Reputation check: Tesco hits back at 'behemoth' tag

Tesco's retail juggernaut rolls on. But its image may lag behind its margins, as Alex Black reports

Tesco last week announced it made £2.2bn profits in the previous 12 months, cementing its dominance in the UK supermarket sector.

Profits surged by 17 per cent on last year, with UK sales up by 11 per cent.

Yet instead of celebrating its success, CEO Sir Terry Leahy spent most of last week defending the retailer against allegations of unfair competition and an unscrupulous policy of land acquisition.

Last week The Independent asked whether the achievements of the 'retail behemoth' were being overshadowed by 'growing accusations from a loose alliance of consumer and environmental groups, small shopkeepers, farmers, residents' groups and local authorities'.

A day later the firm announced a raft of green measures, including the earmarking of £100m for 'environmental improvements', and plans to build the 'greenest store in the world' in Aylsham, Norfolk - made entirely from recycled material.

Foreign shores
Tesco is also expanding beyond these shores. It is active in 13 European and Asian countries, and is due to open 12 more hypermarkets in China over the next year alone. In February it announced plans to do battle with convenience stores on the west coast of the US.

As the expansion continues, Tesco's in-house comms team has reacted to increasing media scrutiny. Reuters' European retail correspondent Trevor Datson, for example, joins at the end of May to work on corporate comms (PRWeek, 28 April).

Indeed, public opinion research commissioned by PRWeek reveals a number of image problems being faced by Tesco: from being outflanked in quality terms by Asda, to being identified as a major threat to small retailers.

ANALYSIS 1: The retail PR view
Jan Shawe, former director of corporate relations at Sainsbury's
'Over the past 30 years Tesco has gone from a UK-based "pile it high, sell it cheap" outfit to a sophisticated international business competing against multinationals such as Carrefour and Wal-Mart.

'It is crucial that Tesco ensures there are strong alternatives for consumers and suppliers. If Tesco is perceived to have reduced that choice beyond sensible terms, its reputation will come under attack.

'It is the biggest supermarket chain in the UK because people keep shopping there, but it will lose that leading role as soon as it fails to play fair. The green measures it announced last week are all very well, but they certainly don't do anything to tackle the issue of limiting choice.

'Now the Competition Commission investigation has beenannounced, it is vital Tesco concentrates on showing that it is not dominant in all areas. The supermarket industry is still a very competitive sector, but it is not perceived as such. Tesco needs to work on that before the commission reaches a conclusion.'

ANALYSIS 2: The national journalist view
Elizabeth Rigby, retail correspondent at the Financial Times
'Sir Terry Leahy joked two weeks ago that if you cut him in half he would have the red, white and blue of Tesco running through him.

But Leahy went a little bit green on results day as he unveiled a £100m fund to explore sustainable energy sources.

'The press dismissed his new hue as a PR stunt - something he vehemently denied. But with £3bn capital expenditure set aside for this year alone, that £100m is a drop in the ocean.

'What is significant is that Tesco seems to be trying to soften its image amid the rising clamour from the Women's Institute, farmers and small shopkeepers - who say the supermarket is too big, too powerful and does not care about local communities. It will announce an initiative in this area in the coming weeks.

'The timing is also significant given the forthcoming Competition Commission investigation. Tesco will be under a lot of scrutiny. For the past few months the supermarket has tried to keep a low profile but now is the time to get out there and engage with the media - even if Leahy's wind turbines do take a bit of flak.'

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