Page last updated at 07:12 GMT, Friday, 24 June 2005 08:12 UK

Will protests hurt the Tesco brand?

By Bill Wilson
BBC News business reporter

Tesco store
Clouds are gathering over the Tesco success story

The UK's supermarket group Tesco has reported another set of strong financial figures, showing how its influence is growing rapidly to dominate ever more people's shopping habits.

With profits topping 2bn a year, it has nearly a third of the UK's grocery market, and it is steadily building up its share of non-food markets for CDs, clothing, fuel, and electrical goods, as well as insurance and other financial services.

Though the UK remains its main market, the group's global footprint is also growing fast.

Tesco operates more than 2,300 stores in 13 countries, including Japan, Poland, Turkey, Hungary, and a joint venture in China.

'Action needed'

But not everyone is happy at such supermarket success stories.

There is a growing coalition raising questions about how global giants, including Tesco, affect independent retailers, producers at home and abroad, and the environment.

There is weaker recycling of money into local economies when it goes to a big national or multinational chain, rather than to local traders
Andrew Simms, New Economics Foundation

Tesco, which is the fastest growing supermarket group in the UK, has become a target for campaigners.

On Thursday, an anti-Tesco website - Tescopoly - was launched by a coalition of eight campaign groups.

"People might ask 'how can such a successful company as Tesco be a bad thing?'," says Vicki Hird, supermarket campaigner for Friends of the Earth.

"But their growth and actions are damaging in many ways.

"There needs to be action to control them. There are a lot of people who feel this way."

The Small and Family Farms Alliance and the New Economics Foundation (NEF) are among the other groups that back the new website, which replaces Tesco's slogan "Every Little Helps" with the phrase "Every Little Hurts".

Tescopoly website
Tescopoly brings together eight groups

Pointing out that last year 2,000 small food retailers in the UK closed down, Andrew Simms of the NEF says he believes the independent sector "is at tipping point" and that more shops will be forced to close in the years to come.

"There is weaker recycling of money into local economies when it goes to a big national or multinational chain, rather than to local traders," he argues.

The other five groups behind Tescopoly are: Women Working Worldwide; the GMB union; the National Group on Homeworking; War on Want; and Banana Link.

Shareholder obligations

So, in the face of such broad opposition - designed to put the spotlight on Tesco's practices - has the brand been tarnished in any way?

Or indeed, is there a danger of investors revising their opinion of the grocery giant, which started life as an East End market stall.

"The coalition of people who are unhappy with Tesco seem to be using two lines of argument, " says Richard Hyman, chairman of retail analysts Verdict.

Tesco facts
Founded 1924
First store in Burnt Oak, London
2,316 stores in 13 countries
326,000 employees
World's biggest online supermarket

"On the one hand there are calls for its power to be reduced, and for it to be broken up.

"Their other approach is designed to attract the public at large, by highlighting various things and then trying to persuade people not to shop there.

"However, what they have to remember is that Tesco continues to deliver to its most important stakeholder - the customers. This is something the City realises."

Mr Hyman points out that supermarkets are in business not to be "philanthropic" but to "discharge obligations", among them to shareholders.

An early Tesco store in the 1940s
Global group Tesco has left its humble beginnings behind

Moreover, it is often forgotten that Tesco has developed from very humble origins, he adds.

"The reasons it has become very large is that it is more adept at knowing what consumers want, and delivers it consistently every day in its stores.

"What has delivered its large profits is that it is part of a success story that has actually worked. In 1980 there were many more supermarket businesses, but we had less choice.

"The big players that are left are now at each other's throats and has to come up with different offerings to attract customers."

'Fiercely competitive'

However campaigners insist this has come at the price of local shops, and the constant price squeezing of UK and international suppliers.

"The Tesco bonanza comes at a price for farmers, workers, town centres and the environment," insists Friends of the Earth.

The minute people don't like Tesco's proposition they will stop shopping there
Richard Hyman, Verdict

The pressure group says Tesco's market-leading position rests on unfair trading practices.

But Tesco says "the supermarket industry is fiercely competitive as the last three competition inquiries have found".

"There is plenty of choice for customers to go elsewhere and our experience is that they certainly do so if we let them down".

In March, an Office of Fair Trading audit into the Supermarkets Code of Practice showed the four major chains were complying with its requirements.

Mr Hyman says the overriding view in the financial community is that Tesco is "at least as good as any other retailer in the world".

"It's success is its relationship with the consumer. The minute people don't like Tesco's proposition they will stop shopping there."

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