September 10 was a dark day for Tesco legend Lord MacLaurin. The supermarket had finally given up on its tortured American arm, Fresh & Easy, and MacLaurin was an angry man.
Not because he wanted the project to be given more time. Far from it, he always knew it was doomed to fail. And it wasn’t just because of the financial damage done to his beloved Tesco, either. It was also because the man responsible for the embarrassingly expensive experiment was MacLaurin’s former protégé, Sir Terry Leahy. It’s clear from the look on MacLaurin’s face that he is still struggling to comprehend why it had to happen at all.
Snapshot
Age: 76.
Status: Married, three children.
Favourite sport: Cricket. I was chairman of England and Wales from 1996 to 2002.
We left it a bit better than when we started. I also support Tottenham.
Hobbies: Golf. My handicap is 14. Before I had two new knees and hips it was better! I also have two springer spaniels.
Favourite meal: I love good pub food.
Favourite wine: I love wine. It’s why Tesco are the leading wine sellers in Europe!
For years, MacLaurin’s decision to hand Leahy the coveted CEO baton in 1997 looked inspired. His blue-eyed boy had already introduced Clubcard and pioneered Tesco’s online service as MacLaurin’s marketing director and, in the early years of his tenure, Leahy kickstarted Tesco’s international expansion with successful acquisitions in South Korea, Poland and the Czech Republic. MacLaurin even referred to Leahy’s appointment as the most important decision in his 18 year tenure at the helm of Tesco. But that was before Fresh & Easy. Would he give the same answer today?
“No,” he replies curtly, jaw set firm. “Terry was part of my team, which went to America twice. We looked at it, inside and out, and we said we’d never do it. And for the first five years of his administration he followed the blueprint that we, and a very good team of people, had laid down.
“Then he phoned me up one day and said, ‘Ian, we are going to America.’ And I said, ‘Terry, you must be nuts! What on earth are you doing that for?’ He said, ‘Well, I’ve had people out there surveying the marketplace and I think it’s going to be terrific.’”
MacLaurin shakes his head at the memory: 18 months after Fresh & Easy made its debut in California he flew out to take a look for himself. And, like a lot of Californians, he wasn’t impressed.
“If I hadn’t said what I said at the agm, it would have been nagging away at me for years. And there was only one person in the UK who could say it and that was me”
Lord MacLaurin
“I just thought it was a damp squib, 15,000 sq ft stores, all self-service, all pre-packed food, all very un-American. That’s why I got upset with Terry. Having spent all my life building up the business with a brilliant team of people, to watch him throw a billion pounds at America hurt, because the chances of success were never very good.”
In June, his frustration boiled over at the Tesco agm, the first MacLaurin had attended since he left Tesco. His lamentation that Sir Terry had left a “sad legacy” was widely reported as an attack on his successor, but he doesn’t think the headlines sensationalised what he was saying.
“I made a bit of a splash one way or another but I was cross. Really cross that somebody I had thought was really good should do those things. Everyone makes mistakes, but £1.4bn is a bloody great mistake isn’t it? To see Tesco punctured and slightly flounder is very upsetting, and if I hadn’t said it at the agm it would have been nagging away at me for years. And there was only one person in the UK who could say it and that was me.”
Under-investment issues
It wasn’t just Fresh & Easy that made him speak out, though. It was also the under-investment in the UK, which he says unpicked years of hard work by his team.
“What I said at the agm wasn’t necessarily to criticise Terry, but also to support Philip Clarke,” he explains. “When we sailed past Sainsbury’s in the early 90s we were flying - absolutely flying. And we continued to fly, as the profits show you. It wasn’t until we lost the investment in the UK business, and the huge write-down in America, that Tesco started to wobble.”
It also meant when Clarke took over in 2011 he was faced with some horrible decisions. The barrage continued with an unprecedented profit warning in January 2012. First half year results this week showed flat UK sales growth and an overall group pre-tax profits drop of 24%, suggesting there is still a lot of work still to do, but MacLaurin is keen to show his “great confidence” in Clarke’s ability.
“If you cut me there, on my forearm, it wouldn’t bleed blood, it would bleed Tesco. I spent 39 years there, and it’s been my life”
“Philip was a Saturday boy with me, he worked for his father in a store in the Wirral in 1974, he went to university and got a degree, he came back. The only thing he knows is Tesco. He is a very bright guy and I like the cut of his jib. He’s doing all the things that, at my advanced age, look very sensible, like the Watford store, which is going well. I know the like-for-like figures, which I’m not going to tell you, but they tell me it’s performing well - and we are pleased about that.”
I suggest his use of ‘we’ indicates he still feels part of the Tesco operation. He rolls up his sleeve and draws a fine white line across his forearm with his fingernail.
“If you cut me there, it wouldn’t bleed blood, it would bleed Tesco. It’s been my life. I was the first trainee and I spent 39 years there.”
MacLaurin pulls an iPhone 5 out of his pocket and opens up his email to show me the Tesco Alumni trading update he was studying before I walked in. “I get this every day. I know exactly what is going on at Tesco. I get kept in the loop by everybody. I have a very good association with Philip and the chairman, Sir Richard. I see them both socially from time to time, they are very kind and keep the old boy informed.”
Clarke’s leadership skills
That doesn’t extend to asking for advice, though. “Philip doesn’t ask and nor should he. He may say ‘what do you think about this?’ and we will have a conversation about it, but he knows exactly what he’s going to do. He’s got a good team of people there, he’s sorted it out as any good CEO should, and got the people that he wants and trusts to work for him.”
One high-profile victim of Clarke reshuffling of the pack was UK CEO Richard Brasher. A “nice and very capable man” but another victim of the lack of investment in the UK, says MacLaurin. “It’s obviously sad because Brasher gave a big service to Tesco, but if a person doesn’t fit in with the captain’s choice they have to go. That can mean heartache for some, but it’s absolutely right the CEO should do that.”
Other big decisions taken by Clarke include withdrawing from Japan and what MacLaurin describes as “trying to offload some of the responsibility in China”. And he is supportive of the “retrenching” taking place in the East.
He’s also happy with Clarke’s focus on the domestic business, both the large and small stores, and says Clarke is “absolutely right in taking the large stores and seeing what he can do with them, putting other trades in, refurbishing and remodelling them”.
Eyeing up the competition
However, he also says he watches the competition in a personal capacity, purely out of love for the business.
“I can’t help it, it drives my wife mad. We go on holiday in Scotland and I say, oh, I have to see this store in Edinburgh and she groans ‘oh no not again ’ But you have to see what’s going on, don’t you?”
Despite still having so much enthusiasm for the game, he insists his retirement from the hot seat at Tesco, aged 60, wasn’t premature. Almost 17 years later he’s still busy as chairman of “the very exciting” eReceipts, which eliminates paper receipts in favour of pinging them to a smartphone. Besides, he has some great memories of Tesco.
“I was the first trainee in 1956, taken on by the legendary Jack Cohen. I was Tesco MD and executive chairman for 18 years. When you’ve been involved for that long you hit your sell-by date and need to move on. Jack stayed on too long.
“He was instrumental in developing Tesco - he founded the place - but he wasn’t thinking ahead. My team transformed Tesco from where it was to laying down the foundations of where it went, but part of our view was always to bring people through the business to succeed us.”
The most prominent of which was, of course, Sir Terry. And, America aside, his former protege still has plenty of achievements to be proud of during his time at Tesco. Yet that still leaves one all-important question to be answered: if MacLaurin no longer considers appointing Leahy as his most important act, what was?
“Transforming Tesco,” he smiles. “Turning it around. It was the most thrilling time. We made Tesco number one. And if Philip Clarke does his job, we always will be.”
Lord MacLaurin on…
Discounters: “I am most impressed with Aldi. They have a limited range but quality is good and they pick off various departments brilliantly well. Their booze business is excellent. They are increasing market share, people like them, they are opening in all sorts of places, they are a power.”
“Horsemeat: “With all the millions of lines supermarkets sell, it’s very difficult to police every supplier regularly, and this supplier bent the rules. The retailers got a bloody nose, which is sad. But it’s a warning call. If people are going to be dishonest, you need to have the checks in place to cover it.”
Price-matching: “It’s just marketing, isn’t it? But if you can keep your customer happy by doing that sort of thing it renders a lot of this ‘amazing price’ advertising pointless.”
High street: “There is a lot against the high street. Online is getting stronger and stronger. And there are some wonderful shopping centres out there and people go because it’s easy to park. Take Bath. It’s a lovely city but getting your car in, parking and doing your shopping is a nightmare.”
Graduates: “A lot of them aren’t prepared to get their hands dirty. I started unloading vans in the warehouse. My mother was aghast she had spent all this money on my education to unload trucks but I knew the business inside out. I broke down sides of beef and boned out bacon. I love to see people starting at the bottom. Don’t have airs and graces. Start there, build yourself up.”
Being the boss: “Always listen to people. Never put them down, even if it’s a stupid idea. Say ‘I am not sure we’re ready for it now, but keep bringing me ideas’. And say thank you. We used to stand there on a Friday night and say thank you to the staff on the way out. And I know they used to say, ‘the guvnor was there today and he said thank you’. It means such a lot to be recognised. When I started, Jack Cohen said ‘Remember one thing - the most humble person in the organisation is the most important.’ I’ve never forgotten it.”
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