Tesco is aiming for “transformational change” with its Fit for Growth program, which will involve a review of its entire fresh and packaged food lineup.
The London, U.K.-based grocery store chain, which operates more than 4,600 locations globally, including over 3,400 in the U.K., said changes to its lineup will begin over the summer and will continue through the remainder of 2023.
Fit for Growth does not have a target number for eliminating SKUs, but rather represents a holistic review of the company’s approach to the in-store layout of its food items. The move is geared toward finding efficiencies and optimizing its operations, according to The Grocer, which said Tesco informed suppliers of the program’s launch earlier this month at IGD at London’s Tobacco Dock. The program will also include the implementation of a new pricing policy across all tiers and an effort to eliminate duplication across its entire food range and to improve the effectiveness of its promotions.
The initiation of the Fit for Growth program comes on the heels of a separate announcement from Tesco in March 2023 that it will begin charging fulfillment fees for suppliers using its online and Booker Group wholesale services. A March 2023 letter sent by Tesco to its suppliers said it would charge a GBP 0.12 (USD 0.15, EUR 0.14) per-unit fee on branded goods and GBP 0.05 (USD 0.06, EUR 0.05) per unit on own-label goods for all items sold through Tesco.com or via its app.
“The fee is essential as we work to fulfill more orders for our customers across the group and we are asking suppliers to engage on this request and to support us,” the company wrote. “Without introducing a supplier contribution, we would need to take additional decisions on range optimization, differentiated price and trade plans. It is important you work with us on the fulfillment fee as we both look to benefit from the investment into serving customers.”
Initially presented as mandatory, Tesco backtracked this month, with its chief procurement officer, Ashin Prasad, saying the fees would be optional. However, suppliers are concerned their items may be cut from Tesco stores as part of the range review if they don’t agree to the fees, The Grocer reported.
“I believe that this is designed to fill any hole that is left by suppliers not signing up for fulfilment fees. It is all about end-to-end efficiencies which buyers will identify and then look to recover from suppliers,” an unnamed supplier told The Grocer. “In other words, a not-very-subtle veiled threat." …
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