business news in context, analysis with attitude

Global notes & comment from…

Speaking at a recent industry conference, as reported by The Grocer trade magazine, the chief executive of UK market leader Tesco, Sir Terry Leahy, has said that supermarkets have a responsibility towards society but should not be blamed for all of its problems. He suggested that “We shouldn’t blame the mirror if we don’t like what we see in it. We’re not politicians, bishops or philosophers. Tesco has been successful because we’re good at finding out what customers want and reflecting it.”

He noted that food retailers are all making an effort to improve product formulations and to assist shoppers in making healthy choices, arguing that rising obesity was more a reflection of shifts in lifestyle rather than the targeted marketing of sugary foods on the part of grocers: Sir Terry stated that “We’re more a symptom than a cause. The blanket notion that supermarkets are bad for public health is wrong.”

Other telling comments that he made included the observation that the British held businesses in a strange light - on the one hand wanting them to do well, but on the other hand not wanting them to do TOO well. He suggested that UK retailers were lauded for job creation, price reductions and increases in consumer choice, while at the same time being criticised for pressuring suppliers, destroying value and reducing choice. He went on to question the validity of suggestions that retailers should restrain their goal of customer satisfaction - “I struggle with the notion that we should only want supermarkets to do half good.”

Some very interesting and contentious issues were raised by Sir Terry in his address, revealing the almost impossible situation that major grocery retailers are finding themselves in, being forced to juggle the demands of employees, suppliers, shareholders and customers. While it is easy to agree with the assertion that retailers like Tesco are simply responding to consumer demands, it would be more realistic to suggest that the actual situation is somewhat different - retailers do, of course, react to changing public tastes and change their offer accordingly, but it is also the case that retailers have a massive impact on consumer patterns and can actually shape and encourage different consumption trends.

Simply put, consumers will buy and consume practically anything that is put in front of them and can be encouraged in particular directions through marketing and pricing initiatives. Suppliers and retailers cannot and should not be blamed for issues like obesity - that is down to personal lifestyle choices - but it is slightly disingenuous to argue that they have had no role in the problem. They might not have been pulling the trigger, but they’ve been happy to sell the bullets.

It is much easier to sympathise with Sir Terry’s comments on the perception of successful and unsuccessful businesses - and it is not a phenomenon that we think is limited to the UK. Indeed, it’s becoming increasingly clear that Wal-Mart is suffering from a similar problem in the US. Businesses like Kmart in the US, and M&S and Sainsbury’s in the UK, are continually berated for their shortcomings and their underperformance, so one would assume that retailers with superlative business models and decent profitability would be congratulated by the press and the public for doing a good job. Unfortunately, there seems to be a perception in some quarters that big somehow equals bad and that success is achieved at the expense of others.

Is it really such a bad thing to be good at what you do?
KC's View: