Tesco boss Dave Lewis today claimed the retailer was succeeding in the battle against inflation, which in turn was helping it win the supermarket war.
After the supermarket giant recorded UK like-for-like sales growth for the first quarter of 2.3%, driven by 2.7% like-for-like sales growth in food, Lewis thanked the “partnership approach” of suppliers in enabling Tesco to keep the lid on prices.
He said in the past 12 weeks Tesco’s price inflation had been in the region of 1.4%, compared with Kantar Worldpanel’s figure for the market of 2.9%, a massive outperformance of the market.
Lewis said talks with suppliers, which The Grocer revealed in April had been taking place, geared around ways to fight off inflation, had been a key part of its success.
“I’ve always been struck by the how pragmatic and action-orientated our supply base is,” said Lewis.
“We have been having conversations with suppliers looking at our prices and volume and how we can use that mix.
“It’s been very much a partnership effort and so far so good in what that has achieved.”
In April, Lewis said he was willing to “do everything, and I do mean everything” to prevent cost hikes being passed on to consumers.
The Grocer revealed Tesco had been holding talks with suppliers in key categories, including bringing forward range reviews under its ongoing Project Reset, to thrash out deals to keep prices down.
Tactics it has used include offering longer-term deals with suppliers in return for cheaper prices, a reduction in the number of SKUs in return for greater volumes and reduced promotional activity.
Today Lewis also raised the example of partnership among suppliers on crop utilisation, praising potato suppliers for work, which had seen crops, used not just to provide potatoes but also ready meals, which had brought costs down.
Tesco started the year with an aggressive price strategy to fight back against the discounters, with many fresh fruit & veg items selling for 49p. Lewis said the impact on volumes was seeing Tesco outperform the market.
Lewis said: “In tough market conditions, we have stayed true to our commitment to helping customers - working closely with our supplier partners to keep prices low.
“Customers have responded by doing more of their shopping with us and as a result we continue to grow volumes, particularly in fresh food.”
Bruno Monteyne, senior analyst at Bernstein, said Tesco had significantly outperformed other supermarkets in the war on inflation.
“Dave Lewis is reported as saying that they are experiencing inflation below the market trend. This reflects working together with suppliers, not margin compression.”
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