Tesco is launching a discount supermarket chain revolving around UK-made products to rival cut-price European rivals Aldi and Lidl.
The chain, called Jack’s, will open its doors for the first time tomorrow, 20 September, at two stores in Cambridgeshire and Lincolnshire, and promises that eight out of 10 food and drink products will be sourced in the UK.
The food retail giant’s new brand promises “a simplified range of products” with a “lowest possible” price policy, following the example of Aldi and Lidl, who have continued to muscle in on Tesco’s market share in recent years.
Tesco remains the largest food retailer, occupying 27.4% of the market, down 1.7 percentage points since 2015, while the discounters have made joint gains of 4.8 percentage points over the same period, now at 13.1%.
Stores will stock a “unique” own-brand range, which the company boasts will retain quality and value. This will be bolstered by “some familiar grocery brands” and a range of general merchandise.
But the retailer will only attract new customers while leaving its existing Tesco customer base unscathed if it has “little or no overlap in terms of goods stocked,” according to Callum Stayton, retail sector specialist at management consultancy Vendigital.
“Whilst consumers would probably expect to see Tesco’s ‘everyday value’ ranges on the shelves at Jack’s, they would not expect to be able to buy Kellogg’s cornflakes, or other high-quality branded goods, at a cheaper price,” he said.
“Following its takeover of Booker, Tesco has first-hand experience of sourcing and supplying large volumes of goods and this will stand it in good stead when rolling out Jack’s, which is expected to stock higher volumes of fewer goods than its mainstream stores.”
Over the next six months Tesco will launch between 10 and 15 Jack’s stores in the UK. The first two stores will open in Chatteris, Cambridgeshire and Immingham, Lincolnshire, on sites which make use of excess Tesco space, the company said.
Some stores will be on entirely new sites, while others will occupy sites adjacent to existing Tesco stores. A “small number” would be converted Tesco stores.
The launch has been timed to coincide with the company’s centenary and is named after founder Jack Cohen.
Dave Lewis, Tesco chief executive, said it was “fitting” that the brand should launch a new store bearing Cohen’s name, adding it would sell “great tasting food at the lowest possible prices with eight out of 10 products grown, reared or made in Britain”.
The announcement also coincides with an update from the Competition and Markets Authority (CMA) that the proposed merger between Sainsburys and Asda has been referred for “in-depth” investigation.
After the first phase of investigation, which began in August, the deal was found to raise “sufficient concerns” to be referred for a more in-depth review, the CMA confirmed.
The CMA said it was concerned that a merger between the two grocery retail giants could result in “increased buyer power over suppliers,” as well as “higher prices for consumers and a worse quality of service”.
Earlier this year, Rebecca Long-Bailey, shadow secretary of state for business said the merger risked “hammering” suppliers.
She warned the potential merger would give the new group “immense purchasing power” and the ability to “bargain very harshly with suppliers”.
The phase two investigation is a more detailed review, led by an inquiry group made up of the CMA’s panel, and could go on for nearly six months until March.
The group will gather evidence by engaging with suppliers and industry bodies as well as “multiple customer surveys”.
It would also consult other retailers, it said. If the merger were to go ahead, Sainsbury’s and Asda’s combined market share of 31% would see it bypass Tesco as the UK’s biggest food retailer.
Professor John Colley, associate dean of Warwick Business School, said the CMA should turn down the merger “to preserve competition and innovation otherwise the consumer will have very little choice indeed”.
In a joint statement, Sainsbury’s chief executive Mike Coupe and Roger Burnley, Asda's president Roger Burnley, said: "We expected the CMA would want to undertake an in-depth review and look forward to engaging with the CMA and Panel on this next phase of the process."
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