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.

Own Brand

Mr Adams (Consumer No. 37) alleges that selling own-brand products allows Tesco “an unfair advantage in competitive intelligence, because they have full insight in to many [supplier] financials that would not be available to other stores”. In his subsequent submission, Mr Adams suggested that own brand should not be allowed.

We do not stock own-brand products in order to gain “competitive intelligence”. We recognised the merits of the own-brand strategies developed by the likes of Marks & Spencer and J Sainsbury, and have developed a range of own-brand products to meet the demands and expectations of our customers. Customers like and expect us to have own-brand products in every category, as an essential part of our breadth and depth of range. We try to offer a choice of own-brand products, and our aim is that they are at least as good quality as the branded alternatives but less expensive.

Although Mr Adams feels that own-brand products should not be allowed, we think own-brand is valued by our customers and brings many benefits including:

  • Greater choice of products to a category. Our own-brand nuts, for example, were developed to give customers an alternative to KP nuts.

  • Reinvigoration of a category suffering from lack of innovation. For example, the dramatic increase in ready meal products was spearheaded by own label.

  • Rapid response to changing customer requirements. For example, we introduced low sulphur diesel in response to customers’ environmental concerns.

  • Offering smaller suppliers a route to market – it is much cheaper and less risky for a small supplier to become our own-brand supplier than to try to develop its own brand and reputation.

  • Giving customers cheaper options in a category where branded suppliers dominate – for example, our own-brand soap powders are around 30% cheaper than Ariel and Persil.

He also alleges that “In effect Tesco can switch off the local supply of Alpro soya milk” and only offer their own brand soya milk. Mr Adams later retracted the claim we had discontinued Alpro soya milk in a couple of stores and replaced it with an own brand product.

We are pleased to note that Mr Adams later retracted his claim, as we did not in fact discontinue Alpro soya milk. Alpro is a leading brand in this category, which our customers expect to see on our shelves. We work very hard to deliver customers what they want, and so it would be very rare for us to switch away from a supplier who might be regarded as a leading brand.

Mr Adams claims that we are able to subsidise own-brand soya milk “in order to try and gain market share over Alpro. Once it has achieved this aim, and killed off Alpro, it is able to put up the prices of its own brand product”

We do not engage in this sort of pricing strategy. Our prices are set nationally, and the aim is to provide the best value to every group of customers. We ensure we are not beaten on price – an important part of our core purpose that “no one tries harder for customers”. There is no part of our pricing policy which “aims” to harm our suppliers – on the contrary, our relationships with our suppliers are crucial to our business, as we rely on them to deliver the products our customers want.