Tesco Launches New Discount Chain to Tackle Threat from Aldi, Lidl

By Maryam Cockar

Tesco PLC (TSCO.LN) on Wednesday launched a new discount brand, Jack's, in an effort to tackle growing competition from German discount retailers Aldi and Lidl.

The U.K.'s biggest supermarket launched the new store in Cambridgeshire, England and said it will open 10 to 15 Jack's stores in the U.K. over the next six months.

The first two stores will open on Thursday in Chatteris, Cambridgeshire and Immingham, Lincolnshire, on sites with excess Tesco space. The stores to follow will include a mix of new sites, sites near existing Tesco stores, and converted Tesco stores, the company said.

The new chain is named after Tesco founder Jack Cohen, who Chief Executive Dave Lewis said "championed value for customers and changed the face of British shopping."

Tesco said Jack's will operate a business model "designed to keep costs low and prices down" and that eight of 10 food-and-drink products at Jack's will be made in Britain. The stores will also stock an own-brand range under the Jack's logo.

Jack's is Tesco's bid to fend off growing competition from Aldi and Lidl, who have a seen their share of the U.K. market grow significantly. In the five years to September 2013 their combined market share increased by 2.4 percentage points to 6.8% and in the subsequent five years the two nearly doubled their share to 13.1%, according Kantar Worldpanel.

Meanwhile, established grocers Tesco, J Sainsbury PLC (SBRY.LN) and Wm. Morrison Supermarkets PLC (MRW.LN) have seen their market share fall.

In a bid to strengthen its business, Sainsbury, the U.K.'s second largest supermarket chain, has proposed an merging with rival Asda Group Ltd., the U.K. arm of U.S. retail giant Walmart Inc. (WMT).

Tesco, having recently bolstered its proposition with the acquisition of wholesaler Booker Group, is ready for the next part of its evolution, according to Russ Mould, investment director at AJ Bell.

"At the moment [Tesco] is streets ahead of Sainsbury's, both in market-share terms and strategically in the fight of the supermarkets. And any major setback to the Sainsbury's-Asda deal would certainly give Tesco another boost," Mr. Mould said.

Write to Maryam Cockar at [e-mail]

(END) Dow Jones Newswires

September 19, 2018 06:46 ET (10:46 GMT)

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