Tesco launches fresh price-cutting drive to combat Lidl and Aldi as its market share tumbles and accounting scandal takes toll
Tesco has embarked on a fresh discounting drive to combat the rise of Lidl and Aldi, it has emerged.
The grocer’s One Stop stores are trialling lower prices and limited ranges in order to find new ways of heading off cut-price rivals.
It is already two months into a programme at three northern stores – in Solihull, Burntwood and Manchester – that it could roll out across the chain’s 780 outlets.
One Stop has been owned by Tesco since 2003, though it does not the carry the grocer’s branding.
Fighting back: Tesco has embarked on a fresh discounting drive to combat the rise of Lidl and Aldi
Its stores are most commonly found on estates or in villages and are newsagent-sized, unlike Tesco’s town centre Metro stores or convenience-size Express outlets.
One Stop is run by its own management team, which is able to make decisions on pricing and strategy without getting clearance from Tesco’s board or management team.
The price cutting drive is the brain child of One Stop’s chief executive Tony Reed.
It sees the three stores mirroring Aldi and Lidl’s methods by offering limited ranges of products but at lower prices.
If successful, Tesco could be forced to look at adopting a similar tactic in its desperate bid to maintain its share of the grocery market.
The giant has seen its crown slip, having once accounted for almost a third of the UK market.
The latest figures from Kantar Worldpanel show that Tesco’s share of the market has fallen to 29.1 per cent – down from 29.9 per cent at the start of the year.
In addition, its sales in the 12 weeks to December 7 fell by 2.7 per cent, according to Kantar.
All of the major supermarkets have been roiled by the rise of the German price-cutters – which now control a combined 8.1 per cent of the market.
Tesco is struggling to grow, having issued four profits warnings in the space of a year and found itself mired in an accounting scandal that has led to a clearout of senior management.
Under pressure: Phil Clarke was ousted as chief executive over the summer following a disastrous tenure to be replaced by Dave Lewis (pictured) from consumer goods giant Unilever
Phil Clarke was ousted as chief executive over the summer following a disastrous tenure to be replaced by Dave Lewis from consumer goods giant Unilever.
Lewis, who had no involvement with One Stop’s price move according to sources, will reveal his new strategy next month.
Analysts expect him to spin off parts of the business such as Tesco Bank or its analytics business Dunnhumby.
Separately Tesco faces a pension black hole of up to £3billion.
It could be forced to inject up to £300m a year into the scheme that has 350,000 members including 200,000 current staff.
Its three-yearly valuation is due in the summer, and the most recent one in 2011 showed a deficit of £934million.
But the latest annual report showed the scheme has assets of £8.1bn but liabilities of £11.3bn – although these figures are calculated under a different accounting scheme to the one used by Tesco’s pension trustees.
Tesco refused to comment.
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