Tesco supermarket. (Photo: Mankind 2k/CC BY 3.0)
Tesco is to launch a new discount chain amid Aldi and Lidl’s increasing gains
Wednesday, September 12, 2018, 21:30 (GMT + 9)
Supermarket Tesco is to launch its new discount chain Jack’s next week with cut-price brand named for founder Jack Cohen.
The retailer has forced staff and suppliers working on the project to sign non-disclosure agreements but when the Guardian visited the Chatteris store a Jack’s sign could be seen over the door, albeit covered with a blue tarpaulin, and branding was also clearly visible inside.
Mainstream supermarkets have been searching for a way to get into the fast-growing discount market, having seen Aldi and Lidl steal their shoppers since the recession, when rising food prices encouraged Britons to shop around for groceries.
The German chains control more than 13 per cent of the UK grocery market, according to Kantar Worldpanel data, compared with less than 9 per cent four years ago.
Since taking the helm, Tesco’s chief executive, Dave Lewis has launched the low price “farm” brands to take on the discounters. The brands, with fictitious names like Redmere, Woodside and Willow, are expected to be sold in Jack’s.
More recently it has replaced its cheapest “Everyday Value” brand with generic names like Bay Fishmongers, Ms Mollys and Butcher’s Choice, which would also fit the bill.
Shore Capital analyst Clive Black expects the Jack’s chain to encompass 100 stores, including around 60 of its small “Metro” supermarkets, some of which are struggling.
During the summer months, Tesco started recruiting staff for a “new store format” in Chatteris. The premises have been empty for four years since Lewis put the brakes on openings when he took charge in 2014.
Tesco has 2,659 stores in the UK, a sprawling estate that includes 172 Metros. It is thought that Tesco Metros in St Helens and Edge Hill, Liverpool are among those destined to be converted to the Jack’s brand. It is not the first time one of the mainstream supermarket chains has tried to fight back with a discount chain of its own.
Referring to the new chain, Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said: “Strategically, it makes sense for Tesco to consider its own discount chain and try to capture some of that growth.”
McKevitt explained that the big four now make up less than 70 per cent of grocery sales – down from 76 per cent a decade ago. The proposed Sainsbury’s-Asda merger acknowledges this decline, as did Tesco’s own acquisition of Booker, which gave it access to wholesale and out-of-home sales.
“The opening of a new discount chain would be further recognition of this shift,” he concluded.