Sir Terry Leahy’s legacy at Tesco is formidable. He invented Clubcard, took the grocer into non-food and online, and propelled it to become one of the world’s leading retailers. In an exclusive interview, Tim Danaher speaks to the man who changed the face of retailing.

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I took over a good business from Ian MacLaurin, and the business now is better than the one I took over. That’s all you can ask for.”

It may be his last week running the world’s third biggest retailer - it also happens to be his 55th birthday - but if you thought Sir Terry Leahy might lose his famed sense of understatement amid a dizzy spell of demob-happiness, forget it.

Leahy’s final departure from Tesco’s Soviet-style Cheshunt headquarters two weeks ago was greeted with the sort of cheering crowds around his car that you’d more normally expect when a royal or a popstar came to town. But as far as the outside world was concerned, Leahy wanted the manner of his departure to be the same as the manner of his 14 years in charge at Tesco. No big fanfare, no big interviews.

But as he prepared to receive an award recognising his Outstanding Contribution to Retail at last night’s Oracle Retail Week Awards, Leahy took time out to tell Retail Week about how he turned Tesco from a strong UK supermarket to the third-biggest retailer in the world. He might have invented Clubcard, made Tesco into an international business and taken it into non-food and online but, in Leahy’s eyes, that was all in a day’s work.

All part of the job

“I’ve enjoyed it enormously,” he says. “Working for one company for 32 years is a nice thing to do, and to lead the company you’ve grown up in is the greatest privilege there can be.”

Leahy is modest about the transformation of Tesco on his watch, although he admits: “There have been plenty of highlights.” But the facts speak for themselves. When he took over in 1997 the business was generating profits of £774m on sales of £13.8bn. It had just overtaken Sainsbury’s to become the UK’s largest supermarket and begun to dip its toe into international markets.

Few could have seen how in 14 years it would grow to a business of £3.2bn profits and £62.5bn sales. But one person did: Leahy himself. Leahy says he was clear in his mind about the potential, and knew that to sustain the growth of the business that had taken it to number one in the UK, diversification would be necessary. “Tesco already had a large UK base, and I could see the potential to grow into international markets,” he says.

But asked to identify the one factor that really made a difference, he identifies an initiative that pre-dates his time in the top job. Clubcard was Leahy’s brainchild during his time as marketing director, and is widely acknowledged as the most sophisticated customer loyalty scheme of its type anywhere in the world.

“The key turning point was Clubcard,” says Leahy. “It gave us the impetus to get to number one in the UK market, and it reoriented the business around the customer. And it was that focus on customers which allowed us to succeed on a global scale.”

It’s that focus on the customer - and understanding that one size doesn’t fit all in different parts of the world - that has propelled Tesco’s success in expanding globally. It now trades in 14 countries, and while it had just started to expand overseas before Leahy took charge, he turbo-charged the expansion, entering countries as diverse as South Korea, Turkey and the US.

Culture club

Working at Tesco for a long time is part of the executive culture in Cheshunt and Leahy’s successor Phil Clarke has worked there even longer than he has, having first worked at Tesco in 1974. Clarke began on the shopfloor and worked his way up, a characteristic that Leahy says epitomises the Tesco culture.

“It’s a team effort. We’ve always been very focused on customers, the team has stayed together and it’s a hard working team. It’s always been about more than one person.”

Leahy warms to the theme, as he explains the self-sacrificing, customer-obsessed culture he has created in Cheshunt and beyond. “We have good values in Tesco. Tesco attracts people who are relatively generous, they give more than they take. It’s not about how much money can I make or how famous I can be. A lot of the senior people here started at a lower level in the business with modest ambitions.”

This focus on the customer is Leahy’s guiding principle, but not everyone has appreciated it. The retailer’s growing power during his time in charge has led to accusations that Tesco is destroying independent retailers and town centres with its proliferation of new stores in formats ranging from the giant out-of-town Extra stores to in-town convenience shops. During his leadership, the number of UK stores has quadrupled and Tesco now takes £1 in every £7 spent in this country.

Leahy admits that the criticism of Tesco bothers him, but maintains that the average shopper appreciates the role Tesco and supermarkets generally play in generating jobs and prosperity. “It can be frustrating,” he admits. “The media likes to write about controversy. But among ordinary people it’s recognised.”

He adds that the dramatic improvements in the quality of UK grocery retailing over recent decades are appreciated. “Supermarkets are respected by normal people for providing safe, good quality food, a good shopping experience, constant innovation, creating jobs… it’s a public service delivered.”

Leahy thinks the banking crisis helped bring home to shoppers and the wider world the job retailers do and the trust in their brands. “The industry is now seen in perspective following the banking crisis and the recession.”

The timing of Leahy’s departure surprised observers. He only turned 55 at the start of this month, and was expected to want to see Tesco’s US venture Fresh & Easy through to profitability before calling it a day. But he insists that the time was right.

“The timing was good. We’re coming out of recession, and it’s good to hand the business over as you’re coming out of recession. Phil was ready, the team was ready, I was ready.”

Not everything has worked. The business in Japan has consistently lost money, and Fresh & Easy in the US has yet to break even, although Leahy committed that it would be profitable by 2013. That’s not his problem anymore but Leahy insists he has no regrets over any decisions he has made as chief executive - in business you have to take some risks, he says, and while not all of them pay off, you learn from them all.

Leahy is genuinely passionate about retail as a force for good and, looking to the future, sees little changing in what remains important. “It’s a great industry. It serves ordinary people, it offers career opportunities for ordinary people. It’s a really honest industry and that will be the case for years to come.

“There’ll be more done on the internet, more attention to sustainability, more international. All these things we’ll see more of but the essence of it will remain the same, which is about serving customers.”

That’s Leahy’s view of the future for retail, but what about the future for Leahy? “I have private investments and I’ll be active with those, maybe acting as a business angel, doing some charity work. I like business and I’ll be staying in business, but I won’t be taking another job.”

There’ll certainly be plenty of takers for his services, but any retailers hopeful of coaxing Leahy back into the industry will be disappointed. “I won’t be getting in Tesco’s way,” he says, with a chuckle. And in the case of this one-company man, you know that he means it.

‘An ordinary guy who created an extraordinary business’: Tim Danaher on Sir terry leahy

Sir Terry Leahy gives little away. He’s businesslike and to the point, and during his time at Tesco, was unapologetic in focusing his time and energies on what would help the company serve its customers better and therefore make more money.

Some mistake that for being a cold and robotic individual. But the criticism of Leahy tends to come from people outside the business, somewhere where it’s very hard to get to know him well. I’ve never heard anyone who’s worked with or for Terry who’s got anything but good things to say about him.

I saw a glimpse of the real Terry when interviewing him after he gave a speech at the 2008 BCSC Conference in Liverpool. He wouldn’t normally be speaking at a property conference, but he will have known that by being on the programme, the cream of the property investment world would take a look at his home city.

He enthused about the city centre’s regeneration, and was absolutely impassioned on the role retail can play in breathing new life into run-down places. And he was angry. Angry that planners and NIMBYs were holding up regeneration by blocking new Tesco-led schemes.

Would those schemes have helped Tesco become even bigger and more successful? Unquestionably yes. But whether or not you agree with it, Leahy has a missionary-style zeal for Tesco and its customers that is hard not to admire.

He also has a sense of humour. A very dry one admittedly, but it often came to the fore in the shape of withering responses to any questions from journalists that were anything less than well-informed at Tesco’s half yearly results press conferences.

I first met Terry in the foyer of the Cheshunt HQ in 2005, a few weeks after joining Retail Week. I’d written to all the chief executives of the big retailers introducing myself as the new editor, and the first response was a call inviting me to Cheshunt for lunch the following week.

What struck me was how down to earth it all was. It was the man himself who came down to reception, said hi, and took me upstairs to the directors’ dining room. To call it modest is an understatement - it reminded me of being at school. But the food was decent and Terry was generous with his time - no small talk, just a very clear elucidation of Tesco’s strategy.

There were no airs and graces, but that was Terry’s Tesco. An ordinary guy, who created an extraordinary business.

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