No longer the bad guy, Tesco set to reassert UK dominance

Mon Dec 5, 2016 2:02am EST
 
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By James Davey

LONDON (Reuters) - Two years after an accounting scandal plunged Tesco into the worst crisis in its 97-year history, the British supermarket looks set to reassert its dominance, given the edge by a transformed relationship with suppliers.

Monthly industry data shows Tesco (TSCO.L: Quote) is once again pulling ahead of rivals in Britain under a plan led by boss Dave Lewis, where lower prices and improvements in store have led to more goods being sold to more customers.

That in turn has allowed Tesco to agree better deals with suppliers, driving more price cuts and further volume growth - and consequently even better deals with suppliers.

It's what former Unilever (ULVR.L: Quote) executive Lewis calls "the virtuous circle" and it has enabled him to target both an increase in sales and profitability.

Tesco, whose shares have risen 38 percent this year, is entering the key Christmas weeks with growing sales momentum. That could spell trouble for traditional rivals Sainsbury's (SBRY.L: Quote), Asda (WMT.N: Quote) and Morrisons (MRW.L: Quote), as well as the German discounters Aldi [ALDIEI.UL] and Lidl [LIDUK.UL], whose sales growth has started to slow over the past year.

"Years ago we dealt with Tesco and we were just a number but I've really seen a change," said Lisa Moore, senior national account manager at The Abergavenny Fine Food Co., which supplies the supermarket with goats' cheese and party food.

She said Tesco helped it after a fire in 2015 devastated a production unit, providing technical support and advice on how to make it fit for the future.

"There's definitely a better relationship and a clear understanding of what our potential can be," said Moore.   Continued...

 
A discarded carrier bag is seen in a shopping trolley outside a Tesco supermarket in London, Britain, January 5, 2015.     REUTERS/Luke MacGregor/File Photo