Tesco

IGD Convention Speech by Richard Brasher

Press Release   •   Oct 12, 2010 15:33 BST

Good morning and thank you.

I last spoke at this convention in 2006 and again the theme of the day was looking to the future.

Now, whilst life is best lived looking forward, it is often best understood looking back.

We’ve all spent some time looking back of late, be it wars, economics, politics, health or the environment.


1.  The 70th anniversaries of the Blitz and the Battle of Britain.   Air raids, evacuations, families sleeping in Tube stations.  The memories have been powerful – and utterly alien to most people who were not alive at that time.

2. Even if we fast-forward almost half a century, to the mid-1980s , a time when many of us here began working in the food industry, so much of the landscape looks totally unfamiliar now.  Forget pomegranates, sushi and feta.

For most people, convenience still meant frozen, we were more worried about what microwaves might do to us than how they might heat our food, and the height of innovation in our stores was the humble sandwich.


Delivering for customers

3. Since that time British food manufacturing and retailing has been totally transformed.  It has become the most modern, responsive and innovative in the world.  Tesco has changed beyond all recognition too – from a domestic grocer to an international retailer of goods and services.

4. But one thing has remained constant: our focus on the customer.  Passionate, relentless, maybe even fanatical, we have never flinched from the belief  that our business revolves around our customers, and the need to win their loyalty.

5. On behalf of Tesco I can give you an assurance that this focus will not change in the years ahead.

6. It is this focus on doing the right thing for customers that has delivered huge benefits.  In the rough and tumble of our trade we should not blind ourselves to this, nor forget it.

7. The  cost of food has fallen dramatically – a huge benefit for everyone, but particularly for lower-income families.  In the 20 years since the mid-1980s, the proportion of a household’s income spent on food fell by a fifth.  It would have taken the average person over two hours in 1950 to earn enough to buy their Sunday roast.  By the mid-eighties you'd still have to work over an hour-and-a-half.  Now it’s less than an hour.

8. Our sector has also helped people to eat more healthily.  Consumption of apples, pears, citrus fruits and bananas has risen by 70% since the 1950s and by 15% since the 1980s. 
The amount of fats and oils people eat per week
has almost halved.

9. Retailers, suppliers, manufacturers – we have driven these changes.  They have touched almost every aspect of life, and every family in this country.  We have improved people’s living standards, and have become a powerhouse for economic growth.  The number of people employed in retailing has increased by two thirds since 1981 and the industry now accounts for 8 per cent of GPD.

Food and drink is the largest manufacturing sector in the UK, and invests as much in research and development as aerospace and telecoms.

The IGD has been at the heart of this revolution, serving as a forum of excellence for our industry.

10. And yet this success is something too few people know about.  The fierce competition between our businesses serves our customers well.  But it seems to encourage us to talk publicly more about our problems than our achievements.  This has distracted us from telling our story.

I think it may now be time for us to change that. Time for us to talk with confidence about how our industry is an engine for progress, how it creates opportunity, and how it has given so many in society a better life.


Success built on a shared focus

11. We need to explain the benefits we as an industry deliver.  And we need to go further and explain why our industry can achieve these things.  Our achievements have not been delivered by retailers alone.  Nor by manufacturers on their own. Together we have worked hard and have delivered on behalf of our customers.

12. But when I say we have done this together - retailers and manufacturers - I am not trying to conjure up a romantic idea of us sitting together holding hands, one set of common interests and no commercial tension between us. 
You wouldn't recognise this as authentic.  And, to be frank, any such relationship would not have at its heart the relentless drive, focus and inventiveness that defines our industry.

13. The hallmark of our industry is not some cosy notion of collaboration.  It is competition .

14. All day, every day, retailers compete for  customers' attention, for their trade and for their loyalty.  In a competitive market – and ours is a truly competitive market – the gap between success and failure is narrow.  To succeed we must compete on price, on quality, on service, on innovation.

And it is the relentless drive underpinning this competition which helps improve and transform our products, our offer and the lives of our customers.

15. As to the relationship between retailer and supplier, I know it has provoked almost as many newspaper column inches as the relationships on Eastenders.  But the simple truth is that the king in this relationship is not the retailer.

Nor is it the supplier.  Again it is the customer.  It’s difficult to have an argument with the customer.  What customers thought was a good quality product one week becomes  the same old product the next.  To win we cannot stop raising the bar, pushing ourselves to be better, going that extra mile.

16. Our relationships are competitive.  But providing what is best for the customer gives us a shared focus.

17. In pursuit of this focus we put each other under pressure.  For better products.  Lower prices.  More effective marketing.  This pressure, in truth, cuts both ways.  Suppliers push on behalf of their products, new or improved, and the potential of these products to satisfy the customer.  Retailers push to give the customer new choices, more convenience, fresh ideas. 
The customer is in the driving seat, empowered through the choices they can make.

18. I believe this commercial tension between retailers and suppliers is positive and healthy.  Strong and fair competition forges strong and fair relationships.

It has made our industry more efficient as well as more creative.  Customers demand continual change and improvement.  Our response has created value.  Each year, our industry delivers thousands of new products to our customers – many of them are from small businesses.


How we help each other

19. Commentators sometimes think that an industry forged by competition and efficiency must stand in opposition to the small manufacturer, the local supplier.  Certainly this logic is wrong.  A business like Tesco can provide huge opportunities for small businesses.  Let me give you a few examples.

20. Firstly, I don’t hold to the view that large manufacturers have a monopoly of new ideas and new innovations.  The best ideas can, and often do, come from the smallest suppliers.  What these suppliers may lack is not vision or ideas, it is the confidence to put these ideas into practice.

A business like Tesco can foster and encourage that confidence by providing a strong and certain route to market.

Many of the smaller suppliers I worked with in the 1980s are now amongst our largest.

21. Branston  has supplied Tesco with potatoes since 1989. Starting small, they've grown to become our biggest fresh potato supplier.

By giving them a clear route to market, they had the confidence to innovate.    They have developed and invested in new varieties, facilities and their growers. 
Branston now supply Tesco all year round from Lincolnshire, Somerset and Perthshire, as well as from the traditional potato growing areas of Cornwall, Suffolk and Pembrokeshire.

22. Secondly , we have together developed one of the best supply chain network in the world.  The challenge of satisfying the UK’s 60 million shoppers gives rise to a logistical operation comparable to the D-Day landings - each and every day.  Ten per cent of the UK’s work force are involved in feeding our population, working in 300,000 farm holdings, more than 3,500 fresh food intermediaries and more than 6,500 food and drink manufacturers.

23. This is impressive enough in itself.  But this network provides an efficient route for large suppliers and a huge opportunity of access for small and growing suppliers.

The access we provide through a national and international network can instantly give suppliers an opportunity to touch many more customers – not just across the UK but globally.

24. Rather than standing in opposition to the small manufacturer, retailers like Tesco can liberate suppliers, and increase their potential.

25. Isle  of Man Creameries began their relationship with Tesco by selling cheese to one store on the island.  The business is a co-operative of about 30 farmers who all farm within 30 miles of the creamery itself.  Our customers on the Isle of Man told us it was an excellent product.  So we took it across to the mainland, and it's now sold in our stores throughout the north-west.  It might grow even further afield.

26. Bury Black Pudding Co. started selling to Tesco in Lancashire  in 2006.  By 2009 they were supplying Tesco stores across the UK.  Sales have quadrupled in the past two years and the company recently invested £1 million in their factory, and is one of the few companies in Bury that has continued to take on new staff in the recession.

27. This supply chain network has delivered other benefits too.  In many developing countries, up to 50% of food decays before it reaches the consumer – as a result of inadequate processing, storage and transport.   The equivalent figure in the UK isn’t 50% - it’s 3%.

Whilst we can work to reduce this further, the UK is held up as a model to aspire to around the World.


Where we cannot work alone

28. So our highly competitive market, where the customer is king, has delivered huge benefits.

29. But we must also recognise that there are areas where we need to raise our sights, where competition by itself cannot deliver the answers.  Challenges like rising obesity or climate change cannot be tackled by businesses – or by governments – acting alone. We can only make progress by working together.

30. Take obesity .  We as an industry can choose to camp on our achievement in reformulating products and revolutionising nutritional labelling - helping the average UK consumer in recent years to reduce not increase their overall calorific intake.

Or we can choose to understand that these actions by each of our businesses is not enough: that the reduction in average calorific intake is being outpaced by the reduction in average calories expended.  Many of our businesses have initiatives to get people physically active.

But in truth they cannot succeed without complementary work by government, schools, the media and others to educate, encourage, support and incentivise people to change their behaviour.

31. Or take climate change .  Tesco has been active in recent years, reducing the average carbon emissions of our stores worldwide by 16%, halving energy use per square foot in the UK, and opening the world's first zero carbon supermarket in Cambridgeshire.

32. But we know that we cannot work on climate change alone.  We need a mass movement in green consumption.

We need to green our products and make them not just mainstream, but desirable.  We need to label them better, make them easier to use, and make them more affordable.

All this will help tap consumer power, increase the consumption of low carbon products and send a message up the supply chain that those who produce green products will be rewarded.

33. Again, none of us can make all these changes ourselves. We need to work together to change what we are producing, and how we produce it.  IGD has shown the way.

By getting our businesses to work together, its sustainable distribution project led by our new President Charles Wilson,  has already saved 120 million road miles - with even more to come.

34. I’ve recently written to our top 1,000 suppliers to ask for their collaboration in reducing emissions from all the products we sell by 30% by 2020.  I appeal to each of you today to join us in this initiative - sharing our data, identifying common priorities and collaborating to make progress on them.  It's important work.  But there's another benefit here.

Based on current energy prices, if we succeed we could together save £1 billion a year in costs.  In these tough times I think you'll agree that's a prize worth having.


Conclusion

35. Competition  has made our industry, and made it I believe one of the most dynamic and innovative in the world.  We can be proud of this competition, but proud too of the benefits it has brought not just to our customers but to our economy and society.  Year after year, thanks to innovation, investment and hard work, we have made millions of people’s lives better – the food they eat, the goods they own, the quality of life they lead.  Long may this continue.

36. But part of being one of the most dynamic and innovative industry in the world is recognising new conditions and new challenges.  I've come to realise that, however much it goes against the grain, there are challenges like obesity and climate change where it just doesn't make sense for Tesco to work alone.  We need to work together on these things.  And if we succeed, we might just make the most dynamic and innovative industry in the world even better and even stronger than we are now.  Thank you.