Tesco’s slow retreat from Europe is depressing

Working with Tesco can be both a blessing and a curse, a relative of mine, who used to work in wine sales in Australia, recently told me.

Some winemakers who struck deals with the British supermarket, one of the world’s biggest purchasers of wine, would quickly be rolling in cash, such were the size and frequency of Tesco orders.

But others ended up walking away from contracts because they were so huge as to become overwhelming. One mildly disappointing harvest, or a slight delay in production, would mean deliveries fell short. Tesco would not be forgiving.

Over the years, though, that has become less of a problem. Tesco is shrinking, and appears to be retreating from all its European operations outside the UK and Ireland, following reports the supermarket is in talks with the owners of Lidl to offload operations in Slovakia, Hungary and the Czech Republic, which together account for a little under a tenth of its total turnover. 

If it went ahead, that would add the three countries to an ever-growing list of places that Tesco has pulled out of over the past decade or so. To name a few: France, the US, Japan, Malaysia, Poland, South Korea, Thailand and Turkey.

Thirty years ago, Tesco set a course for world domination. Bosses had a vision to turn the British firm, which started life on a high street in Hackney over a century ago, into a worldwide grocery group. The company snapped up supermarket chains in various corners of the planet and expanded them, or struck joint ventures with local suppliers in others.

Back in Blighty, meanwhile, a big diversification drive was being cooked up. The FTSE 100 firm purchased a restaurant chain and a garden centre group and launched a coffee chain, a bakery chain, a new discount grocery chain – even a bank. 

Now, all of that is either gone or about to go – shuttered or sold – and Tesco is back to being, well, just Tesco. 

Scaling back ambitions

There is something to be said for sticking to the things you’re best at, and cutting out the excesses, to become extra efficient. Like supercar makers that strip out all the modcons – air conditioning, heated seats, cutting-edge sound systems – when they prepare a vehicle for the racetrack.

But the Tesco rollback points to a wider trend that we’ve seen across many of Britain’s biggest blue-chips – one of penny-pinching and scaled back ambitions. Scores of firms on the stock exchange are shadows of their former selves – and have become more likely to be bought up by an overseas investor than they are to acquire something abroad themselves. They are like old couples, looking to downsize to something a bit smaller, more manageable.

Britain still has plenty of younger, ambitious firms – chief among them Revolut, which wants to be one of the world’s biggest banks – but our public markets have so far failed to attract many of them. Until that changes – and let’s hope the Airtel Money float rejuvenates activity – our stock market will keep slowly morphing into a corporate retirement home.