Sir Terry Leahy retires as CEO of Tesco today and, as ever, his timing is good.
When he announced his impending retirement last year there was a degree of surprise. At 55 he’s still relatively young and, as one surprised commentator put it over the weekend, he doesn’t even get his pension for another three years.
One doubts that Sir Terry is short of a bob or two (he says one of the things he’s going to do now is invest his own money for ‘large stakes in small businesses’) but he knows that Tesco is at as much of a crossroads as it was in 1979 when he took over from Ian McLaurin (now Lord McLaurin).
Then Tesco had finally ditched its ‘pile it high, sell it cheap’ market trader image to challenge long-time UK supermarket leader Sainsbury’s. Now Tesco is struggling (although succeeding) to match the rate of growth at a renascent Sainsbury’s with (from Tesco’s point of view) alarming evidence that a growing number of UK shoppers prefer the more upscale offerings at Waitrose.
And Tesco has become a fully-fledged international business with about half its sales coming from overseas (although only a third of profits). Today (probably not coincidentally) it announced that it was to build three shopping malls in China, centred around Tesco hypermarkets.
So there are a new set of challenges and Tesco has chosen former international director Philip Clarke as its new CEO, not an exciting choice (there are many other bright young executives at Tesco) but a logical one. Tesco is not the kind of company to skip a generation just for a good headline.
Sir Terry was also Tesco’s first marketing director and set the pattern for the entire UK retail trade in which being marketing director counts, however much status they are perceived to have lost in other big UK companies.
One of his first acts as marketing director was to move the advertising business from the brothers’ Saatchi & Saatchi (where it was an efficient but dull price-led operation) to newbie Lowe Howard-Spink which went on to produce a number of top notch campaigns beginning with a wonderful and surprising effort featuring the late Dudley Moore chasing free range chickens around the French countryside.
Tesco followed the Lowe team and Sir Frank Lowe to The Red Brick Road of course.
And with data mining company DunnHumby he introduced the Clubcard loyalty scheme which has done as much as anything to keep Tesco on top in the UK with 30 per cent of the market and over £30bn of sales.
So Sir Terry will undoubtedly be missed but Clarke is a safe pair of hands with tremendous knowledge of Tesco’s international operation. The only immediate problem on the horizon is the US where Fresh & Easy has struggled to establish itself on the West Coast.
This is run by Leahy’s successor as marketing director and one-time seeming heir-apparent as CEO Tim Mason. So there could be fireworks between him and Clarke.
And in the longer term Clarke is faced with the kind of challenge that Sir Alex Ferguson’s successor will face at Manchester United. How do you top that?
But he has the opportunity on the international stage. So Leahy, typically, has dealt him a decent hand.