Dave Lewis vindicated on Farms brands as Tesco records like-for-like growth

Tesco boss Dave Lewis this week credited the retailer’s continued sales recovery to the launch of its Farms brands products, which he said had won customers back from all its rivals, including the discounters.

The seven new brands, featuring 70 own-label products, attracted fierce criticism from some quarters when they were launched in March because they were from so-called ‘fake farms’.

But as he unveiled a second successive quarter of like-for-like sales growth in the UK, albeit only at 0.3%, Lewis said Tesco’s investment had vindicated the launch by driving up sales volumes.

“Our recovery continues to be volume-led and volumes have been driven particularly by food,” said Lewis, who added that the growth had been driven “purely through the investment in these brands”.

“Two-thirds of customers have tried at least one of the Farms brands range,” said Lewis, adding that they had also made Tesco far more competitive on price with the discounters.

“As a result, our customers are able to save £1.60 on a typical basket of the 10 most popular lines,” he claimed.

“The key lines are outperforming the market by 5% despite deflation.”

Lewis also claimed vindication for his move to a new strategy of everyday low prices, with couponing down 38% year on year across the first quarter and Tesco’s multi-buys offering down 42%.

Lewis said the strong performance of the Farms brands - such as Redmere Farms for vegetables, Suntrail Farms for imported fruit and Willow Farms for chicken - had proved criticism of the range among some critics had been unfounded.

“I was always confident in what we were doing,” he said, adding that Tesco had conducted extensive research among its customers.

“What we’re now seeing is customers returning to Tesco from right across the market, whereas 18 months ago we were losing customers from across the market.”

Clive Black, an analyst at Shore Capital, said: “It’s still early days so we need a sense of perspective, but the fact that Farms brands have got traction is absolutely vital to Dave Lewis’ plans.”

“They are right at the heart of having a credible fresh food offer against the discounters let alone the other supermarkets.”

“It doesn’t stop at Farms brands, Tesco will be revisiting every category in its armoury.

“But this result is potentially very significant and just imagine if Farms brands had fallen flat on its face, it would have been a serious blow to Tesco’s recovery.”

Bruno Monteyne, senior analyst at Bernstein, said the Farms brands were key to the Tesco turnaround. “In line with our own taste tests, Tesco reports high customer scores for quality and taste,” he added. “Tesco is cutting ahead of the market. Farms brands are a key driver of this, with these products described as being 17% cheaper than the standard range.”

Retail Vision analyst John Ibbotson added: “The success of Tesco’s new fresh food brands will not have been missed on Morrisons’ Market Street,”