The Tesco founder, Jack Cohen, was an enterprising market trader who brought modern supermarket retailing to postwar Britain. Nearly a century later, Cohen, nicknamed “Slasher Jack” because he liked to “pile it high and sell it cheap”, is making a high street comeback.
On Wednesday, Tesco will unveil Jack’s, a discount chain named after its no-nonsense founder who famously gave top lieutenants tie-pins engraved “YCDBSOYA” – an abbreviation of “you can’t do business sitting on your arse”.
The closely watched venture is one of the most significant moves by a mainstream UK supermarket chain in recent years, and points to Tesco moving on from the 2014 accounting crisis that brought it to its knees.
The unlikely venue for the big reveal is the sleepy market town of Chatteris in Cambridgeshire. The £22m store has been an empty shell since 2014, a victim of the sudden halting of the machine that had underpinned its growth in the 20 years leading up to the accounting scandal.
As it finally opens, Chatteris will act as a window to Tesco’s future under its chief executive, Dave Lewis. Bolstered by this year’s £3.7bn takeover of the cash-and-carry chain Booker, Lewis is trying to rebuild profit margins at what was once one of Britain’s most profitable companies. The project has been shielded in secrecy, with visitors to a mock store at Tesco head office in Welwyn Garden City asked to sign confidentiality agreements before entering.
As staff worked late filling the shelves of the Chatteris store last week, it was clear the spartan layout had been designed to appeal to shoppers used to the no-frills experience of an Aldi or Lidl. Whereas Aldi has a regular “Super 6” deal, the signs in Jack’s advertise a “fresh five” offer. Another hoarding promises ‘‘every drop of milk is British” – again, a nod to the German chains, which have heavily marketed their British sourcing credentials.
“The reason why discounters succeed is not just because they are cheap,” says Bryan Roberts, an analyst at TCC Global. “The food is high quality and it’s simple to shop. You don’t have to choose between 15 types of ketchup; you choose between two.”
Tesco is dipping its toe in the fast-growing discount market at a time of huge upheaval in the UK’s £117bn grocery market. The competition watchdog is agonising over the proposed £12bn merger between Sainsbury’s and Asda, which would create a retailer more powerful than Tesco. A tie-up between the UK’s second- and third-largest supermarket chains would previously have been unthinkable but for the rise of Aldi and Lidl, whose sales are growing at 10% a year. Their low prices have forced down those of the major chains and eaten away at profits.
The scale of shopper defections means that £7bn less is being spent annually with the “big four” supermarkets – Tesco, Asda, Sainsbury’s and Morrisons – than a decade ago. To retaliate, Tesco has replaced its cheapest own-label products with the generic “farm” brands and ersatz ranges such as Bay Fishmongers, Ms Molly’s and Butcher’s Choice, which could also be sold in Jack’s.
But some senior industry executives wonder why, given the extra buying power created by the takeover of Booker, which boosts group sales to £60bn, Tesco needs a discount brand.
“Are they effectively raising the white flag?” asks one former supermarket boss. “Why can’t Tesco compete with Aldi and Lidl? Will Tesco now be a more expensive alternative, albeit with a bigger range?
“Supermarkets have always been discounters since they were brought here from the US after the war. The self-service model was all about lower costs and cheaper prices. Why can’t Tesco be a discounter rather than launching Jack’s? It just gives Aldi and Lidl affirmation and legitimacy.”
Time has not stood still in Chatteris and in the intervening years an Aldi store, one of nearly 800 in the UK, has opened and built a clientele. Tellingly, it emerged when Tesco decided to mothball the store that locals had expressed a preference for an Asda or a Morrisons in the first place.
In the 90s and 00s, the big supermarket chains engaged in a “space race”, competing to open the most supermarkets. Under Terry Leahy that race was won emphatically by Tesco as it shape-shifted into tiny convenience stores and the huge department-store-style Extras. Leahy’s legacy is an unparalleled 2,659 UK stores, but these days some of them – particularly within the 172-strong Metro chain of small supermarkets – are feeling their age on ailing high streets where the discounters are their new neighbours.
The Shore Capital analyst Clive Black says the Jack’s format could give 100 Tesco stores a fresh lease of life. Jack’s could also be deployed in eastern Europe, where Tesco operates, but is also under attack from discounters, he suggests. “This is about a group of problem UK stores: whether it turns out to be something more material, time will tell,” he says.
It’s not the first time that a mainstream supermarket has tried to be a discounter as well. Sainsbury’s co-opened stores with the Danish chain Netto in 2014 only to shut them two years later after struggling to make a profit. Asda briefly experimented with the Asda Essentials chain of small outlets.
Analysts say Jack’s will only succeed if it is run at an arm’s length from the mothership. “Being a discounter is about turning efficiency into scale and the lowest possible prices and highest possible quality for shoppers,” says Roberts. “You can’t play at being a discounter. If you try and do it alongside the main brand and there’s overlap, shoppers will notice.”
