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Horse meat scandal puts grocers through the mincer

January 17, 2013

TescoUntil a couple of days ago, few outside the food retail and logistics business would ever have heard of Silvercrest. Now it has achieved household notoriety as the weak-link in the food chain that has served illegal horse meat up on British tables, in the guise of own-label supermarket beef burgers.

The reputational damage has, rightly, been severe for all those involved. Tesco – which fessed up to at least one line of its apparently legit beef burgers being contaminated with 29% horse meat – has seen £300m wiped from its stock market valuation overnight and has now taken out full-page ads in most national newspapers, grovelling abjectly. The timing could not have been worse, from a corporate point of view. Just days ago, a halfway decent set of financials had seemed to indicate that Tesco was on the ramp of recovery.

Luckily for Tesco, it is no longer alone. A host of other high street names – Aldi, Lidl, Sainsbury, Asda, the Co-Op, Morrisons, Burger King among them – have now opted to clear their shelves of the offensive products. In some cases because they use the same supplier, ABP/Silvercrest, in others merely as a “precaution” lest the same fate might befall their own supply chain. Only McDonald’s and Marks & Spencer have been able to stand aside, smugly waving a clean bill of health.

Their smugness is unwarranted. This disaster could so easily – in only slightly modified circumstances – have happened to them.

Some might argue that the horse-meat scandal is little more than a storm in a tea-cup, got up by the media. After all, no one died and no one is likely to: horse meat is eagerly consumed all over the globe, from Kazakstan to Argentina, as a tasty substitute for the tougher, stringier beef that can be bought for about the same price. Indeed, there’s not a little hypocrisy in this country about the cultural taboo surrounding horse meat. Until about 100 years ago, the Brits themselves were avid consumers of the stuff. Only more recently have we developed the refinement of conscience that prohibits national consumption, while allowing us to send up to 10,000 nags a year to specialist abattoirs, there to be despatched for the perverted pleasure of less civilised foreigners.

Alas, the ramifications of this affair go somewhat deeper. Imagine, for a moment, that instead of horse meat (and elements of pork), those eagle-eyed  inspectors at the Irish Food Standards Agency (FSAI) had found the minutest traces of human DNA. The uncontainable revulsion – far from affecting a few animal lovers, Muslims and Jews – would be universal. An official inquiry would, there and then, be instituted into how these three wise monkeys – the suppliers, the retailers and the regulator – had, through cavalier negligence and the unobstructed pursuit of greed, been allowed to corrupt the integrity of the food chain. Because, make no mistake, this little cock-up is all about money. The burgers most tainted were those from so-called “value” products where the cost of ingredients is at all times under pressure. Retailers want to satisfy their customers with the lowest possible prices consistent with food safety regulations. The suppliers – browbeaten by the retailers – seek low-cost substitutes (in this case from the less  punctilious Netherlands and Spain, where the consumption of horse meat is legal). And the UK regulator takes a passive, compliant attitude to anything that is outside its immediate remit (no conceivable threat to health, so why bother with DNA tests?), suggesting a “lite-touch” relationship that is too cosy with the industry it is supposed to govern.

It makes you wonder why the FSAI could be bothered with such tests, but the UK’s FSA could not. Or indeed, why the retailers didn’t carry out such DNA tests themselves. After all, it’s their brand reputation which is going through the mincer because they have not.

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Tim Mason – end of the road for the other half of the Tesco dynamic duo

December 6, 2012

Tim Mason, former chief executive of Tesco's Fresh & EasyChief executive Philip Clarke’s ruthless dispatch of his number two, Tim Mason, is a final reminder – if any were needed – that the past is another country, so far as Tesco is concerned. They did things differently there; they will never do them the same again.

Eventually, someone had to pay the price for Tesco’s enormous strategic folly in setting up – from scratch – the ironically-named Fresh & Easy retail venture in California. One thousand stores were promised in 2006, when the initiative was hatched; 200 have actually opened and nothing but a £1bn loss has been banked. By rights, the faulty judgement was Sir Terry Leahy’s (as he himself has admitted). But Leahy has long since departed as chief executive; while Mason fronted it and is still very much in the public eye. Mason offered to conduct the strategic review into Tesco’s US operation himself, but Clarke needed a scapegoat and declined the offer. Mason had to go.

Arguably, however, Mason set himself up for a fall with his own poor judgement call in 2006. He should never have allowed Leahy to prevail upon him to undertake mission impossible in the first place. The USA – even in the heady early noughties – was widely perceived to be a graveyard for aspirant UK retail brands. Marks & Spencer, Sainsbury and several others had broken their back on the same reef – and paid the price in years of dysfunction. But Tesco, at the time, was in the grip of advanced corporate hubris: as the head of world’s most successful retailer, Leahy was convinced he would be the one to buck the trend.

And who better to lead the vanguard than his most trusted lieutenant, Mason? Mason and Leahy were the dynamic duo at the heart of Britain’s most successful retail story. Leahy was the sharp business brain, and Mason the marketing man with an uncanny, intuitive feel for what the customer wanted. Together they had not only assured Tesco’s dominance in the UK retail market, but put an unchallengeable distance between Tesco and all its competitors – encapsulated in a single, extraordinary, statistic: By 2005 £1 in every £8 spent in Britain’s shops went to Tesco.

The feverish back-story to all this success was more disquieting. What would happen, in the not-too-distant future, when Leahy retired? Leahy clearly supposed that Mason could make the leap from marketing to corporate leadership that he himself had so effortlessly executed. Mason, who joined Tesco in 1982 and had headed marketing since 1997, was desperate to prove him right, and eagerly clutched the poisoned chalice of Fresh & Easy.

The transition fatally upset the balance of power at Tesco. Mason may have had his fair share of bad luck in California, but his operations skills were clearly inferior to those of Leahy. With the result that, as US losses inexorably mounted, he was passed over when the succession issue finally came to the fore. Not only that. Mason’s marketing nous was sorely missed back home, just when Tesco’s UK operation most needed it.

When Mason – then group marketing chief – decamped to America, he took with him his head of UK marketing Simon Uwins. Their UK successors lacked finesse. High turnover of subsequent personnel did not help. But something other than stability was missing – that old Tesco marketing magic. Marketing became too formulaic, and too sales-obsessed.

While Tesco struggled to find a new compass-bearing in post-recession Britain, it let its competition off the back foot. Asda, Sainsbury’s and Safeway (now recast as Morrisons) began to catch up. The Tesco offer, by contrast, began to look tired and over-extended (particularly in non-groceries). The retail behemoth was engaged on too many fronts at once and it showed – in declining profits and advertising campaigns that lacked the common touch.

Would this have happened if Mason had actually been chief marketing officer in more than name? That’s the thing about subjunctive history – we will never know. An easier lesson to draw from the Mason story is one about symbiotic work relationships. Corporate success is rarely the product of a unique talent. Would Mason and Leahy in their heyday ever have succeeded to the extent they did without each other? I suspect they would not.


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