Tesco has set an ambitious new target for sales from new products – telling suppliers it wants to be “bigger and bolder” on innovation.
Britain’s biggest supermarket chain told suppliers at its annual IGD trade briefing at Wembley Stadium this week that it wanted to increase the portion of sales from new products from 8% in the latest quarter to 20%.
It said it wanted to lead on health and wellbeing and make produce and convenience food ranges “an even stronger point of differentiation”.
To help achieve this, the retailer was looking to develop stronger partnerships with suppliers, it said. It was removing the annual tender process and making two-year contracts available to all. Longer contracts of three or even five years would be made available to suppliers classified as strategic and integrated partners, it added.
When agreeing joint business plans with suppliers, Tesco said these would not just be based on sales and margin. Multichannel growth would also be key.
Tesco’s UK MD Chris Bush also shared details of the work underway to transform its store estate. He said Tesco was refreshing 450 Express stores in 2014/2015 alone and was in the process of refitting 160 large stores.
Tesco was adopting a “food first” strategy in larger stores, he added. Changes included new lower-level fixtures, wider aisles, investment in counters and a dedicated, front of store area for food on the go – currently on trial in 34 stores. Merchandising for the new food-to-go areas would change according to the time of day.
This financial year, Tesco would introduce 80 family dining areas, such as Giraffe and Decks, 50 Harris + Hoole coffee shops and 110 bakeries, said Bush. The revamps fitted into two broad categories – remodels costing £3m to £4m and refreshes costing £1.5m, he added.
Refreshes involve changes to the look and feel and the introduction of new departments such as food-to-go, but minimal changes to space and layout, whereas remodels involve extensive changes to space and layout giving priority to food and potentially renting out space to other retailers .
Suppliers were positive in their reaction to the briefing. One said: “Tesco seems to have a very clear plan in place and of all the retailers they have the management team to deliver it.”
Another agreed that management was “singing from the same hymn sheet”, but expressed concern about how little price was mentioned. “There was no new news on price and Tesco does need to reassert itself there.”
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