Tesco Thailand wins record market share
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Embattled Tesco achieved a record market share in Thailand in the latest quarter – as Asia shined in a mixed set of financials.
Analysts appeared in agreement that the UK’s largest supermarket operator delivered patchy results overnight, despite the solid Asian performance.
“Foreign adventuring hasn’t been all bad,” observed David Gray, retail analyst at Planet Retail.
“Asian expansion did deliver a big windfall last autumn with a sale raising some £4 billion,” he said, referring to the divestment of the Korean business
“And Tesco still holds valuable assets in Asia – the Tesco Thailand business (which has long-term growth potential), plus Malaysia (though potential here is less obvious), while India (though not valuable at the moment) is set to receive more attention,” Gray concluded.
Conlumino senior consultant George Scott added: “In Asia, improvement in its food offer helped Tesco achieved positive like for likes across the region.”
But the majority of Tesco’s business is still the UK, where its market share is under attack by super discounters Aldi and Lidl from Germany. Like-for-like sales in the UK slipped 1.5 per cent, despite a 1.3 per cent increase in the Christmas period.
“Tesco showed signs of a fightback against discounters Aldi and Lidl over the festive period, delivering a UK Christmas like-for-like performance well ahead of market expectations and comfortably beating the comparable trading of rivals Morrisons (+0.2 per cent) and Waitrose (down 1.4 per cent),” said Scott.
Planet Retail said it saw the third quarter domestic decline as indicative of the wider challenges hitting the UK grocery market.
“Foreign adventuring hasn’t been all bad,”
“With growth of Aldi/Lidl at the value end, M&S Food lording over the premium segment and Sainsbury’s holding its own in the mid-market, this comes as little surprise,” said Gray.
“As anticipated, Tesco’s Q3 domestic recovery has slowed, with like-for-like declines widening on Q2, even if the shorter Christmas period delivered a more positive number,” said Gray
“This was to be expected considering Dave Lewis has always said recovery would be choppy. Even so, a slowdown is a slowdown. The difficulty for Tesco is that, by being the UK’s largest retailer, it has most to lose from wider food price deflation and structural shifts.
“With Aldi/Lidl gaining share at the value end, M&S Food ruling premium and Sainsbury’s holding the middle ground, Tesco is stuck between a rock and a hard place,” Gray concluded.
Scott says despite the patchy figures, Tesco has shown a marked improvement in putting the customer back at the heart of its proposition, particularly over Christmas.
“To this end, a further shift away from give-away promotions to deeper investment in base price cuts and its brand match, coupled with improved availability were particularly key. The introduction of 4000 additional ‘Here to Help’ in-store colleagues, will have undoubtedly boosted in-store standards. Elsewhere, demand for online grocery home grocery shopping led to a record number of orders on December 22, which was certainly helped by an improved price and service reputation.”
Tesco CEO Dave Lewis was upbeat about the figures, especially for the festive trading season.
“Our Christmas performance was strong, benefiting from lower prices on an outstanding range of products. Our customer service improved materially and our colleagues went the extra mile. Put simply, we put customers at the heart of everything we did and they responded by buying more of what they needed at Tesco.”
Lewis said Tesco would continue to focus its efforts to serve its customers “a little better every day”.
“There is plenty more to do, but we are making good progress and are trading in line with profit expectations for the full year.”
Questions & Answers
Q.How did Tesco manage to improve its performance during the Christmas period compared to its rivals?
How did Tesco manage to improve its performance during the Christmas period compared to its rivals?
Tesco achieved a UK Christmas like-for-like performance of +1.3 per cent, beating Morrisons (+0.2 per cent) and Waitrose (down 1.4 per cent). This was attributed to lower prices, an improved range, better customer service, and increased staff.
Q.Which Asian businesses does Tesco still operate, and which are considered to have growth potential?
Which Asian businesses does Tesco still operate, and which are considered to have growth potential?
Tesco still holds the Tesco Thailand business, which has long-term growth potential, and Malaysia, where potential is less obvious. India is also held but is not currently considered valuable.
Q.What measures has Tesco taken to improve its customer proposition in the UK?
What measures has Tesco taken to improve its customer proposition in the UK?
Tesco has shifted away from giveaway promotions to deeper investment in base price cuts and its brand match. They also improved availability and introduced 4,000 additional 'Here to Help' in-store colleagues.
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