Category Archives: Economics

What Jack Did Next: Tesco’s new weapon in the superstore wars

Watching the games being played in the supermarket arena has always been great spectator sport, but right now things are particularly fascinating.

While the proposed merger between the old-established Asda and Sainsbury’s is resting in the lap of the Competition and Markets Authority, into the fray steps Tesco with its launch of Jack’s, which seems to be offering something rather new.

I know this because we’re already shopping there …

Along with other family members I’ve been to one of the two Jack’s which launched on September 19th. You may recall that in a Periscope broadcast I’d previously bemoaned the demise of the little Budgens supermarket which was sited just around the corner from where we live, here in Chatteris in Cambridgeshire. So this new development is greatly welcomed by locals. But the launch wasn’t just big news around these parts – it was featured as a major news story on the BBC News channel both on the launch day and on days before and after. Fame at last for little Chatteris!

Some people say that Jack’s will be targeting Aldi and Lidl customers. Here in Chatteris, Aldi was – until now – the only superstore in the immediate neighbourhood, in a prime site at the entrance to the town. About four years ago, it seemed that they would face a huge challenge from Tesco, who built a very large store just on the opposite side of the A141 road which skirts the town. But a new Chief Executive arrived at Tesco. Noting falling market share and sliding profits, he made a number of radical changes to the business. Tesco’s share of the grocery multiples market was 30.9% in 2012; in the 12 weeks ending 12th August, 2018, it was down to 27.4% (source: Statista). Discount chains Aldi and Lidl have made rapid progress – Aldi’s share is up from 3% in 2012, Lidl’s up from 2.8%.


It seemed quite bizarre at the time, but one of the first actions taken by the incoming Tesco CEO was to put the huge, just-completed store in mothballs (like some other Tesco new-builds around the country); that is, until very recently, when Poundstretcher – themselves in some difficulties if media reports are to be believed, moved into one side of the building.

Not long afterwards, rumours began circulating that Tesco was about to launch a newly-branded network. Lo and behold, the launches in Chatteris and Immingham were confirmed – and the white elephant across the way suddenly sported a large Jack’s logo. Soon, carrier bags emblazoned with the brand began to appear on the streets of Chatteris.

Jacob Edward Kohen, better known as Jack and later Sir Jack Cohen, was born on 6th October, 1898. He saw active service in the First World War, including a spell in the Royal Flying Corps. In 1924, he married Sarah (Cissie) Fox – no relation to your truly, as far as I’m aware – who was the daughter of an immigrant Russian-Jewish tailor. The money they received as wedding gifts went towards a new venture in wholesaling. It was in that year that he created the Tesco brand, the name formed by combining those of a tea supplier called T. E. Stockwell and the first two letters of his own surname. He owned and ran the company, expanding it largely through takeovers and mergers. By the time of his death in 1969, Tesco was the fourth largest store chain in the UK.

In the ‘sixties, self-service supermarkets began to appear everywhere. Smaller specialist retailers and traditional grocers were hit very hard. My mother had always shopped at Peglers, in Castle Street, in our home town of Caerphilly. It was a friendly little grocery shop, where the people behind the counter fetched the items, cut the cheese (sometimes Caerphilly cheese) and weighed out the potatoes, all the while loading the goods into a tall, round, brown paper bag. Handles would have helped, but that didn’t seem to matter.

I’ve found this extremely old photograph (even older than me!) of Peglers on the net. This may not be the actual shop but this is the kind of Peglers store front that I remember. It wasn’t actually on a corner, but Peglers was the very shop I had in mind when I wrote my song Corner Shop.

Interestingly, an Aldi leaflet which dropped through our door recently seemed to lay greater emphasis on the quality of the goods they have on offer. Whilst the usual money-off coupons were there in abundance, it appears that if you’re in need of Champagne, Blue Eggs, Aberdeen Angus Sirloin Steak and classy preserves, Aldi is the place for you.

I find this rather interesting. Although the point-of-sale marketing at Jack’s underlines the British sourcing of 80% of the goods on display, the main message one takes away is low price. In a post-Brexit environment, this combination of British-sourced and low prices may be extra-powerful.

The store was crowded on the day we visited. Most of the goods were food lines, but we spotted some electricals. Maybe the proximity to the next door Poundstretcher, with its bigger range of homewares, may over time spark some synergy between the two. And – here’s a thought – Tesco has been doing its own shopping recently, notably with its purchases of both Booker and Budgens. Could Tesco cast an acquisitive eye over its neighbour sometime soon?

One could sense a buzz about the place. And my own impression was that yes, prices were low, certainly for some of the KVIs (Known Value Items – my marketing training, y’know) that I’m aware of. No great claims about champagne and blue eggs. Another interesting aspect was that there was the option of using self-checkouts. I haven’t seen this at my local Aldi and indeed I’ve never found Aldi’s checkout system something to relish on my few visits to the store.

So the white elephant seems to have turned into a really useful addition to the retail scene, at least here in Chatteris.

But, as others have suggested, the really big elephant, stamping its feet outside the room, may be Amazon. That brand seems to have those feet in so many sectors at the moment that a move into superstore bricks and mortar may well be high on its wish list.

 

Credit: grocery statistics – Statista.

 

 

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Recycling: the seagulls are still circling


As someone who makes frequent visits to my local council rubbish dump – sorry, recycling centre – I’m frequently reminded by the calls of the seagulls circling overhead of the crying shame of our ever-growing mountains of waste.

The problem of landfill continues to grow at a speed far too close to the rate at which we’re consuming packaged products. 23.6 million tonnes of waste were produced in the UK in 2016/17, according to Defra. In a perfectly re-cycled world, there would be no seagulls above landfill mountains.

A report issued by the UK’s National Audit Office earlier this month warned that much of the waste we put into our recycling bins doesn’t in fact get recycled. In the report, the NAO comments:

“Reducing waste and using resources more efficiently are long-standing objectives for the government, and tackling packaging waste is essential to achieving these ambitions”.

I couldn’t agree more. And neither, no doubt, would Athelstan Spilhaus, writer of an article entitled “The Shape of Things to Come”, which appeared in Reader’s Digest way back in August 1970:

” … industry so far is doing only half its job. It performs magnificent feats of scientific, technological and managerial skills, taking things from the land, refining them, and mass-manufacturing, mass-marketing and mass-distributing them. But then the same mass of material is left, after use, to the so-called public sector, to be ‘disposed of’. By and large, in our society, the private sector makes things before use, and the public sector disposes of them after use. There must be a loop back from user to factory, which industry must close. If industrial genius can mass-assemble and mass-distribute, why cannot the same genius mass-collect, mass-disassemble and massively re-use these same materials? If industry were to take upon itself this task, its original design of “things” would almost inevitably include features facilitating their return and re-making. If, on the other hand, we continue to allow the private sector to make things and the public sector to dispose of them, designs for re-use will not easily come about”.

However, here we are, nearly fifty years later and the future has arrived, without Spilhaus’s dream having anywhere near come true. Things have moved on to an extent, of course. We have regulations on the initial sorting of household waste via different coloured local authority collection bins; recycling centres and processors have made vast strides technologically; since the passing of the Producer Responsibility Obligations (Packaging Waste) Regulations 2007 act, we have had Packaging Recovery Notes (PRNs), which provide evidence waste packaging material has been recycled into a new product; and, according to recent data from Defra, 46.7% of household waste is being recycled.

But a recent study suggested that in the UK packaging producers pay only 10% of the cost of recycling, much less than in many other countries. And the NAO report makes clear that too much of our waste is evading the system and being shipped abroad, with too little control on what happens next – for instance, what proportion ends up in landfill. Environmentalists are calling for PRNs to be toughened up. They want to see packaging producers and supermarkets being made to make much more use of recycled materials, with more insistence on ‘closed loop’ recycling, where packaging materials are returned to the manufacturer and re-used within a continuous loop of production, usage and recycling. And, maybe most important, they want to see the building of a whole new domestic industry, with associated employment opportunities, by keeping waste products in the country and making it cost-effective for manufacturers to use home-produced recycled materials. Experts suggest that manufacturers would absorb costs in such a system.

So, forty-eight years on, the seagulls still circle above the landfill mountains; the polluter is yet to really start paying for the huge stream of waste being dumped and pumped into the environment; and an effective solution to the recycling conundrum is still part of The Shape of Things to Come.

 

 

 

Picture credit: colin grice [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)%5D, via Wikimedia Commons

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