Tuesday, April 23, 2024

Tesco to launch discount chain to take on Lidl and ALDI

A new Tesco discount chain could launch in the UK as early as September to take on cut-price German giants, according to media reports.

Industry insiders have speculated the new chain will be called Jack’s in honour of Tesco’s founder, Jack Cohen. Tesco declined to comment.

The UK company has reportedly earmarked 60 existing stores to transform into branches of the new chain. It has also begun recruiting staff, reputedly offering £9 ($16) per hour, which is higher than its standard wages.

One source has suggested it could open 50 to 60 stores in the first wave. Possible locations include London, Cambridgeshire, Lincolnshire and Liverpool.

The move is being seen as part of Tesco’s resurgence after a difficult period in its history.

A decade or more ago, it looked set to dominate the UK’s retail market.

But it was seriously blindsided by the German invasion of Lidl and ALDI, which have eaten into its market share.

By 2014, a £250 million ($444 million) chasm had opened up in Tesco’s profits. This led to the appointment of new CEO ‘Drastic’ Dave Lewis, who has since nursed the chain back to health.

Tesco’s profits have since rebounded to more than £1 billion ($1.78 billion). It has also forged a “strategic alliance” with French giant Carrefour.

Could a new Tesco discount chain complete the comeback?

Analyst Steve Dresser of market researcher Grocery Insight said: “It’s difficult to take on ALDI and Lidl, but if Tesco can get it right this could run and run.

“There is an opportunity to look at any stores still struggling and say, ‘Let’s see if we can try something else here rather than closing them and losing them to a competitor’.”

Global Insights Director Bryan Roberts at marketing group TCC Global said: “It’s better to eat your own lunch than stand by and have someone eat it for you.”

He said Tesco should “avoid a complete facsimile of ALDI or Lidl and come up with something different, because otherwise it’s not going to be compelling enough to win shoppers back from the Germans.

“The key thing is scale. They need to go at it hammer and tongs, otherwise it will never escape the shadow of their main business.”

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