EXCLUSIVEBRANDSOURCING RETAILER/WHOLESALER ...

Profile: Fiscal 2012 was a year of transition and change for Tesco, especially in its biggest market,
the United Kingdom, where profits for the year were off by 1%. This impacted on overall Group
profits, up by 5.3% to £ 3.8 billion. A strong international performance helped, where profits
climbed upward by 18% to £ 1 billion for the first time. Internationally, Tesco operates just over
half its stores, some 3,200 outlets, internationally. Two weak links, however, are found in this
portion of its business. In August 2011, Tesco decided to sell its 129 small stores in Japan (around
Tokyo), allowing Aeon (also in this database) to take 50% of them for a minimum amount while
offering a so-called £ 40 million ‘dowry’ to help Aeon to refurbish the stores over to its store
format. Tesco, which entered Japan in 2003, could not competed effectively with its Tesco
Express and inherited Tsurukame supermarket banners. Tesco also bit the bullet in the US market,
where since the launch in 2007 of its new Fresh & Easy format of local neighborhood stores,
focused on fresh, high-quality, wholesome foods sold at affordable prices, the chain has operated
in the red ever since: More than $1 billion (£ 646 million) had been lost over the past five years.
While Tesco expected to break even by fiscal 2014, since Fresh & Easy sales were up significantly
in fiscal 2012, the company lost patience waiting for bottom line turnaround. (The U.S. Operations
includes a distribution center and of two suppliers’ US operations--2 Sisters Food Group, Inc.
(fresh meat and poultry) also in this database and Wild Rocket Foods LLC (processor of fruits and
vegetables—salads) Indeed, the worsening situation in its biggest market, the UK, deserved more
investment attention. Tesco, during the year sought to improve this business, upgrading its stores
and introducing the successful Tesco Extra format (44 stores in Europe and 3 in Asia) into its
larger stores in UK market. The Extra strategy includes creating “Worlds” within the store, such as
Baby World and Sports World. Tesco also purchased BzzAgent, a service that combines word of
mouth marketing with a commercial application for social media. Since pioneering online grocery
shopping service in 1997, Tesco has emerged as the world’s largest and most profitable online
grocer retailer, realizing sales now at more than £ 2 billion per year. Tesco’s ‘Click & Collect’
option strategy for customers picked up steam as well: Consumers order online and pick up their
purchases as certain store locations. Hundreds of Tesco stores are now adopting this service.
Since own brand is a critical factor to Tesco’s success (its UK stores stocking up to 50% of sales
in own brand), the retailer embarked on a two-year program to refresh more than 8,000 Tesco
brand products in terms of their quality plus brighter packaging. Its Tesco Value brand also was
re-launched as Everyday Value with improved product quality. Tesco additionally launched
premium line of Venture Brands in the UK and its European markets, different product categories
carrying exclusive brand identities without any reference to the Tesco name: Chokablok chocolate
and ice cream, Carousel children’s toys, Parioli Italian foods, Lathams and Nutricat pet food
brands etc. Also, Tesco debuted a Goodness brand for healthy and nutritious foods into the UK
market.
UPDATE: Early in 2013, Tesco re-launched its Baby and Toddler Club brand as Tesco Loves
Baby club, focused on products for children up to three years of age.
Procurement Contacts: John Gildersleeve, Commercial and Trading Director; Andrew Batty (meat
& poultry), Steve Ager (bakery, beer/wine/spirits, frozen foods, convenience foods, snacks,
sweets, soft drinks), Simon Uwins (non-foods), Sandra Turner (groceries, teas, coffee) all
commercial directors; Oleg Pisklov, Senior Buying Manager
TJX COMPANIES, INC., THE
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