Examination of Witnesses (Questions 131-139)
TESCO PLC
7 SEPTEMBER 2004
Q131 Chairman: Good afternoon Ms Neville-Rolfe.
We are very pleased that you could make it. I know that before
we had been trying to fix up a time and you were away so you are
now hot-foot from the area that we have been looking at and I
think really what we would like to start off with is if you could
maybe scene-set for us and give us a description of the way in
which Tesco is located in South East Asia because I know it is
not quite in the way that you would be operating in the UK. Could
you also tell us about the countries in which you are actually
operating. Is it a kind of template that is the same in all of
the ASEAN countries or is it slightly different and how different
is it from the UK and from the Tesco that we know and love or
shop in—there is sometimes a difference—but, anyway,
could you use that as a start?
Ms Neville-Rolfe: Thank you very
much indeed and thank you for seeing us. I have been at Tesco
for seven years now and in that period I suppose we have moved
to become an international retailer. We are actually regarded
now as probably third in international grocery retailing after
Walmart and Carrefour in food, which is also our heritage in the
UK. As far as Asia is concerned perhaps the disappointing news
from the point of view of your inquiry is that we have retailing
interests in only two of the ASEAN countries. We are in Thailand
with 81 retail stores. We are now the market leader in Thailand.
We have a younger business in Malaysia with five stores and some
more due to open in the coming year. In both cases we started
with a partnership with a local operator because retailing is
very local, which will begin to answer your question about the
difference between the stores there and the stores in the UK.
I think we are well-known for trying to develop a local business
rather than for planting flags. And to answer your question about
where we are. We are of course as well as in the UK in Ireland,
we are in Hungary, Poland, the Czech Republic, Slovakia and more
recently Turkey so in the emerging markets of Central Europe.
Then we are in Thailand and Malaysia and also outside the ASEAN
group in Korea, Taiwan, Japan and earlier this month we concluded
a joint venture deal in China. Do you want me to go on and say
something about our approach and why we have been successful?
Q132 Chairman: We will probably get on
to that. I think what you said as far as the ASEAN countries are
concerned is that you have got something like 86 stores at the
present moment.
Ms Neville-Rolfe: 81 in Thailand
and five in Malaysia.
Q133 Chairman: 81 and five, was it?
Ms Neville-Rolfe: Yes.
Q134 Chairman: How do you see South East
Asia? Before you go on to that maybe you could give us a feel.
You say that shopping is local. Does that mean that it is smaller
convenience stores? How big are the stores that you have? What
is the square footage?
Ms Neville-Rolfe: What I meant
by local was almost national, that it varies from country to country,
and that is to do with the nature of shopping which is how you
go up the road—walk, go in your car, or whatever—to
go shopping. Our main block of stores in Thailand consists of
48 supercentres, that is hypermarkets, so they are big stores
selling a large variety of food and non-food products. We also
have 28 express stores in Thailand which are the little convenience
stores which you have also now begun to see around the place in
Britain. And we have five value stores, which is a new format
we invented really in Thailand for that market up-country where
disposable incomes are lower and that is more of a value store
and we have local traders alongside the store, so it is a less
expensive format that we have developed there. In Malaysia we
have at the moment just started with hypermarkets. What tends
to happen in countries which do not have a lot of good retail
space is you go and you research it and you find that the customers
are very attracted to large, beautiful, air-conditioned stores
with a wide variety of goods and that is what we found in Central
Europe when we went there. In time it is sometimes possible to
also extend into other formats and that is what we have done in
the UK and are beginning to do overseas as well.
Q135 Chairman: To what extent is the
hypermarket dependent upon the motor car in the sense that we
are talking about countries where car ownership is not as high
as it would be in Western Europe?
Ms Neville-Rolfe: Obviously car-driven
trade is important but it is not entirely reliant on cars.
Q136 Chairman: Public transport.
Ms Neville-Rolfe: You have public
transport and what tends to happen is you link the public transport
in. Sometimes the tube line goes alongside the shopping mall.
In China one of the things I found most interesting going around
the hypermarkets that we were buying a joint venture in was the
huge numbers of bicycles parked. It was a completely different
picture. So it is not dependent entirely on the car. In fact,
public transport links are very important to somewhere like Central
Europe where there are a lot of people who do not have cars.
Q137 Chairman: You have committed quite
a lot to South East Asia and indeed to China. How does this feature
in your future ambitions?
Ms Neville-Rolfe: Our international
business is obviously a very important part of our ambitions.
In Tesco the international business has been successful partly
because it is on the back of a quite clear strategy, the core
UK business, the grocery business which we all recognise, and
the extension of that into non-food where increasingly we have
managed to extend our stores and bring in non-food as well often
at very good value and the service businesses—the dot-com
and the bank and so on—and then this fourth plank which
was to go overseas to see whether we could grow the company overseas
and use some of the expertise we have got in the UK, to transfer
that overseas. Know-how is a very important export in a way and
that is what we have done in these markets.
Q138 Chairman: You have got Tesco UK
and you have got places in Europe and you have got Ireland. Is
there Tesco Asia or is it Tesco International? How do you organise
within the Tesco company your activities in that part of the world?
Ms Neville-Rolfe: The international
business is obviously separate. We have a board director responsible
for international operations and the country businesses in Eastern
Europe, Turkey and Asia reporting to him. Another director looks
after Ireland, which has slightly different issues arising. Each
business is really very much a business in its own right. What
we have sought to do is to go into perhaps a smaller number of
countries than some overseas businesses you will talk to and set
up a business of scale in those countries so that we can really
employ a lot of people, gain an expertise and build up the businesses
so that you have a strong Hungarian or a strong Thai business.
Q139 Chairman: You have got a board director
responsible for, as it were, the world as distinct from Britain
or the world outside of Europe?
Ms Neville-Rolfe: Yes.
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