Tesco to Boost Private Label Fresh Produce

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July 7, 2011

Tesco is on the march to increase its store brands presence in the fresh product category, according to a report in ISN (International Supermarket News).

Tesco is consolidating the “less meaningful brands to create space for our own brands and the power brands,” said group food sourcing commercial director Matt Simister. This is one of many supply chain changes the U.K. retailer will be making since it recently set up its Group Food Sourcing division.

The company hopes to switch from its current system where “many growers currently supplying many packers whose product is delivered through national distribution networks” to a new model where it is “buying more from the best growers in the world, supplying better invested packers, serving regional distribution networks,” according to the report.

“Tesco is looking at a lot of things abroad in Asia around the production of packaging,” an anonymous source told ISN. “If it standardizes things like cardboard, which has gone up in price, by getting it in bulk from China and then distributing to suppliers of various types of produce it would be a massive cost saving. It will create uniformity across the supply chain and ultimately will bring down the price of the product. I doubt the savings will completely go back to growers but they may get a little bit more.”

In other Tesco store brands news, the company reported this week that it is seeing solid growth in fresh prepared foods and meat, fish and poultry. “Tesco brand products are also seeing good growth, with the Finest range up by almost 10 percent like-for-like, as customers seek out quality alternatives to eating out.”

SBD Views: The supply chain innovation that Tesco is exploring for the sourcing of both produce and packaging materials have the potential to be replicated by large U.S. retailers. Right now, we are only aware of Walmart’s efforts to cut costs further up the supply chain in store brands sourcing.-- John Failla for Store Brands Decisions

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• Private Label Produce Gains Ground
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