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Tesco CEO Says ‘Long Way to Go’ in U.K. as Market Share Slips

Tesco Plc Chief Executive Officer Philip Clarke said the U.K.’s largest supermarket chain still has a long way to go to turn around its underperforming domestic business as its market share slips.

“We have only just begun, we have a long, long way to go,” Clarke, 52, told journalists today at Tesco’s newly-renovated 42,000 square feet (3,902 square meter) superstore in Bishop’s Stortford, north east of London.

The CEO is spending 1 billion pounds ($1.6 billion) overhauling the U.K. business with more staff dedicated to fresh food, new own-brand ranges such as Everyday Value entry-price products, and services to help customers monitor their spending and check out of the store faster. U.K. same-store sales have declined for the last four quarters at the Cheshunt, England-based company while its market share slipped to 30.8 percent in the last three months, according to Kantar Worldpanel.

U.K. Chief Operating Officer Chris Bush said “food is first” in the customer offer, with more than 1,000 new lines being added. At the Bishop’s Stortford store, space given to fresh food has been increased by 8 percent, while non-food space such as cooking utensils and saucepans has been reduced by 23 percent as customers go online to shop for those items.

The executive team overseeing the overhaul meets for one day a week inside a store as it tests about 150 projects such as new bakeries, which have been introduced to all Tesco’s large-format Extra outlets and superstores. That includes 675 new product lines, one tier of pricing instead of the typical three price points of “good, better and best,” and centre-aisle stands with fresh produce on wooden slats. Hand-made wood-fired pizzas and a Rowe’s Cornish pasty stand are also being trialled.

Guided by Clubcard

“We’re really pleased that we’re starting to see the green roots of progress,” David Hobbs, operations strategy and business director for the U.K., said at the store.

Clarke said Tesco is being guided by its Clubcard loyalty program to determine range and space layout of each store.

“Ranging was about store size, now it’s about demographics,” the executive said. For example, the Bishop’s Stortford store, which has a relatively wealthy customer base, has a premium range of water products that includes Voss Still Artesian 800 ml bottle for 2.29 pounds.

Tesco, which reports interim results on Oct. 3, has responded to more customers seeking midweek meal deals with Family Favourite 6-pound dinners for four people, Clarke said. The frozen-food section has had its first range overhaul in five years with new ranges like a 1-pound macaroni cheese Everyday Value meal and Tesco is also using rounder prices.

Coupons in newspapers have been reined back, in favor of more personalized coupons linked to products that customers buy, rather than tempting them to buy other brands, Clarke said.

Tesco has also made changes to its meat offer, which was “a bit clinical” in the past, said Andrew Yaxley, fresh food commercial director. Tesco has increased signs promoting 100-percent British chickens and beef that is “matured for extra flavor” as well improving the quality of its product.

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