Tesco - A New Food Vision
Tesco is in the process of fundamentally changing the manner in which it sources and buys its produce - and when you spend more than £30 billion on food, that's a pretty big undertaking. Calum MacLeod talks to the man in charge Matt Simister, Tesco's group food sourcing director about the why's, how's and the opportunities it is creating for head office professionals
"People are really excited about GFS because they can see the world changing [and] where we can make a difference." So says Matt Simister, group food sourcing director at Tesco, the man in charge of driving through one of the biggest changes in operational strategy the UK's largest retailer has ever seen: the development of a group food sourcing capability. The idea is simple enough, but the task is massive - the world is changing and Tesco is changing with it.
In the most basic terms, group food sourcing will enable the retailer to buy food commodities on a group-wide basis rather than individually across its 14 different global territories. It doesn't take a genius to see that the huge orders involved in this 'buying together', as Tesco calls it, should produce significant economies of scale but this is only one strand of the new capability. The retailer is also looking to develop and extend both its sourcing capability (a practical necessity one would have thought given the likely scale of the group orders) and its inbound supply side processes. And while the commodities are being sourced, bought and transported on a group basis, the focus of the individual country teams will be utilising their 'local' expertise in category management, customer insight and selling product. Overall, Simister says, "the idea is to apply group scale and skills to win locally. So this is about winning - very much about winning". In this part of our discussion it was interesting how fervent the Tesco man was to avoid having GFS framed as just a money-saving means to leverage better rates from suppliers. Working with new and existing producers it is, he insisted, "much more about the quality of the product, how you look after it in the chain and how you ensure it gets to the customer in the right condition...customers are going to see better products at better prices and more consistently throughout the year".
Of course group-wide sourcing isn't a new idea for Tesco, its general merchandise (non-food) business has used this model for some time, but this is food - upon which the company spends in excess of £30 billion each year, its biggest product cost by some way.
Whichever way you slice it, it's a massive change being brought in at a time when the global trading environment is not at its most benign. But right now change is very much the watchword for the UK's biggest retailer as well as the market in which it operates. Key to this is the change in organisational ethos stemming from new chief executive Philip Clarke; where historically Tesco saw itself as a UK business with an international division it is now effectively recognising the fact that it is a global group with different operating regions. In fact today two-thirds of Tesco's business operates outside of UK. Both the development of GFS and the introduction of Richard Brasher as the company's first UK chief executive are evidence of this change in emphasis.
On a more macro scale, the world markets have also changed dramatically: the days of cheaper and cheaper food are gone; with demand chasing scarce resources, commodity prices have been consistently on the rise. Companies such as Tesco have been faced with the unsavoury choice of absorbing these cost increases or passing them on to their customers...or indeed investigate new ways to optimise performance and value in the food chain - GFS. As Simister says: "If anything good has come out of the recession, it's been to step back and think; it almost gives you the incentive to think of a better way."
"For me personally", he continued, "I think the timing is exciting. I think the opportunity to develop a business from a relatively blank sheet of paper, to be a core part of the new group with real scale and to be leading the international retailers is hugely exciting.
"I think we are slightly behind the FMCG guys on the inbound supply side, but I think we're well ahead of a lot of the retailers. I think this gives us the opportunity to do something that a lot of our domestic competitors couldn't do, from a scale or skill perspective.
"So I think this is very much about scale and skill and that's why recruitment is such a key part for us, because it's not just about how big you are. You don't win just through being big; you win through being big and good at what you do. That's why we're really keen to bring skills in the right areas."
Indeed, formulating a potentially successful strategy is one thing, but for GFS to go from strategy to reality Tesco is in the process of recruiting 240 professionals for the initial phase of the process. Principal among these will be buyers and technical managers, but the retailer will also be looking beyond its normal employment pool: "...on the supply side for instance, we are now moving further down the supply chain, so we're looking for expertise at source, we're looking for expertise in commodity buying, we're looking for expertise in inbound logistics," says Matt.
While the geographic bias of the initial intake of recruits is likely to reflect the importance to the business of the UK market, there are some pretty far-flung and pioneering posts in the mix too, with more likely to emerge in the coming months and years. Tesco sourcing managers will be faced with the challenge of establishing a foothold in countries from which it wishes to source product but in which it has no retail footprint. The role of these 'brand ambassadors' seems to tap into the ethos of what the company is trying to achieve with GFS: "Around the world we have a job to build the brand and part of that journey is that we're sourcing from the right suppliers, the right growers, we've got the right standards and that we're able to bring those standards to market."
Thus far the retailer has been pleased with results of its recruitment process. "The people who are coming in are very high-quality and that's very exciting...people want to be part of a leader, which I think Tesco is, but it's not an arrogant leader; in fact it's a humble, almost reluctant leader," says Matt.
This was an area I was keen to explore a bit further; with all the barrel-loads of ink spent writing about the vast scale of 'big bad Tesco', there's actually very little about what draws people in or indeed what it's like to work for them.
The GFS boss gave his take: "I think you've got to be seen as a force for good, otherwise you're not going to win in the modern world that we live in. I actually find that people who are outside of Tesco don't believe this; they see us as being a big, bad corporate animal. What I think is motivating to a lot of the people coming through into the business is that actually that's not what the culture's all about. The culture is actually very, very down to earth, but it's also very decent.
"The other thing is that I think people are excited by the fact that they still have the opportunity to change and leave their mark on things. You can come as an individual and make quite a big difference; you can make it across multiple markets. So I think people are surprised that they can make a big impact."
Of course Matt Simister is a 15-year veteran with Tesco, with his vocational heart located firmly in Cheshunt, but what about newer recruits into the UK's biggest retailer, how do they find the culture? As luck would have it I had the opportunity to talk to two recently appointed GFS buyers to find out.
"I think the culture isn't entirely what I expected, but then I didn't really know what to expect," says Joseph Reed a former chemical and commodities buyer now working on frozen foods. "There's a lot of very passionate, very bright people working here and that was really one of the big drivers for me; that's why I wanted to get involved. The people who are working in these departments are some of the very best at what they do. I think the underlying thing is that the people who work here just want to deliver the best that they can."
Supply-side sourcing is very different from frozen food retailing, so what sparked his interest? "Well, when the country's biggest retailer comes knocking you have to at least go down and see what they're on about! The people who interviewed me were just passionate, very switched-on commercial people who I really wanted to work with."
Cereals and spreads buyer Santiago Fornes, who with English as a second language and a background in trading commodities for food manufacturers has had to potentially overcome a number of cultural hurdles, actually echoes Joseph's experiences: "I'm amazed by the passion of what we're trying to do here with GFS. Now it's something I'm passionate about and trying to transmit this to my colleagues as well as manufacturers."
So, now they're in place at the vanguard of this huge new process, how have they found their day-to-day? "At the moment I'm a buyer but I'm doing sales basically! We're still trying to sell our strategy so it is understood by our counterparts and colleagues within the whole group as well as suppliers," says Santiago.
"You're certainly not sat at your desk twiddling your thumbs!" Joseph interjects. "The first week or so we were already out visiting local buyers, local countries, having discussions with suppliers, meeting people, trying to work out where we were going to take the category. Then very quickly after that putting together a plan and kind of defending your plan and putting together a strategy of how you're going to develop it. It all happens very, very quickly, that's the great thing about it."
Tesco remains a fascinating place, particularly right now with all the changes going on at the moment. On the one hand it is this massive global player, with global plans and huge teams - an unstoppable juggernaut with an unassailable market share lead in the UK. But on the other, when you actually look under the bonnet, when you actually meet the people driving the business along, see their interaction, their determination to push themselves and their passion for their jobs, the sense you get is not of a machine at all, it is of a team; a team that really wants to win.
This thought brings us back to GFS, what would constitute a 'win' with GFS and over what period of time? Surely such a mammoth change will be afforded a certain amount of time to bed in before being judged? Apparently not: "We work in retail so I think you'll find we'll be judged every day of every week of every month of every year," says Simister. "I do not struggle for lack of tension in the business because we are working across 14 different P&Ls already. The management hierarchy [has] a very strong vested interest in our activities from day one. There's a fair amount of tension for us to deliver immediately. It's not a theoretical exercise." No pressure then.