Tesco's Competitive Edge: CEO Emphasizes Strength in Value

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According to CEO Ken Murphy, Tesco is now more competitive than ever in terms of value. The retailer saw a return to volume growth in the second half of the year.

Tesco reported its preliminary results for the year ending 24 February today (10 April). Sales increased by 7.2% year-over-year to £61.48bn. In recent months, higher prices due to inflation contributed to the growth in sales. However, the retailer also experienced positive volume growth in the second half of the year.

Additionally, Tesco highlighted its competitiveness. The supermarket's value market share, which indicates how much was spent, rose by 28 basis points. Its volume share, representing how many items were purchased, increased by eight basis points.

Murphy, talking to the press today, shared his confidence in Tesco's ability to gain more market share. He mentioned that the supermarket has been consistently outperforming premium retailers for 19 periods in a row. The CEO attributed this success to Tesco's own-label Finest range, highlighting that Tesco Finest has now become a £2 billion brand on its own.

"We are feeling positive about our current position, but it's important to stay focused and not lose sight of our goals."

Ken Murphy, Tesco

As well as taking share from the premium retailers, Murphy also highlighted that Tesco is cheaper than Asda.

"We have been consistently cheaper than Asda for the past 16 months, which is a first in our history," he mentioned.

Despite being confident in our current products and prices, we understand the fierce competition in the supermarket industry, so we cannot afford to be complacent.

"We're feeling positive about our current position, but it's important to stay focused," Murphy expressed.

According to him, Tesco has noticed a comeback from Morrisons with their new leadership. He anticipates that the competition will fluctuate but remain strong.

Standing out on value

Murphy emphasized the importance of having a healthy dose of paranoia in the grocery retail industry due to its intensely competitive nature. He pointed out that threats can come from various angles in this environment.

Tesco claims to be more competitive than ever in terms of value. They attribute this success to their "unique customer offer", which includes the Aldi Price Match initiative, Clubcard Prices (offering exclusive deals to members), and Low Everyday Prices (highlighting value offers on brands).

The supermarket is focusing on strengthening these initiatives to maintain their competitive edge. CEO Murphy emphasizes the importance of "consistency" in helping Tesco gain market share. Despite Tesco's efforts, there are competing versions of these initiatives offered by rival companies.

All the major supermarkets like Tesco, Sainsbury’s, Asda, and Morrisons offer price matching to Aldi. Asda and Morrisons even price match to both Lidl and Aldi. Sainsbury’s, Morrisons, and Co-op have special deals for loyal customers.

Recently, Sainsbury’s launched its own ‘Low Everyday Prices’ program, which is quite similar to Tesco’s approach.

When asked how Tesco could differentiate itself on value in a competitive market, Murphy emphasized the importance of not just introducing offers, but also executing them effectively. Success, according to him, involves providing value on products that are important to customers, and doing so in a sophisticated manner. Murphy suggested that Tesco could set itself apart from competitors by making sure the right products are offered under the right initiatives.

Quality and price play a key role in shaping how customers perceive value, according to Murphy. He also highlighted the importance of convenience, mentioning that Tesco is committed to offering high-quality products and ensuring easy access for shoppers.

In addition, Murphy emphasized that Tesco is dedicated to enhancing the availability of products and improving the overall shopping experience. These are the final two factors that the retailer is focusing on to differentiate itself within the sector.

Cautiously optimistic

The cost of living crisis is still impacting consumers, hence why Tesco believes it is so important to invest behind its value perceptions.

Tesco has experienced success in improving value perceptions, with its value score increasing from 19.3 to 24.8 in the six months leading up to April 9, according to YouGov Brand Index figures.

The easing of inflation rates may have contributed to these positive value perceptions. Asda also saw a rise in value perceptions, albeit more modestly, from 23.4 to 26.3. This suggests that despite Tesco claiming to be consistently cheaper than Asda for over a year, consumers still view Asda as offering better value.

Murphy anticipates that like-for-like comparisons will be weaker as inflation eases, attributing the previous strength to rising prices. Despite this, he remains optimistic about seeing growth in both volume and value this year, noting a positive shift in customer sentiment.

Regarding the ongoing investigation by the Competition and Markets Authority (CMA) into supermarket pricing, Murphy was questioned about the impact of loyalty schemes. The investigation aims to determine if these schemes are disadvantageous to most consumers and hindering competition.

Tesco is collaborating closely with the CMA, according to Murphy. He mentioned that the supermarket is fully confident in the value that Clubcard provides to customers.

Murphy also expressed that they believe they have a very strong platform that effectively caters to consumers and will keep doing so in the future.

Editor's P/S:

Tesco's recent financial results demonstrate the company's ongoing resilience and competitiveness in the face of a challenging economic environment. Led by CEO Ken Murphy, Tesco has prioritized value-driven initiatives, including price matching, loyalty programs, and everyday low prices, to differentiate itself from rivals. This focus has resulted in increased market share and positive customer sentiment. However, the supermarket industry remains intensely competitive, with other major players offering similar value-oriented strategies.

Despite the positive outlook, Murphy remains cautiously optimistic about the future. The easing of inflation may present challenges, but the company is confident in its ability to maintain growth in both volume and value. Tesco's commitment to quality, convenience, and product availability will be crucial in sustaining its competitive advantage. The ongoing CMA investigation into supermarket pricing is also a potential concern, but Tesco is collaborating with the authority to demonstrate the value of its loyalty schemes. Overall, Tesco's strong performance and customer-centric approach position it well to navigate the competitive landscape and continue its success.