Opinion: Tesco contrition must be followed by real change

Jeremy Corbyn’s call, on being elected leader of the Labour Party, for a new, kinder, more honest and inclusive type of politics, seemed somewhat insincere given some of his subsequent appointments.

A shadow chancellor who once talked about “honouring” the IRA and a militant urban vegan as his food, environment and rural affairs spokesperson spring to mind.

But as the party’s bigger rats fled the sinking ship, he had little choice but to start a long and painful rebuilding process with rather limited options.

See also: Dairy sector should have welcome cost-plus contracts

Tesco, on the other hand, has not quite hit the same depths of disarray as Labour. The recent apology to suppliers by its chief executive Dave Lewis for the “unintended consequences” of “chasing margins” is perhaps an early indication that the retail giant, whose profits continue to tumble, is finally coming to terms with the fact that it cannot keep fuelling growth from its suppliers’ balance sheets and has to address the problems at its core.

David AlvisDavid Alvis is managing director of Yorkshire Dairy Goats, based in the East Riding. He is a Nuffield Scholar and formerly co-managed the Technology Strategy Board’s sustainable agriculture and food innovation platform

Tesco’s current plight is largely of its own making and is a long overdue correction for years of overinflated returns.

The seemingly alchemistic ability to grow profits while cutting prices in the face of rising input costs was first brought into question and put in the spotlight in the wake of the horsemeat crisis.

As many commentators pointed out at the time – at £1 for eight burgers, what did people think they were getting?

In many ways Tesco has escaped lightly, but it has spawned a media feeding frenzy, with exposé after exposé lifting the lid on the extent of the spiv culture that had developed within a national institution that for so long had been the darling of consumers and the stock market alike.

The rest, as they say, is history. Heads rolled throughout the organisation as a new broom was brought in, in the shape of Mr Lewis, to effect a long-overdue clear out. 

He started his honeymoon period, predictably and sensibly enough, with a £6bn write-down of property assets in the last year-end accounts, effectively drawing to a close the smoke and mirrors financial chicanery that had underpinned the company’s seemingly unstoppable but ultimately unsustainable growth trajectory.

Retail is a very tough business and Tesco is now getting a taste of the same medicine that it has been dispensing to its suppliers for years. In that time, “taking costs out of the supply chain” evolved from a perfectly reasonable mantra for increasing efficiency into a euphemism for lazy and cynical exploitation of stakeholder goodwill, which one could infer from Mr Lewis’s recent public apology has, at long last, been acknowledged internally.

One can only hope that Mr Lewis is genuinely committed to developing the “transparent relationships” he outlined at the recent IGD conference as, love it or loathe it, Tesco is still, and for the foreseeable future is likely to remain, UK agriculture’s biggest customer and there is significant long-term value in that relationship.

The transparency he is calling for, however, has to work both ways if it is to deliver a sustained recovery for both Tesco and its beleaguered suppliers and only time will tell if the retail giant’s approach really will change.

We, as an industry, have much to gain from being fully engaged in that process. As Mr Lewis said: “We can never go back.”.

What matters now is how we move forward together.

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