"For those of us who have never heard of Tesco, I'm amazed"

Jonathan Sutton of Tesco on Sept. 6 provided delegates to the AsiaFruit Congress a sketch of the company and some of the paramaters of supplying directly to the retailer. He began his talk with the above quote before he described who and what Tesco is. Frankly, I think we have all heard of Tesco, but we can still be amazed with Tesco. Here is an audio link to his talk.

Sutton described the early days of retailing for Tesco founder Jack Cohen, who sold surplus army food after returning from World War I. With sales of £4 on his first day he turned a profit of 25%. Another good backgrounder on Tesco's growth can be found here.
Sutton said Tesco is now the third largest retailer in the world, operating in 15 countries. He said the global fresh produce business for Tesco is $7 billion (US) out of sales of $100 billion. Produce sales as a percentage of store sales vary from country, with produce accounting for 10 to 12 % in UK, and significantly less than that level in Asia, he said.
Sutton said the core purpose of Tesco is to create value for customers to earn their lifetime loyalty. And the value statement is defined by “No one tries harder for customers” and “Treat people how we like to be treated.”
Tesco is supplied by 50,000 farms from 150 countries. With 3,500 stores, 2,000 fresh produce items and 20 million customers.
Tesco’s four retail food strategies are the small express format, the High Street format, the supermarket and the hypermarket. Sutton said Tesco is expanding its non-food format as well, insisting that the retailers wants to be as big in non food as it is in food.
Tesco has 50 million square feet of selling space in the UK and Europe and the UK alone has almost 2,000 stores. The company began to expand internationally in 1994 and right now, the majority of Tesco’s sales space is overseas, Sutton said, with 1,000 stores outside the U.K.
He noted that Tesco wants to be the one-stop shop for consumers, making life more convenient by supplying services like banking to customers.
Relative to the fresh produce suppliers, Sutton said Tesco sources from producers ranging from 1 tree to those with more than 20,000 acres. Suppliers of fresh produce have everything from on-farm packing to 60,000 square foot warehouses.
“Size is really not important,” he said.
Sutton said direct sourcing will increase in the future, and he said Tesco is now direct sourcing grapes from Chile for its UK operation. Central Europe Tesco buyers are buying orchids direct from Thailand and another sourcing office is opening in Shanghai.
Market opportunities for direct sourcing to Tesco exist for grapes, apples and citrus, he said.
He touted the effectiveness of Tesco’s Nature’s Choice code of practice for suppliers. Established in 1991, it was the first retail code and has been revised several times as new demands and needs of retailers are taken into account.
“We believe it is the starting point of many many GAP schemes around the world.” he said. He said consumers embrace retail standards more than suppliers realize.
The principles behind Nature’s Choice are simple, based on the rational use of crop inputs:
“We want to make sure you are applying what’s right at the right time,” he said. Sutton noted with satisfaction that many suppliers in the Asia Fruit Logistica trade show advertised their compliance with Nature’s Choice standards.
Minimizing the environmental impact of farming practices is a key theme of Nature’s Choice, he said. Tesco is also working to lower consumption of energy, and has pledged to reduce its percentage of business relying on airfreight. Consumers are also interested in reducing social abuse, particularly the abuse of farm workers.
“It not just about physical quality of the produce,” he said.
Sutton said retail schemes are not about audits alone, but rather embedding standards into the daily business.
Sutton said suppliers must be flexible to meet the demands of all market needs and look for innovation.
“Customers love innovation, and are looking for the next new thing,” he said.
Sutton said growers must accept the standards that are required by retailers and consumers, saying it is “futile” to resist. “You have a choice - to comply or not to comply; nobody is forcing you to do business,”
Sutton has a point. Not every produce supplier may want to conform to Tesco’s Nature’s Choice standard and create more costs . But as Tesco expands its US business, it may prove a wise move for those producers who do.