Tesco’s overseas strategy: next steps

You may have already taken an interest in Tesco’s strategy in the US and an article has come up in The Guardian in which it describes Tesco looking to overseas markets in order to make a ‘change of gear’.

According to the article, the business plans to create new brands to spruce up its product ranges and appeal to increasingly aspirational shoppers (i.e. people who aspire to a wealthier lifestyle) across the world. The new CEO has been outlining his strategy and said Tesco would be online in all 15 of its markets this decade and, while it would continue to expand rapidly in its main British market, it would likely allocate a growing proportion of resources to its overseas businesses.

A new objective is to create “highly valued brands”. This is partly about the group’s own-brand foods ranges, from “Value” at the cheapest end to “Finest” at the most expensive, but is also about developing new brands for shoppers who do not necessarily want to have the name of a supermarket emblazoned across the products they buy. “As people develop their higher levels of disposable income, they want to treat themselves. They do not want to just buy Tesco Value shower gel. They want to have something sat in their bathroom that looks like it is a brand. So you create brands,” said the CEO in an interview. The group has already built up international brands like F+F in clothing and Technika in consumer electricals. It will also aim to create new brands in other product areas like Go Cook in kitchenware and Lighter Choices in health foods, and take them to all of its markets to benefit from economies of scale.

The company plans to continue expanding Tesco’s British business, where it accounts for about 30% of grocery sales and over 10% of all retail spending, but if overseas businesses delivered according to plan, however, a growing proportion of capital spending will eventually be allocated there.

Everyone is watching Tesco’s US chain Fresh & Easy to see if it will reduce its losses this financial year and break even by the end of 2012-13.