Specialist
Former divisional leader at Tesco plc
Agenda
- Tesco’s (LON: TSCO) price positioning vs those of Asda, Sainsbury’s (LON: SBRY), Morrisons (LON: MRW) and discounters
- Tesco’s pricing and promotional outlook
- Recent industry trends including online and potential rise of rapid delivery players
- Margin outlook in light of inflationary pressures and competitive threats
- Tesco’s online growth sustainability and channel outlook
Questions
1.
What 2-3 key trends have you noticed in the UK grocery market over the past 18 months? How might this industry shape up and what does that mean for Tesco?
2.
Where do you see online penetration normalising within the UK grocery market? You mentioned it spiked during coronavirus but that there has been a slight return.
3.
You mentioned a variety of impacts that come with growth and online mix. What does this growth mean for shopping behaviour and habits for the grocers? Have we seen much change in products or purchasing behaviour as online has grown?
4.
Do you think the spend and mix online is here to stay, and perhaps as consumers get more adapted, basket size and spend will continue to be higher online?
5.
Have the unit economics of online started to improve as the big four players – Tesco, Asda, Sainsbury’s and Morrisons – have started putting investments behind this channel, or are they still structurally weak?
6.
What are your thoughts on rapid delivery players? You mentioned Tesco’s offering with Whoosh and we’ve seen Getir and Gorillas. Do you think this is a trend that’s here to stay, and could it grow quite potent within the cities?
7.
Do you think any of the big four players are more at risk to growth from smaller rapid delivery players than others, given they target more of the convenience sector, or does it hit the market as a whole?
8.
What other trends do you think we should be monitoring over the next 6-12 months that might alter the UK’s grocery retail landscape? You mentioned convenience coming back which is a key trend.
9.
We often hear about the carrier mix moving towards organic healthy food. Do you think that trend might revert now, given we are seeing price increases and inflation coming through the market with that depressed disposable income that you mentioned?
10.
How might the current period of cost inflation and environmental cost inflation be impacting Tesco and the wider UK grocery industry? Inflation is obviously one of the big hurdles in the market.
11.
Will retailers take the cost increase coming from manufacturers and brands in full and pass it on in full to consumers? Alternatively, do they pass on a certain amount and then try to make up the shortfall by cutting costs elsewhere?
12.
You mentioned Tesco might hold off costs until the last minute, which I think places it in a good position to take some market share if consumers are really price-sensitive. Obviously the company is facing its own set of costs around energy, labour and supply. When it does push these costs through, would it tack on an additional cost increase to those coming from suppliers, just to offset its own costs? Alternatively, do you think there’s too much cost being passed through and Tesco will have to almost drip feed that through over the longer term?
13.
Do you think power is shifting from retailers to suppliers in the UK grocery market? You mentioned the whole negotiation of suppliers is now changing. Could there be any risk of stock-outs with suppliers holding off if price increases aren’t accepted?
14.
Do you think the level of rising prices brings private label brands more into play, and thus maybe positions the discounter ahead of some of the big four players?
15.
Are there any categories that lend themselves better to private label exploration alongside the trading up with a good private label vs trading down, or is it very much dependent on the retailer’s strategy?
16.
Do you think a PE ownership structure changes the way any of the big four might think about price and margin? How might that play out in a competitive dynamic over these next 12 months? We’ve obviously seen a lot of PE interest in the segment, with Morrisons set to be acquired by a PE firm.
17.
Do you think that, despite the ownership change, businesses won’t face any loss of share and possibly come out even stronger?
18.
What is your outlook for Tesco’s performance and market share over the next 12 months? The company has performed relatively well over the last 12 months. Do you think its scale and size will help it navigate the waters better and perhaps grow its market share?
19.
Do you think Tesco will take share from any one competitor, or will it be quite broad-based? Who do you think might stand to lose to Tesco’s benefit?
20.
How do you rate the quality of Tesco’s core range relative to its competitors? The company’s range of offering is key in this environment. How do you think customers perceive its range?
21.
You mentioned Tesco’s quality is quite good, but the perception might be not up to the quality. Can anything be done to change this? Is the company doing anything to change that, or is it just a stigma that might continue?
22.
Are there any other strategic initiatives from Tesco that you think are worth discussing, and which put the grocer on the front foot, or possibly on the back foot? We’ve touched on importance of the Clubcard.
23.
What do you make of Tesco’s clothing strategy? Is this quite important? Obviously, a lot of retailers have a clothing and a non-food option, but how well-set-up is Tesco in that regard?
