Check out Tesco. Or perhaps that should be 'Czech' out Tesco. It invited journalists to the Czech Republic and Turkey last week to see what it is doing in central Europe. In this land of low prices and high potential, Tesco has found that it's not only able to indulge its appetite for fast, substantial growth; it can show off about it too.
We were told by the CEO in Turkey, Steve Hammett, for example, that one of his goals is to take more share from local grocers' markets. That's not an ambition you'd expect to hear voiced in the UK at the moment with the Competition Commission's inquiry into supermarket practices well under way. And Philip J Clarke, CEO for Tesco in the Czech Republic and Slovakia, says his focus next year will be on smaller, Express style-stores that will eat into the discounters' share.
You only have to look at Tesco's most recent results to see that these goals are built on solid foundations. Tesco's sales in non-UK Europe for the six months to 26 August hit £2.6bn, up 21.6%, double the growth of the UK and on a par with Asia. It built or bought 71 stores in the same period to take its total to 432, and it plans to add 82 stores by next February. It is clear that Tesco has marked the wider European market, which includes the Czech Republic, Hungary, Poland, Slovakia, Turkey and Ireland, as full of promise.
It isn't an easy market to take on. Kaufland, Ahold, Metro, Globus, Penny, Delhaize and Lidl all have a presence in the Czech Republic and, although analysts predict that Delhaize will leave the market soon, at least one more discounter, Casino-owned Leader Price, will be entering next year.
So why the interest? For Tesco, the central sourcing advantage is one reason. It plans to continue sourcing products centrally where possible and by February will include 1,200 grocery lines, up from 500, clothes from Turkey and shoes from Italy. Clarke says: "Buying across central Europe has allowed us to be profitable, leveraging our scale and applying Tesco's point of value, driving prices down."
The region also is a fertile test ground for Tesco's hard discount model. Tesco intends to be a full-range discounter in the Czech Republic, which means all its stores, from hypermarket to convenience store, offer the same low prices. Most of the hypermarkets have already been built, so next year the focus will be on 1,000-3,000 square metre stores, says Clarke. "Because we have the hypermarkets, the new builds will be smaller. We'll have our first Express store in Prague next year and we'll open another eight or nine of these 1,000 square metre discount-format stores later."
The trick, says Clarke, is to make these smaller stores, which directly compete with the likes of Lidl, feel more comprehensive. "We have 3,000 lines in these stores. We're not a discounter with a limited number of lines; you should be able to do a full weekly shop in our stores."
Meanwhile, in Turkey, Hammett's mission is to see how Tesco's newest market after China will respond to different formats. "At the moment we're following an Aldi model, but we're cheaper. And we're developing where Carrefour isn't. They're concentrating on the big cities, so we're starting elsewhere, like in Izmir."
Again the c-store format, known as Kipa Ekspres in Turkey, will play an important role. "Plus, 50% of food is still sold on the open market, but it was 65% three years ago, so our share is growing and we want to keep that up," Hammett adds.
With Tesco's history in the area, who's to say it won't?
We were told by the CEO in Turkey, Steve Hammett, for example, that one of his goals is to take more share from local grocers' markets. That's not an ambition you'd expect to hear voiced in the UK at the moment with the Competition Commission's inquiry into supermarket practices well under way. And Philip J Clarke, CEO for Tesco in the Czech Republic and Slovakia, says his focus next year will be on smaller, Express style-stores that will eat into the discounters' share.
You only have to look at Tesco's most recent results to see that these goals are built on solid foundations. Tesco's sales in non-UK Europe for the six months to 26 August hit £2.6bn, up 21.6%, double the growth of the UK and on a par with Asia. It built or bought 71 stores in the same period to take its total to 432, and it plans to add 82 stores by next February. It is clear that Tesco has marked the wider European market, which includes the Czech Republic, Hungary, Poland, Slovakia, Turkey and Ireland, as full of promise.
It isn't an easy market to take on. Kaufland, Ahold, Metro, Globus, Penny, Delhaize and Lidl all have a presence in the Czech Republic and, although analysts predict that Delhaize will leave the market soon, at least one more discounter, Casino-owned Leader Price, will be entering next year.
So why the interest? For Tesco, the central sourcing advantage is one reason. It plans to continue sourcing products centrally where possible and by February will include 1,200 grocery lines, up from 500, clothes from Turkey and shoes from Italy. Clarke says: "Buying across central Europe has allowed us to be profitable, leveraging our scale and applying Tesco's point of value, driving prices down."
The region also is a fertile test ground for Tesco's hard discount model. Tesco intends to be a full-range discounter in the Czech Republic, which means all its stores, from hypermarket to convenience store, offer the same low prices. Most of the hypermarkets have already been built, so next year the focus will be on 1,000-3,000 square metre stores, says Clarke. "Because we have the hypermarkets, the new builds will be smaller. We'll have our first Express store in Prague next year and we'll open another eight or nine of these 1,000 square metre discount-format stores later."
The trick, says Clarke, is to make these smaller stores, which directly compete with the likes of Lidl, feel more comprehensive. "We have 3,000 lines in these stores. We're not a discounter with a limited number of lines; you should be able to do a full weekly shop in our stores."
Meanwhile, in Turkey, Hammett's mission is to see how Tesco's newest market after China will respond to different formats. "At the moment we're following an Aldi model, but we're cheaper. And we're developing where Carrefour isn't. They're concentrating on the big cities, so we're starting elsewhere, like in Izmir."
Again the c-store format, known as Kipa Ekspres in Turkey, will play an important role. "Plus, 50% of food is still sold on the open market, but it was 65% three years ago, so our share is growing and we want to keep that up," Hammett adds.
With Tesco's history in the area, who's to say it won't?
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