3 things to highlight from Tesco’s Interim Results

1. Aldi is running circles around the Big 4

The German discounters Aldi & Lidl dominate the UK grocery market discussion. Tesco’s most important strategic priority currently is price pressure. Tesco promoted the Aldi Price Match even in its quarterly reporting, highlighting the price leadership of Aldi & Lidl.

An interesting detail in the quarterly report is that the clear UK market leader goes on to mention Aldi in it’s Interim report a whopping eight (8) times.

This is quite remarkable taken as the main rivals Sainsbury’s and Asda are mentioned only twice.

2. Tesco is also locking prices

The price pressure is driving the other crucial strategic initiative from Tesco: Price locking. Tesco is following Asda by locking the prices for over 1 000 products. Despite 1 000 products being a relatively small part of the entire assortment, they could be a significant part of customers’ shopping baskets.

3. Online: pandemic growth bump dissolving

As the pandemic has faded, also online grocery sales have declined. Tesco was probably the biggest winner during the rapid acceleration of the pandemic. Tesco was able to ramp up online volumes alongside the demand.

During the first half of fiscal 2022/2023, online has declined by 11,3%. Despite the decline, online is still 12,9% of total sales in the UK, a significant portion of sales for a market-leading European grocer. The online share is 3,6%-points above the pre-pandemic level.

For online, Tesco continues to invest in the Urban Fulfilment Centers (Micro Fulfilment Centers). They have opened five centres so far and opening two more this year.

The other priority for Tesco online seems to be the drive to get customers to collect the orders from the stores. During the last year, Tesco has opened 75 new Click & collect locations, increasing the number to 530.