Vi­sion­ary who changed the face of shop­ping: Page 14

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SIR TERRY LEAHY’S reign as chief ex­ec­u­tive of Tesco matches al­most ex­actly the pe­riod t hat New Labour oc­cu­pied Down­ing Street. As Leahy pre­pares to hang up his apron at Bri­tain’s biggest gro­cer, the con­trast be­tween his achieve­ments and those of the wasted Blair-Brown years could not be greater.

Leahy has been a trans­form­ing fig­ure, cre­at­ing a world-class cor­po­ra­tion that has left its chal­lengers J Sains­bury, Wm Mor­ri­son, Asda and Marks & Spencer for dust.

Un­der his stew­ard­ship, Tesco’s op­er­at­ing prof­its more than tripled to £3.5 bil­lion, and £1 in ev­ery £3 spent on gro­ceries in this coun­try lands in a Tesco till. It is a mea­sure of the man that on the day he an­nounced his de­par­ture, £778 mil­lion was wiped off the value of the com­pany, with even the smoothest of suc­ces­sions planned.

In con­trast, un­der New Labour the nation was ef­fec­tively beg­gared as Blair and Brown ran up the high­est bud­get deficit in the nation’s his­tory.

The Tesco boss has been well re­warded for his work, tak­ing home more than £5 mil­lion in to­tal earn­ings last year.

Mod­est

De­spite the wealth and the ac­co­lades, he has never lost touch with his mod­est work­ing-class roots in Liver­pool. Not for him are the baubles of high of­fice — so im­por­tant to Blair and his cronies and a whole po­lit­i­cal class. Quite the con­trary.

When I last had lunch with him at Tesco’s un­pre­pos­sess­ing head­quar­ters on an in­dus­trial es­tate in Cheshunt, in Hert­ford­shire, the head of one of Bri­tain’s biggest com­pany’s ate in an open-plan can­teen.

The women who served lunch were ad­dressed by their first names and pass­ing ex­ec­u­tives felt com­fort­able in­ter­rupt­ing the boss for a chat.

In­deed, it is no won­der that when Gor­don Brown was cast­ing around for some­one to pi­lot the changes in the NHS — as the health bud­get soared f rom £42bil­lion to £110 bil­lion — he saw Leahy as t he i deal can­di­date.

At the time the Tesco chief, who knows the NHS well (his wife is a doc­tor), never took the govern­ment bait, de­cid­ing he still had im­por­tant work to do in busi­ness.

What is cer­tain, how­ever, is that had Leahy taken charge of Bri­tain’s health sys­tem, the money would have been far bet­ter spent, the stan­dards of clean­li­ness would be far higher and the pro­duc­tiv­ity im­prove­ments — the holy grail for the pub­lic sec­tor — would have been of a dif­fer­ent quan­tum.

For Leahy and his col­le­giate team at Tesco have shown not just an abil­ity to con­trol costs and in­vest, but also demon­strated an ex­tra­or­di­nary imag­i­na­tion in de­liv­er­ing changes to their busi­ness.

It is this abil­ity to see the fu­ture and jump in ahead of com­peti­tors which could have made such a dif­fer­ence had the same kind of com­mer­cial free­dom been

If our lead­ers had one iota of Tesco boss Sir Terry Leahy’s drive and flair, Bri­tain wouldn’t be in such a mess

by Alex Brummer

al­lowed to thrive in the scle­rotic, job­sworth pub­lic sec­tor. So how did Leahy change Tesco? He recog­nised early on that ‘ the pile-it-high, sell it cheap’ model of the group’s founder — the for­mer mar­ket trader Sir Jack Co­hen — was reach­ing its nat­u­ral lim­its.

With some 30 per cent of the UK’s gro­cery trade al­ready sown up, it had to head in dif­fer­ent di­rec­tions. So Leahy turned the busi­ness model on its head and re-colonised the high streets, the corner shops, the newsagents and petrol sta­tions.

De­mand

Where he led, other gro­cers fol­lowed, in­clud­ing Marks & Spencer with Sim­ply Foods, but they strug­gled to match its ad­ven­tur­ism.

Leahy also recog­nised that his su­per­stores could be out-oftown de­part­men­tal stores sell­ing ev­ery­thing from TVs to Levi jeans, bought di­rectly on the ‘grey mar­ket’ in the Far East.

Ad­mit­tedly, Tesco was ac­cused of de­stroy­ing the nation’s vil­lages and high streets with its vast out-of-town su­per­stores — but it was sim­ply re­spond­ing to con­sumer de­mand.

When on­line shop­ping be­came the rage, it chose to ser­vice cus­tomers from lo­cal stores, rather than dis­tant ware­houses, main­tain­ing a cru­cial re­la­tion­ship with

CITY EDI­TOR

the cus­tomer. It con­quered ru­ral ar­eas by buy­ing into Wye­vale gar­den cen­tres, trans­form­ing the whole nurs­ery ex­pe­ri­ence.

In short, Terry Leahy trans­formed Tesco from just an­other High Street gro­cery su­per­mar­ket to also be a bank, a £1bn-a-year cloth­ing busi­ness, the UK’s biggest in­ter­net re­tailer, and it is in the top five re­tail­ers for books, toys, elec­tri­cal equip­ment and home prod­ucts.

It is also Bri­tain’s biggest pri­vate sec­tor em­ployer, with more than 300,000 staff in this coun­try. But while it was think­ing of ever more ways to dom­i­nate the Bri­tish shop­ping mar­ket, it also looked over­seas.

When the bar­ri­ers came down in East­ern Europe, Leahy dis­patched his prop­erty team to the Czech Re­pub­lic, Hun­gary and other East­ern coun­tries where they bought up sites and brought ‘Tesco cap­i­tal­ism’ to the for­mer Com­mu­nist bloc.

He dared to tread where other UK re­tail­ers failed to ven­ture. It also em­barked on a mas­sive ex­pan­sion in the Far East from Thai­land to China.

Recog­nis­ing the prop­erty op­por­tu­nity in China, it is es­tab­lish­ing Tesco-malls — own­ing the land wher­ever pos­si­ble — and draw­ing in re­tail­ers from across Asia.

Rather than jump­ing in and mak­ing huge mis­takes, the firm’s re­search is metic­u­lous. For ex­am­ple, be­cause of the cul­tural bar­ri­ers in Ja­pan, it bought a shop­ping chain around sub­ur­ban Tokyo, leav­ing the busi­ness in­tact and un­changed, so it could best un­der­stand con­sumer habits be­fore reck­lessly ex­pand­ing.

As a re­sult, it was open­ing stores when other Bri­tish com­pa­nies — such as Boots — were busy clos­ing them.

The global push has not been cheap. The in­vest­ment has been in the re­gion of £10 bil­lion and oc­ca­sion­ally — when the re­turns were not im­me­di­ate as at Fresh & Easy (the con­ve­nience store it set up in the Amer­i­can West and which posted £160mil­lion losses) — the City has com­plained.

But Leahy tends to re­ceive the ben­e­fit of the doubt.

Of course, any com­pany which ex­pands with the speed and bold­ness of Tesco cre­ates en­e­mies.

Gen­er­ous

In Bri­tain, its build-up of an es­ti­mated £14 bil­lion un­used prop­erty port­fo­lio ( held for years in readi­ness un­til plan­ning ap­pli­ca­tions are sub­mit­ted) fre­quently at­tracted the at­ten­tion of the reg­u­la­tors who claimed smaller chains were stopped from open­ing stores as most avail­able sites for devel­op­ment were al­ready owned by Tesco.

It also has been reg­u­larly ac­cused of price-fix­ing and bul­ly­ing sup­pli­ers.

As for the firm’s 475,000 global em­ploy­ees, Leahy told me re­cently that they are not paid huge wages. In­deed, cashiers, shelf-stack­ers and ware­house work­ers were of­ten paid be­low the na­tional av­er­age.

How­ever, there is a gen­er­ous bonus scheme in which all work­ers share. In ad­di­tion, Tesco has in­sisted on main­tain­ing a gold stan­dard fi­nal-salary pen­sion plan, open to ev­ery­one, when al­most ev­ery cor­po­ra­tion of com­pa­ra­ble size has given theirs up.

Above all, Leahy re­spects her­itage. As in the great­est Amer­i­can com­pa­nies, the suc­ces­sion is al­ways in­ter­nal. There is no brash head-hunt­ing process.

Leahy’s suc­ces­sor will be Philip Clarke, a fel­low scouser who started as a shelf-stacker be­fore go­ing t o Liver­pool Uni­ver­sity and be­com­ing a lo­cal store man­ager.

Such rags-to-riches ca­reers mean that Tesco bosses are of­ten more hun­gry than their ri­vals. Above all, it also means they un­der­stand the short­com­ings of the po­lit­i­cal world in which we live.

So, for ex­am­ple, Leahy struck a chord late last year when he railed against the ‘woe­ful’ stan­dards of young­sters leav­ing Bri­tain’s schools and com­plained that em­ploy­ers were too of­ten ‘left to pick up the pieces’.

His record of cre­at­ing one of the strong­est busi­ness cul­tures i n Bri­tain and us­ing i t to con­quer the world speaks for it­self. How dis­ap­point­ing that the same cre­ativ­ity, loy­alty and vi­sion i s missing f rom our gov­ern­ing classes.

Even a lit­tle of Tesco’s phi­los­o­phy could have helped cre­ate a dif­fer­ent, more eco­nom­i­cally ro­bust, Bri­tain.

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