Opinion: Can Tesco achieve continental success?

That is to say, a sourcing concubinage with Carrefour and a doppelgänger tribute to Aldi and Lidl.

Neither of Tesco’s strategies lack merit or logic but neither is new, and both have worrying track records.

Carrefour formed Deuro Buying, a sourcing alliance with Asda, Makro and Metro in 1989. Three years later, it launched a hard discount format in the UK called Ed’s (Jacques’ didn’t quite make the cut).

I was closely involved with both initiatives and saw at first hand why they both ended in failure. A fate that Tesco also suffered at the same time with its transmanche fling and acquisition of Catteau. 

“Neither of Tesco’s strategies lack merit or logic but neither is new, and both have worrying track records”

The most important factor that lay behind the failures of these three very different endeavours was culture. Not consumer culture, as the eating and shopping habits of consumers in different European markets, even in those days, were not as divergent as some commentators wanted to believe. It was corporate culture that was the culprit.

Many buyers in the leading European supermarkets of the 1990s were fully paid-up members of the Hairy-Arsed Grocer Society.

HAGS held sway across Europe. But this did not forge a common understanding across the common market. Instead it fostered a sense of national supremacy if cross-border collaborations were on the table. The British, French, Dutch and German participants in Deuro Buying saw it as a jeu sans frontières.

If the Dutch buyers negotiated the best price for private-label Fino in Jerez, or the French buyers sourced the best deal on cat litter from Lord knows where, their international colleagues didn’t gratefully welcome the lower price but saw it as a challenge to go out and undercut everyone else.

Then and now

Tesco, these days, is a very different beast, due in no small measure to having a multinational FMCG supremo at the helm. But when it purchased Catteau in 1992, responsibility for the acquisition was given to a director who was affectionately known in Cheshunt as “The Animal”.

The entente between the two businesses was far from cordiale from the outset and it steadily worsened until Catteau was sold, in 1997, to Promodès just a couple of years before that company itself was to merge with Carrefour.

“Carrefour bizarrely chose an inveterate old-school Anglophobe to lead its British entry”

The first British Ed’s Discount Food Store also opened its doors in 1992. This was Carrefour’s second foray into La Perfide Albion (its hypermarkets in the UK had opened in the 1970s). Aldi, upon which Ed’s was modelled, already had over 60 stores in the UK.

The main difference between these two limited-assortment, no-frills, hard discounters – apart from the fact that Aldi, the progenitor of the format, had already been rolling it out for 45 years – is that Carrefour was a listed company with shareholders to satisfy and short-term demands to be met, whereas Aldi was, and still is, privately held and wedded to the long term.

Another difference is that Carrefour bizarrely chose an inveterate old-school Anglophobe to lead its British entry.

Ed’s lasted no longer in the UK than Catteau did chez Tesco. Aldi of course (and Lidl) are now calling the shots for the whole market, prompting Tesco now to launch its version. In order to succeed, Tesco must try to establish a private corporate culture at Jack’s; if the City will let it, that is.

The right women or men, who can thrive in a different culture, will be essential if both of Tesco’s continental initiatives are to succeed. No Brexiteers need apply.