© IGD 2011

New insight from IGD’s Retail Analysis service:

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Agenda

• Key developments

• Key personnel changes

• Tesco strategy

• Tesco in the UK

• Tesco international

• Tesco’s other pillars

• Supplier implications

• Next steps

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Key developments

• On 2 March 2011 Philip Clarke took over from Sir Terry Leahy as Group CEO of Tesco

• This has resulted in a number of changes to the following:

– The Tesco PLC Board (see slide 6)

– The Executive Committee (see slide 7)

– The UK Board (see slide 8)

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

The Leahy legacy

• Tesco is now the world’s 3rd largest retailer, and is recognised as an industry leader in format and private label development

• Clubcard has become a core element of the Tesco strategy

• Internationalisation has been a major focus under Sir Terry’s stewardship, with the retailer now active in 13 markets outside the UK

• Sir Terry also spearheaded development of Tesco’s non-food and services businesses

Measure 1997 2010

Group turnover (ex VAT) £13,887m £56,910m

Group operating profit £774m £3,412m

UK Turnover (ex VAT) £13,118m £38,558m

Non UK Turnover (ex VAT) £769m £18,352m

Stores outside the UK 190 2,329

Space outside the UK 2.7m sq ft 60.9m sq ft

“I wanted to develop a purpose and values

that could sustain Tesco through its challenges and

encourage and grow future leaders.”

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

The Philip Clarke perspective…

“Our international business is growing pretty fast, and it’s growing well. It’s been my focus for the past six years, and in some ways we’re

just at the beginning.”

“We’re going to be the best connected worldwide team in

retailing. New technologies and new platforms extending

the way we communicate. We’ll use the skill and scale of

Tesco to create more value than any other retailer.”

“We’ve now got 5,000 stores worldwide and everywhere we’re

committed to really contributing to our communities wherever we are. That’s a very big responsibility; it means local sourcing, it means all

our plans to help tackle climate change. It embraces all of our

community initiatives.”

“At the end of the day, it’s all about our customers. It’s about

the Tesco team working together with our stakeholders

that will bring even greater success in the future”

…On Digital …On International

…On Customers

…On Communities

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Key changes – The new Tesco PLC Board

Source: IGD Research, Tesco

Tim MasonDeputy CEO -Tesco PLC and CEO Fresh & Easy

David PottsCEO Asia

Richard BrasherCEO UK and Republic of Ireland

Laurie McIlweeChief Financial Officer

Andrew HigginsonCEO Retail Services

Lucy Neville-RolfeExecutive Director (Corporate & Legal)

Philip ClarkeGroup CEO Tesco PLC

“To get this right we need the right

structure, and I’ve got a fantastic team”

Note: Also on the board are nine non-executive directors.

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Key changes – The new Executive Committee

Philip ClarkeGroup CEO

“I am delighted that I have been able to bring together such a strong team which

possesses the right blend of talent and experience”

Tim Mason Deputy Group CEO, CEO Fresh & Easy

Richard Brasher CEO UK

Andrew Higginson CEO Retailing Services

Laurie McIllwee CFO

Lucy Neville- Rolfe Executive Director (Corporate & Legal)

David Potts CEO Asia

Alison Horner Group Personnel Director

Gordon Fryett Property Strategy Director

Trevor Masters CEO Central & Eastern Europe

Mike McNamara Chief Information Officer

Noel (Bob) Robbins COO UK

Ken Towle Internet Retailing Director

Note: Philip Clarke is also Chairman of the Executive Committee.

The executive committee exists to run the company below the PLC board.

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Key personnel changes – The new UK Board

Source: Tesco

“I am very pleased to have such a strong team to run the

UK business. Together we have huge experience across

all aspects of our business with a unique combination of

both international and domestic expertise”.

Per Bank, Commercial Director UK Clothing, Electricals and GM

Noel (Bob) Robbins, Chief Operating Officer

Richard BrasherCEO UK and Republic of

Ireland David North, Corporate Affairs Director

Kevin Grace, Property Director

Judith Nelson, Personnel Director

Carolyn Bradley, Marketing Director

Mike Iddon, Finance Director

Tony Keohane, CEO Ireland

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Tesco strategy – The Five Pillars

To grow the core UK business

To be as strong internationally as

in the UK

To be as strong in non-food as in

food

To develop retailing services

To put the community at the heart of what we

do

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Tesco strategy – Group turnover and growth

67

33

International share of sales (%), 2010

UK share of sales (%), 2010

Source: Retail Analysis

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

In addition, Tesco stated in January 2011 that it

will shortly be appointing a Group Commercial Director

Tesco in the UK – Trading Structure

Richard Brasher

UK CEO

John Scouler

Commercial Director

Packaged Foods and BWS

Roger Fogg

Commercial Director

Household and H&B

Andrew Yaxley

Commercial Director

Fresh Foods and Dairy

Per Bank

Commercial Director Clothing, Electricals and GM

Source: IGD, Tesco

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Tesco in the UK – Overview

• Clear market leader in the UK with sales of £39.1bn and operating profit of £2.1bn in 2009/10

• Latest trading (Christmas 2010) shows sales up 0.6% on a like-for-like basis and 4.2% in total

• It has 2,754 stores in the UK, making up 55% of its total estate by store numbers

• 34% of Tesco’s total space is in the UK and its new space development plan remains strong

• Philip Clarke will brief analysts on performance in 2010/11 and the outlook ahead on 19 April 2011

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Tesco in the UK – Trading strategy

• Tesco’s UK business is core to its performance, and the new board will have a number of UK priorities:– Continuing to focus on the customer and to earn their lifetime loyalty

– Driving like-for-like sales growth

– Driving further space growth across key formats

– Improving the focus on quality

– Greater tailoring across store formats

– Developing suitable platforms and channels through which to develop non-food and retailing services

– Meeting key aims on sustainability and the environment as part of a longer term goal to become carbon neutral by 2050

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Tesco in the UK – A truly multi-format retailer

Source: IGD Research

Extra now ranks as the single largest format for Tesco in the UK by space, benefiting from both superstore conversions and new store development

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Tesco international – Sales split by region

Source: IGD, Tesco

Europe(81.9% of turnover)

3,848 stores

Hypermarkets, Supermarkets, Convenience, Discount stores, General Merchandise stores

Asia(17.3% of turnover)

1,418 stores

Hypermarkets, Supermarkets, Convenience stores

NAFTA(0.8% of turnover)

165 stores

Convenience/Supermarket Hybrid format

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Tesco has a multi-country expansion focus across Asia, Europe and the US

Local management is a key feature

Increasingly Tesco is utilising the scale and skill of Tesco Group

Tesco international – Key features

Source: Tesco

Strong space growth initiatives in place, with c.7m sq ft added in 2010/11

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Tesco international – Priorities

• Growing scale:– Asian markets in particular will be a powerful driver of long-term

growth and returns for the retailer with significant potential for developments in modern retail

• Best practice transfer:– Tesco is seeking to achieve this across areas such as systems, ranges

and formats, with dunnhumby, F&F clothing and discount brands among the key current priorities

• Multi-format strategy:– Increasingly, Tesco is pursuing a multi-format strategy

internationally, as it seeks to open up new market segments as large format retailing matures. Driving convenience internationally is a growing priority.

• Property:– Property has long formed an important element of the strategy but

in China Tesco is taking this to a new level, as it focuses on mall development as part of the growth strategy

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Tesco international – Top Markets to 2015

Source: IGD Research and estimates

• China will become one of Tesco’s top 5 markets by 2015• Thailand, Poland and S. Korea will also show strong growth

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Tesco’s other pillars – Priorities ahead

•Driving non-food online and adding further space for non-food ranges into stores will be areas of focus – including building Tesco Direct and growing Extra hypermarkets

•Expect more focus on international buying hubs and rollout of best practice internationally eg F&F clothing

Non-Food

•Tesco.com is already a global leader – Tesco will seek to transfer best practice in the UK to other markets

•Building its position as a fully fledged bank, with current accounts and mortgages due later this year

•Global leveraging of dunnhumby and Clubcard insight

Services

•Become a zero carbon business by 2050

•Reduce emissions of products sold by 30% by 2020

•Help customers reduce carbon footprint by 50% by 2020

Community

© IGD 2011

Tesco Trade Briefing 2011, London, 5 May: GO

Outlook and Supplier Implications

• Recognise the potential for further strategy changes as Philip Clarke establishes his approach and reconfirms Tesco’s main areas of focus ahead

• In the UK, expect Tesco’s recent focus on range and quality to continue and consider the opportunities and challenges this can bring . At the same, the latest price check launch confirms the continuing importance of value for Tesco

• Sharing of best practice across markets remains a major focus internationally, not least in areas such as Clubcard, technology, food and clothing ranges and formats. Indeed, understanding Tesco’s international business appears set to become increasingly important across its supplier set, given a potentially even greater focus on international going forward

• Further leveraging the uniqueness of Clubcard will be a continuing priority – being aware of the increasingly significant role of Clubcard within Tesco’s promotional strategy is key

• Philip Clarke has already spoken of his focus on digital – suppliers should keep up-to-date with Tesco’s moves in technology as it seeks to get behind the trend towards smartphone and online shopping. Driving multi-channel capability will be a major focus

© IGD 2011

Next steps…

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Attend the Tesco Trade Briefing 2011 to hear from Richard Brasher and his senior marketing and commercial colleagues

Speakers include:• Richard Brasher• Carolyn Bradley • Roger Fogg• David North • Bob (Noel) Robbins• John Scouler• Matt Simister• Andrew Yaxley