Talking Tesco: UK Competition Commission

Why are we publishing these comments?

Tesco has been reading with interest the third party comments on the Groceries Market Investigation that the Competition Commission has been publishing on its website. Our formal submissions have addressed many of the issues raised by these comments, particularly those of some of the professional lobbying organisations. However, a number of submissions on the Competition Commission’s website contain more specific comments about Tesco which we have not covered in our formal submissions.

Some of these specific comments are inaccurate and misleading, and we are providing a series of short notes in order to put the record straight. In the interests of transparency we are today publishing the first such series of notes.

Scottish Grocers’ Federation

Our Commitment to Scotland

Our Dedication to Local Suppliers

Tesco is committed to ensuring that Scottish consumers have access to Scottish produce. Currently, over 100 Scottish companies supply more than 1,000 product lines to our stores. This amounts to around £800m of goods being sourced from Scottish companies – directly into the Scottish economy.

Consulting with our suppliers, we have worked to raise awareness of Scottish food and drink companies. As well as co-ordinating a number of events for Scottish suppliers and consumers, we have created new signage to be rolled out across our Scottish stores promoting Scottish products.

Earlier this year Tesco hosted "Enjoy the Taste of Scotland", a three-day event run in conjunction with the Scottish Executive to promote Scottish suppliers. This pioneering event featured over 60 Scottish food and drink producers and offered attendees the opportunity to sample products from across the country including household names, such as Baxter’s, Tunnock’s and Mackie’s, and small speciality producers, such as Rannoch Smokery, Tilly Confectionery and Castle MacLellan.

As well as promoting Scottish produce to members of the public, Tesco also looks to build good working relationships with current suppliers and aims to provide opportunities for new suppliers to come on board. To this end, for the past two years we have run a Scottish supplier day, a practical day open to all our Scottish suppliers to help them gain a better understanding of retail operations and to assist them with technical issues.

We have also launched new Scottish lines, including a range of items which are produced and supplied locally to one or two of our stores, by businesses such as J & I Smith Bakers based in Huntly. This can lead to locally-supplied products then being rolled out across the UK, and brands such as Border Biscuits are testament to this. The success of this programme means we are now exporting some of these products to our stores abroad – further growth for Scottish companies.

At Tesco we take our commitment to Scottish producers and the communities they operate in very seriously, actively engaging with local and national stakeholders to this end. In February this year Tesco representatives gave evidence at the Scottish Parliament's Environment and Rural Affairs Committee's Food Chain Supply Inquiry and Tesco is a current member of the Agricultural Strategy Group, run by Ross Finnie MSP, Scottish Minister for Environment and Rural Development.

Employment and the Community

As Scotland’s largest private employer with over 22,000 staff in our stores, distribution centres, and other operations across the country, we believe that our staff are our greatest asset and are committed to helping them deliver a quality service. Tesco has now completed five Regeneration Partnerships in Scotland, creating over 1,100 new jobs and giving a boost to communities around new stores in St Rollox, Shettleston, Alloa, Dumfries and Pollok. In St Rollox for example, we created 527 jobs, with 474 of these positions filled by people from the neighbouring area, 332 of whom were previously out of work.

The most recent Regeneration Partnership to be approved in Scotland is planned for the Wick store. Further boosting the benefits our store would bring to the local area in increased retail choice and employment opportunities, the store will also be a flagship in its environmental sustainability. This has been made possible following a company-wide decision to invest £100 million in sustainable environmental technology. The store will open round the end of November and will be the first of its kind not only in Scotland, but also in the UK.

The planned Eco-store will reduce emissions at every stage of its development. From construction alone we hope to reduce carbon emissions by 50%. The building itself will be built from approximately 33% recycled material, 33% recyclable material and 33% sustainable material.

In their submission to the Commission, the Scottish Grocer’s Federation describe two Tesco voucher promotions and suggest that they are an example of exceptional pricing.

The promotions cited by the Scottish Grocers’ Federation were run in conjunction with the opening of new stores to give consumers an incentive to try our new store. Obviously customers benefit from the introductory offer. We run very few promotions of this kind and when we do they are for a limited period of time and are to support new or refurbished stores. When the OFT investigated a similar promotion, they concluded there was no case to answer.

They also draw attention to Huntly, Aberdeenshire where recently both an Asda and a Tesco store have opened. They describe it as an illogical development.

Two outline planning applications were submitted by local development companies for stores in Huntly. These were put forward at the same time and were promoted by the developers involved, not by Tesco or Asda. Both Asda and ourselves acquired a site which already had outline planning permission – it is incorrect to say either of us was given approval to develop out-of-town sites.

We met with residents of Huntly prior to opening our store. They were enthusiastic about the arrival of a new store and felt they were poorly served by the existing provision. They complained that the local Somerfield had a poor range and the opening hours were inconvenient. When the store opened residents welcomed its arrival. It has widened the choice of food available and means that residents no longer have to drive to Elgin or Inverurie to visit a supermarket, preventing further leakage of trade out of Huntly. Since the opening of the store the local butcher has reported increased trade at weekends and the local ice-cream company has welcomed the opportunity to sell its products in our store. As mentioned above, J & I Smith Bakers – a local business based in Huntly – are now supplying our store.

The SGF suggest that we deliberately build stores in close proximity to our existing stores. They use an example of an Express store close to an Extra store in Dundee, and claim we approached one of their members to buy his convenience store in Dundas Street, Edinburgh.

The petrol forecourt in Dundee mentioned in this submission is not a Tesco Express, but is actually the petrol filling station for our Tesco Extra store, Kingsway. It is not always possible to locate a petrol filling station immediately adjacent to our stores and indeed sometimes it is more convenient to locate them on a different part of the site to ease traffic congestion. As for the Dundas Street, Edinburgh store, we did not approach the store owner but were in fact ourselves approached by someone claiming to represent him.

In some cases we do operate stores in close proximity, in densely populated areas where a single store would suffer from over-crowding and congestion that customers do not like. We only open stores where we can identify customer demand and we work with the grain of the planning regime to meet local needs.