Tesco - and the giraffe in a hamster wheel

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This week has been pregnant with pronouncements. But they have raised many more questions than they’ve answered.

Arguably the most significant involves the government’s decision to backtrack on its controversial minimum alcoholic drink pricing plans. But however humiliating this latest Cameron climbdown, what happens next? And what about Scotland?

Tesco’s acquisition of Giraffe is equally unresolved. On the one hand, it’s an interesting and potentially clever tie-up with a cute and successful restaurant brand and, like coffee chain Harris & Hoole, the addition of high margin sales in increasingly unproductive out-of-town stores could simultaneously enhance the shopping experience far better than an in-house Tesco café ever could. Tesco has also reassured with its decision to retain the existing management and run Giraffe as a separate business.

On the other hand, as social media activity has already confirmed, the funky, quirky and wholesome chain’s image fits as comfortably with Tesco’s brand as a giraffe fits in a hamster wheel. And it will be a real feat on Tesco’s part not to interfere. When it comes to opening new restaurants, for example, will the Giraffe team be able to prioritise based on opportunity, or will Tesco’s strategic need for an out-of-town offer come first?

” The cute, quirky and wholemeal image of the restaurant chain fits as comfortably with Tesco’s brand as a giraffe fits in a hamster wheel”

Adam Leyland, Editor

Promise

The devil will also be in the detail of Tesco’s Price Promise. From our experience in compiling The Grocer 33 every week, we know how hard and contentious it is to compare the price of one own-label product vs a rival’s, with pack weights constantly altering, and arguments over quality, provenance, specification, sourcing etc etc. One likes to assume Tesco has learnt its lessons from the failure of Double the Difference. But even if it is not a costly mistake, the decision to include own label has opened a can of worms and, lacking the neatness and clarity of Sainsbury’s Brand Match, may mean its investment underwhelms.

Then there’s the online plans of Morrisons. Last week The Grocer floated the possibility of a tie-up with Ocado. This week, three weeks after officially denying to us that it had been in discussions with Ocado, it’s admitted that commercial discussions are ongoing. And though he declined to give more details to a puzzled press, CEO Dalton Philips said its online grocery offer, to be launched by the end of 2013, is not dependent on a tie-up with Ocado. The average tenure of a CEO is three years. Will we really have to wait that long - or longer - for Dalton Philips to unveil his online plans in full?

Meanwhile, Costcutter will also have its work cut out to develop the extensive chilled operations it will need following its tie-up with Palmer & Harvey. In the meantime, it looks like Martin McColl is eyeing Nisa, not wholesale incumbent Palmer & Harvey, to help develop its chilled business. And, if Palmak, Palmer & Harvey’s previous joint venture attracted competition concerns, won’t this one too?

The only question on which there has been closure this week is Booker’s acquisition of Makro, cleared by the authorities on Thursday. But will CEO Charles Wilson’s plans work? For answers to all these questions, keep reading The Grocer.

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