The idea that Tesco was turning its focus away from Britain was never very convincing.
True, Tesco’s performance in the UK went a bit soft last year. But it has fought back aggressively, launching its Discount Brands strategy and doubling the rewards offered by its Clubcard loyalty scheme.
And now it appears that Tesco has been quietly preparing a massive land-grab to colonise those areas of Britain where it is still weak.
The scale of its plans is extraordinary. Over the past 12 months, it has lodged more than twice the number of planning applications of its two biggest rivals combined. This comes on top of a huge opening programme last year, which saw it add more space than Sainsbury’s, Morrisons and Asda put together.
Some of this aggressive expansion is an attempt to capitalise on the opportunities thrown up by the economic downturn, particularly in terms of property costs.
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Sir Terry Leahy, Tesco’s chief executive, has pointed out that much of the company’s growth in the 1990s was driven by investment made during the last recession. Tesco may also have accelerated its expansion plans ahead of the introduction of a competition test that will make it harder for supermarkets to open new stores in areas where they are already dominant. The competition watchdog has proposed such a new test and the Department for Communities and Local Government has until early next year to give its response.
Supermarkets would be barred from opening a new store or large extension if there were three or fewer rivals within a ten minute drive and if the expansion would give it more than 60 per cent of grocery selling space in the area.
Tesco, which is the market leader in 70 per cent of the country’s postcodes, would be the biggest loser from such a test which it has persistently opposed.
One of its rivals claims that Tesco is planning a “surge” of new stores ahead of the clampdown. But the company insists it is merely making the most of attractive land values.
Retailers are also awaiting a Conservative paper on planning that will set out its plans. These are thought likely to be less restrictive than the proposals being considered by the Government.
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Tesco’s somewhat sluggish recent growth in Britain has been overshadowed by its rapid expansion overseas. Its international strategy has been performing very well apart from the faltering start for its Fresh & Easy chain in America. These problems and the huge opportunities it sees in Asia had persuaded some observers that it was losing its focus on Britain.
But it recently announced ambitious plans for expansion in financial services in the UK.
Tesco does not have the field to itself. Sainsbury’s, which recently raised £432 million from shareholders to step up its expansion in the North of England and Scotland, is said to have been buying land aggressively.
But the suggestion that Tesco had taken its eye off the ball in Britain in order to concentrate on overseas expansion looks increasingly like wishful thinking.