Tesco’s turnover will increase by £30 billion to almost £74 billion in five years, and store numbers will double, as rapid overseas expansion fuels growth, according to research by the Industry of Grocery Distribution (IGD).
The retailer’s Christmas and New Year trading figures showed and increase in international sales of 26.9 per cent, and eight per cent in UK sales.
IGD’s “Trading With Tesco” report predicts that the retailer will be boosted by store openings in the United States and Asia over the next five years.
“By 2012, a third of Tesco’s revenue, and two thirds of its floor space, will be outside the UK. 250 Fresh Easy stores will have opened in the USA by 2009, and there will be many smaller formats stores across Asia, where hypermarkets account for three quarters of Tesco’s current turnover,” said Ben Miller, report author and online research manager at IGD.
“Overall, Tesco’s international business will treble in size to £24 billion by 2012. This offers a massive opportunity for suppliers. Those who respond to Tesco’s demanding and purposeful approach, demonstrate clear customer focus in all proposals and communication, and maintain a transparent dialogue with Tesco are most likely to reap rewards,” said Miller.
By 2012 IGD predicts:
– Traditional supermarkets will be a smaller revenue channel, accounting for 14 per cent of stores and 33 per cent of total company sales, compared with 26 per cent of stores and 51 per cent of sales now.
– Tesco will focus on increasing its presence in Central Europe, the United States and Asia.
– The retailer will open more Express stores in Japan, and the first mini Expresses in China by 2009.
– Tesco’s revenue will be £73.8 billion. Turnover for the current financial year is £43 billion.
– Tesco’s operations in the UK and Republic of Ireland will account for 67 per cent of sales compared to 79 per cent now.
“Tesco has put environmental responsibility at the epicentre of their corporate strategy and has set environmental and social targets on packaging, climate change and ethical trading. Suppliers who can help Tesco deliver on these targets are going to be well-placed to profit,” said Miller.
Tesco’s strong non-food UK sales over Christmas coincide with IGD’s prediction of a 40 per cent increase in non-grocery sales in UK supermarkets over the next five years. IGD’s Balancing Food and Non-Food In-store report predicts overall sales rising from £10.4 billion this year to £14.8 billion in 2012 – twice as fast as supermarket sales as a whole.
“Overall, we foresee excellent growth potential in non-food, in excess of grocery as a whole, even in a downturn. Supermarkets are seen as value destinations and are likely to gain non-food sales in a less favourable economic climate,” said IGD consumer analyst Tim Maton.
IGD believes non-grocery sales in the UK supermarket sector will grow by 42 per cent by 2012, compared with 17 per cent for total UK supermarket sales as a whole.