Tesco is expected to rationalise its supply base and source more fresh produce directly as part of plans to become “a more vertically integrated” business.
In an exclusive interview with FPJ, produce group food sourcing director Darren Clough outlined the retailer’s plans to rework its produce supply system and increase direct sourcing in a move that could include buy outs.
Tesco also issued a plea to the fresh produce trade to quash rumours surrounding supply proposals as it looks to inject clarity into its supply chain. The retailer set up a new Group Food Sourcing (GFS) division in the spring headed up by Matt Simister, who reports to the board, alongside Clough and David Horton.
The division is yet to confirm the appointments of its grocery or technical directors as well as a number of senior managers, but it is formulating a three to five year plan to revolutionise its work across the world.
There have been concerns in the trade that Tesco’s increase in direct sourcing may cut out suppliers but Clough moved to allay fears despite admitting there may be some cuts.
“We want to give better clarity about what we are doing and we are talking directly to suppliers about tailoring the work we do with them,” he said. “It is not about alienating people or forcing them down one route.”
Clough said the retailer would look to increase the capacity of suppliers who are not utilising certain parts of their business, change its strategy with some suppliers to use the services they provide and “take a serious look at businesses which have less added value or are inefficient”.
On the subject of buy outs, Clough said Tesco is “looking to become more vertically integrated” and would look at acquisitions as part of a considered plan, rather than a blanket approach.
He also said growers had been receptive to direct sourcing and enjoyed direct communication with the retailer.
The GFS has a central goal to tie-up deals across the world using new and existing partnerships to aid the company’s expansion in different regions. Furthermore, new hubs around the world - including in northern Europe, Spain, Greece, Turkey and Chile - are helping co-ordinate worldwide work and offer support to local partners in areas such as varietal development. “We are simply working with suppliers to tailor an efficient operating model,” Clough said.
One importer said: “Tesco has an incredible infrastructure and buying power, they are an aggressive business and they will succeed. If they don’t have the talent in-house they will source it. They will never directly source 100 per cent of supply as they will not want the risk of not selling it.”
Another source added: “What they are doing is quite revolutionary. If Tesco proves it can work, then the others will follow. I think in the next 10 years, the supply chain will be unrecognisable.”
Fresh Produce Consortium ceo Nigel Jenney said on the subject of direct sourcing: “Importers and suppliers will continue to play an essential role in the supply chain, as they maintain their ability to source efficiently a diverse range of fresh produce to meet the high standards required by UK customers.
“By developing unique relationships with growers throughout the world and managing their interests importers and suppliers have the flexibility to secure the ideal customer for the product.”
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