Will Tesco's new fresh food plan prove counterproductive?

Tesco’s plan to axe the fresh food counters at many large stores poses huge questions - and not just for the future of up to 9,000 staff whose roles face the chop.

Tesco is shutting the fish, fresh meat and deli offers at 90 stores, with those at another 700 facing an overhaul.

But is this a case of Tesco being in tune with Brits’ growing demand for the no-frills offers of Aldi and Lidl, or a cut too far?

Tesco, which was forced to rush out an announcement of the changes after an incorrect version of the plans were leaked to The Mail on Sunday, claims they are focused on growing demand for convenience.

Yet some see the move as ­recognition that fresh food counters have become expensive luxuries.

“On a macro level, counters are in long-term decline,” says one source. “Consumers want convenience, not leaky packaging and products which are ready to cook and can’t be stored without stinking out the fridge.

“All retailers, apart from perhaps the 20% best-performing stores, haemorrhage money on fresh fish counters and have done so for quite some time. They have them in store because they felt they needed to have them, but that is becoming less of a driver now.

Opinion: Counter-cutting is ruthless but right for business at Tesco

“There are also huge amounts of waste from services like fish counters, with lots of product marked down every day,” adds the source. “This is because pre-packed fish has a five-day shelf life, while counter fish, out in the open air all day, only has one day.”

Tesco’s battlefield is more about revamping its own label range, including products such as its Eastman’s Deli Foods pre-packed meat and its Creamfields dairy brand, than customers queuing for slices of crumbed ham.

Bryan Roberts, global insights director at TCC, says fresh counters’ contribution is “microscopic” compared with some other countries. “If you take a hypermarket in Spain you could be looking at up to 10% of its turnover coming from its fish counter. I dread to think what that would be over here. It’s infinitesimal.”

In-store innovations?

Roberts thinks Tesco will look to new innovations such as made-to-order pizza counters, extending services already run by local halal butchers, and other concessions.

“Tesco has been looking at the pound every square metre of the store is driving,” says consultant Hamish Renton.

“The optimist in me says they will replace this space with something exciting but it could leave Tesco with an underwhelming and narrow range.

“I worry they are taking away one of the better parts of the store for the well-heeled shopper.”

Morrisons wasted no time cashing in on Tesco’s announcement, this week announcing it was training 500 extra apprentices over the next 12 months, many specialising in traditional craft skills such as butchery, bakery and fishmongery. Morrisons has advantages over Tesco because of its integrated supply chain, with counters supplied from resources such as its fish factory in Grimsby and its Deeside meat factory, says Renton. “It can take out-of-code veg and put it on its deli pizzas, for example.”

“My interpretation is that they [Tesco] do not have sufficient confidence in their ability to add value to service counters,” adds Richard Hyman, director of RAH Advisory.

“Whereas if you look at Waitrose, Morrisons and to a degree M&S in some of their biggest stores, they have service counters. They aren’t easy to do but if there’s a race to the bottom there’s only going to be one winner as far as supermarkets are concerned, and that’s Aldi.”

Research suggests Lewis’ decision could affect its “biggest-spending” customers.

A survey carried out by Mintel in August showed 71% of this segment of Tesco’s consumers used fresh counters each month, the same as Sainsbury’s and slightly below Asda (83%) and Morrisons (85%).

Read more: Morrisons to train up 500 extra fresh food counter apprentices 

“Counters are one of the larger grocery stores’ last remaining USPs,” says Nick Carroll, Mintel retail associate director.

“Our data shows 74% of supermarket shoppers say they visit counters in-store and 41% believe food counters are more important than non-food.”

Tesco is far from alone in looking to slash costs at its counter operation. Last year Sainsbury’s merged its counter and café leadership operations in one such move.

And Tesco UK CEO Jason Tarry insists 700 stores will retain “either a full or flexible counter offer”.

“The wording is pretty weaselly,” says a source. “Does it mean there will be just one counter? Will they only be open certain days of the week or will they operate not as proper staffed counters but just as ‘grab and go’ offers?

“The same is true about its statement on bakeries. Tesco says it doesn’t plan any ‘significant’ changes to bakeries this year. What does significant mean and does that mean it will be next year they get the chop?”

One claim, that Tesco will switch to using frozen rather than freshly prepared dough, is certainly far-fetched - as it’s already common practice.

Perhaps Tesco’s decision is recognition that supermarkets can never truly compete with local delis, butchers and fishmongers, whose demise they have often been accused of hastening.

But Lewis will be hoping it will help it compete with Aldi and Lidl.

And nobody can argue that customers are flocking to them to take advantage of their fresh food counters.