Tesco’s incoming chief executive has been urged by a leading industry analyst to break the supermarket into three parts to help turn its fortunes around.
Bruno Monteyne, an analyst at Bernstein Research, is calling on Dave Lewis to split the supermarket into a range of high-end 'Finest' stores to compete with the likes of Waitrose, a range of discount stores to take on Aldi and Lidl, plus a range of stores that adhere to the current model operated by the UK's leading retailer.
Monteyne told the Independent thata split is the only way that Lewis – who is due to replace Philip Clarke in October – can stop a slow decline at the retailer.
Monteyne told the news outlet: “Splitting themselves into different channels allows them to use different strategies with different customers.
“Rip out 20 per cent of the range, have cheaper shelving and cheaper products in the more deprived areas, and give customers a better deal. In London, where people want someone behind the counter who knows the difference between a parma ham and a serrano ham, that requires more investment.”
Supermarkets currently use the same prices for products nationally as part of self-imposed rules adopted in 2000 to avoid a competition inquiry into the industry.
But Monteyne told the Independent that he believes this is holding Tesco back as it tries to compete with the ever-stronger hard-discounters, as well as its main rivals, Sainsbury's, Asda and Morrisons.
Monteyne added: “By Tesco promising to have the same prices in the most affluent areas as the poorest areas, it’s basically tied its hands behind its back by committing to an uneconomical model.
“Tesco could probably be cheaper than Aldi in some areas, but national pricing would force them to do the same in Chelsea as well and Chelsea wouldn’t be successful.”
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