this morning indicate further signs of stabilisation at Tesco’s domestic unit, with like-for-like declines narrowing on those reported at Q1. There were also encouraging signs on volumes at Tesco, indicating this is a volume-led recovery.
“These figures have firmly cemented the split in the UK mid-market into two camps – Tesco/Sainsbury’s showing signs of recovery and Asda/Morrisons being the laggards. Considering Tesco was in the throes of the accounting scandal just 12 months ago, being in the former camp is an achievement in itself.
“Despite positive numbers in CEE, problems are persisting in Asia where like-for-likes remained flat in Q2 – an improvement, yes, but not stellar growth. Although Tesco’s Chairman has recently reaffirmed its commitment to the geographies in which it now trades, long-term disposals could still be on the cards considering the relative weakness in the company’s balance sheet and the lack of a dunnhumby sale.
“With Korea already culled, Malaysia is the obvious next market at risk with limited growth potential. However, it is profitable and well-established and so could command a decent price. In CEE, markets like Poland would generate the largest windfall considering its size relative to neighbouring markets and the presence of a string of international operators that could be would-be buyers. Most of these aforementioned markets look safe – for now at least.”
Retailer says figures that show exotic salads are becoming lunch option of choice are behind move to expand range
Tesco has trebled its on-the-go salad range to more than 50 lines following new data that shows the lighter salad market is growing around three times as fast as the lunchtime sandwich market.
Data produced by market analysts Nielsen, and published by Tesco, reveals that the sandwich market is growing by 5%, while figures from market insight firm IRI revealed demand for lighter, healthier salads has soared by 19% over the last 52 weeks, while leafy salads are up by 13%.
Tesco said exotic and lighter salads are becoming the lunch option of choice for office workers, as better quality produce is attracting new consumers who might previously have bought a sandwich or wrap. Its new range has expanded both the Finest and Healthy Living tiers, and includes four first-to-market salads.
New additions include a crayfish and mango salad, a coconut Asian chicken salad, and a king prawn and spicy Charlotte potato salad with sour cream.
Tesco salad buyer Helen Dwyer said: “The quality and range of ready to eat salads has improved so much in recent years that they are attracting shoppers who might otherwise have bought a sandwich, roll or wrap.
“Traditionally, sales of prepared salads would rise during the summer months and drop again during the winter. Now, because of the exciting number of new gourmet salads available that demand is not only sustained throughout the year but is bringing in plenty of new customers who might otherwise have chosen a sandwich as a lunchtime snack.
“This current boom has prompted us to launch what we believe to be among the most sumptuous and wide-ranging ‘on the go’ salad range available on the high street but at equally mouth-watering prices.
“We’ve included something for everyone – from our finest top of the range lines to lighter sushi rice salads and Healthy Living range for those looking to maintain a balanced diet.”