Tesco - £5bn loss
Discussion
Vaud said:
iambeowulf said:
These small companies know the risks and rewards.
Yes, and no. If a few big players control a disproportionate share of the demand side of the market, they can, without collusion, exercise negative oligopoly behaviours. Put more simply, few buyers and many sellers can distort the market and make it fundamentally unfair.
That's just business my friend.
Pick any industry and there will always be manipulation.
As an ex supplier I was aware of the rules but still thought it worthwhile financially, if not for my sanity!
NinjaPower said:
I personally think Tesco deserve a lot of the st thrown at them by the media as it isn't just baseless mud-slinging.
Just as one example, go and ask any farmer, grower or producer what they think of Tescos and be ready to hear an enormous string of expletives.
Tesco perfected the whole concept of utterly, utterly shafting the UK supplier beyond belief. Producers lived in fear of being a supplier to Tesco but pretty much had no alternative as they were so big.
You know the up market brand of crisps 'Tyrrells'? Well once they started to become popular in smaller food stores, Tescos approached William Chase the farmer who started the brand and told him they wanted his crisps in all their stores and they would become huge, the next Kettle crisps if you like.
He turned round and told them in no uncertain terms, to Go fk themselves. Despite offering to make him extremely rich, he was having none of it. Such is the hatred for Tesco.
http://www.telegraph.co.uk/finance/2947463/Tesco-b...
I'm friends with a guy locally who grows plants and flowers on a huge scale in greenhouses to supply to UK garden centres and supermarkets, and he almost got bankrupted by Tesco about 3 years ago. They put in an order with him for tens of thousands of Christmas Pointsetta plants, which he duly grew. 2 weeks before Christmas, when all the plants were ready, they phoned him up and just basically said "yeah I know we said we ordered 50,000 pointsetta, but we've changed our mind. Sorry"
That's how they do business, and I don't think many suppliers will shed a tear if they ever go under.
Did Chase sell his Tyrells crisp brand then or have his principals gone out of the window because Tescos sell Tyrells crisps, I bought some just last week. Just as one example, go and ask any farmer, grower or producer what they think of Tescos and be ready to hear an enormous string of expletives.
Tesco perfected the whole concept of utterly, utterly shafting the UK supplier beyond belief. Producers lived in fear of being a supplier to Tesco but pretty much had no alternative as they were so big.
You know the up market brand of crisps 'Tyrrells'? Well once they started to become popular in smaller food stores, Tescos approached William Chase the farmer who started the brand and told him they wanted his crisps in all their stores and they would become huge, the next Kettle crisps if you like.
He turned round and told them in no uncertain terms, to Go fk themselves. Despite offering to make him extremely rich, he was having none of it. Such is the hatred for Tesco.
http://www.telegraph.co.uk/finance/2947463/Tesco-b...
I'm friends with a guy locally who grows plants and flowers on a huge scale in greenhouses to supply to UK garden centres and supermarkets, and he almost got bankrupted by Tesco about 3 years ago. They put in an order with him for tens of thousands of Christmas Pointsetta plants, which he duly grew. 2 weeks before Christmas, when all the plants were ready, they phoned him up and just basically said "yeah I know we said we ordered 50,000 pointsetta, but we've changed our mind. Sorry"
That's how they do business, and I don't think many suppliers will shed a tear if they ever go under.
http://www.tesco.com/groceries/product/search/defa...
iambeowulf said:
Pick any industry and there will always be manipulation.
^This.Big firms shaft little firms all the while. Business owners have to wise up.
Interesting note that a very successful (check balance sheet) and well-reputed British bicycle components manufacturer Hope does not currently sell any components into the major OEM brands - trek, Specialized, Giant etc. - but rather relies on discerning customers either upgrading (often crap OEM value-engineered) parts or building customer bikes from components.
Oakey said:
Did Chase sell his Tyrells crisp brand then or have his principals gone out of the window because Tescos sell Tyrells crisps, I bought some just last week.
http://www.tesco.com/groceries/product/search/defa...
Yes, he sold his Tyrells brand in around 2008 to Langholm Capital, who immediately began selling to Tesco's once they had control.http://www.tesco.com/groceries/product/search/defa...
He then used the money to start his William Chase brands of Vodka, Gin, wines etc.
Adrian W said:
NinjaPower said:
I'm friends with a guy locally who grows plants and flowers on a huge scale in greenhouses to supply to UK garden centres and supermarkets, and he almost got bankrupted by Tesco about 3 years ago. They put in an order with him for tens of thousands of Christmas Pointsetta plants, which he duly grew. 2 weeks before Christmas, when all the plants were ready, they phoned him up and just basically said "yeah I know we said we ordered 50,000 pointsetta, but we've changed our mind. Sorry"
That's how they do business, and I don't think many suppliers will shed a tear if they ever go under.
Sorry but you need to get the full details of that one, they run a min-max supply contract so your friend knew exactly what he was in for, a lot of large UK companies use this system, I manufacture electronics with very long long lead times but have to manage this type of contract without getting burnt.That's how they do business, and I don't think many suppliers will shed a tear if they ever go under.
I spent many years in the meat industry and the UK Supermarkets (almost without exception) are appalling to work with. Due diligence? Food safety? Forget it.
At one point we had a situation where a couple of major retailers decided to stop selling as much Beef Hindquarter meat (basically your nice steaks and roasting joints) in favour of poultry and pork where there was perceived to be a bigger margin. OK you might think, they can do that....except they cannot. The animals had already been grown against the Supermarkets original requirements and the dates for slaughter/processing were already inked in. Beef cattle do not just pop up out of nowhere!
So we hand a glut of hindquarter meat that the Supermarkets refused to take. This lead to a dramatic fall in the price per kilo of bone in hind quarters for processing. This in turn meant that in order for farmers, slaughter houses and processors to recover their costs (or at least reduce the loss) the price of forequarter meat (mince, diced beef etc) had to rise. But no....the supermarkets refused to reflect the rising price of bone in forequarters in their final sale price for mince beef.
So what does all that mean?
Well, lets say you buy a forequarter that weighs 100 kilos for 100 pounds. It used to cost 50 pounds, but the price has had to rise in order to compensate for what the supermarket has done to the hindquarter price.
So, you take the bones out and end up with 50 kilos of meat. Since the bones are worthless that means that the meat stands you at £2 per kilo PLUS the costs of labour, plant, overheads etc. Lets say that comes to £2.20 per kilo. Then you have to pack it, and ship it to the stores so now it stands you £2.25 per kilo. And thats without profit. The the supermarket says.... aha! we want to sell this meat at £1.95 per kilo . But , you say, the price of forequarters is much higher because you killed the price of hindquarters! Tough luck says the Supermarket. We have a contract. Oh, and if you don't supply we will sue you and you will never supply us again. This is not an option for you because the supermarkets represent 80% of UK meat sales, so you grit your teeth and get ready to supply at a 30p/kilo loss for the next few weeks. (work out what 20,000kilos (one truck worth) of meat at 30 pence per kilo represents in terms of loss. And then weep again when Tesco phones you back and says it is their policy to still maintain a 35% margin on the sales price they generate, so you have to swallow an even bigger loss.
2 months later, and you are a lot of money down, but there is light at the end of the tunnel because the price of forequarters has fallen to 45 quid. You are starting to maybe make some money back to cover all those losses when the phone rings. Hello says Mr Supermarket buyer, we have noticed that the price of fores has fallen to 45 pounds. We want to lower the price of the mince beef and the diced beef you supply. But you say, we have a contract - a contract that you held me to last time! Tough says supermarket, you cannot hold us to anything. we are tearing up that contract and we want to renegotiate .....
And so it goes on
UK supermarkets? Bunch of thieves and parasitical cowboys. Tescos? As bad as any. I saw sense and am no longer in the meat industry!!!
They made £1.4billion profit from sales, (it was £3.3bn, the year before)
But the loss is from the reduction in value of assets (property)
and they have a £8.5bn pound debt. So its complicated with lots of zero's.
So probably some kind of clean slate, sorting out the books move.
The figure to watch is always profit, that amount of drop in profit (sales should always have profit growth, like for like year on year) is a worry, but the bigger picture might come into this and market share (ie sales £) would also be worth looking at.
It all works in cycles, but Tesco seem to be struggling to get into a good 'market share>profit>market share cycle' in the last few years.
But the loss is from the reduction in value of assets (property)
and they have a £8.5bn pound debt. So its complicated with lots of zero's.
So probably some kind of clean slate, sorting out the books move.
The figure to watch is always profit, that amount of drop in profit (sales should always have profit growth, like for like year on year) is a worry, but the bigger picture might come into this and market share (ie sales £) would also be worth looking at.
It all works in cycles, but Tesco seem to be struggling to get into a good 'market share>profit>market share cycle' in the last few years.
Their business model, for the grocery side is being decimated by Aldi/Lidl, once the preserve of those on the breadline, they are now pretty universal in their appeal, I was in the local Aldi and the car park was full of Range Rovers, a Bentley and a 458 Spider so the middle classes have embraced it, as have seemingly the wealthy by the looks of it, partly convenience I would imagine, Milk and Bread are pretty much Milk and Bread.
I personally avoid the bigger chains now, I save so much money at Aldi without having to compromise, quality wise I find it to be on par or better, it is just sometimes choice is lacking but I don't really need 47 varieties of Cream Cracker and a 23 mile hike to get through it all, I like the simplicity of 1 item and one price, take it or leave it, no loyalty cards, no buy one get one free stuff which actually sneakily excludes one of the popular varieties of whatever it is and if you don't spot it you pay full price. They all employ these tricks but consumers are getting wise to it.
Tesco got too big, too aggressive and too expensive, basically they pissed everyone off, customers, employees, suppliers and anyone trying to buy land they want or may want in the future.
Its is a shame that Aldi and Lidl arent British owned and I feel sorry for all those Tesco workers but I don't think anyone feels sorry for them as a company.
I personally avoid the bigger chains now, I save so much money at Aldi without having to compromise, quality wise I find it to be on par or better, it is just sometimes choice is lacking but I don't really need 47 varieties of Cream Cracker and a 23 mile hike to get through it all, I like the simplicity of 1 item and one price, take it or leave it, no loyalty cards, no buy one get one free stuff which actually sneakily excludes one of the popular varieties of whatever it is and if you don't spot it you pay full price. They all employ these tricks but consumers are getting wise to it.
Tesco got too big, too aggressive and too expensive, basically they pissed everyone off, customers, employees, suppliers and anyone trying to buy land they want or may want in the future.
Its is a shame that Aldi and Lidl arent British owned and I feel sorry for all those Tesco workers but I don't think anyone feels sorry for them as a company.
Lost soul said:
I used to use Tesco all the time , I got tired of playing their games on offers and "specials" , I now use Sainsburys its simple good produce and none of the tricks Tesco employ
I may be wrong but that's how it feels to me , wold not use Tesco if you paid me
Ive moved to Sainsbury too, but from asda.I may be wrong but that's how it feels to me , wold not use Tesco if you paid me
They all do the silly offers that aren't offers offers, it gets tedious.
http://www.which.co.uk/news/2015/04/which-calls-fo...
Welshbeef said:
The thing is this land was purchased over a very long period of time and as today's prices are above the 2007 peak it raises questions as to were they inflated prices back then.. If so bonuses were paid out on those values.
Has the land been devalued too much?
Also chaps this means HMRC gets zero corporation tax this year and could be the case for years to come. Given they would normally pay a lot of tax half a billion maybe more that a massive impact to our public finances. Which department gets this now additional deficit.
Given that the write downs in the land/property values won't be tax deductible the fact that there is an accounting loss doesn't translate into a tax loss.Has the land been devalued too much?
Also chaps this means HMRC gets zero corporation tax this year and could be the case for years to come. Given they would normally pay a lot of tax half a billion maybe more that a massive impact to our public finances. Which department gets this now additional deficit.
The fact that their trading profits have fallen will however reduce the likely tax bill.
Lost soul said:
I used to use Tesco all the time , I got tired of playing their games on offers and "specials" , I now use Sainsburys its simple good produce and none of the tricks Tesco employ
I may be wrong but that's how it feels to me , wold not use Tesco if you paid me
Used Sainsbury's for quite a while, I hate Tesco's business model & the store in Gillingham is horrible. Our Local Asda is always packed, the car park is dire so we avoid them as well. I may be wrong but that's how it feels to me , wold not use Tesco if you paid me
Aldi are struggling with infrastructure our local one always has a packed car park.
Foliage said:
Lost soul said:
I used to use Tesco all the time , I got tired of playing their games on offers and "specials" , I now use Sainsburys its simple good produce and none of the tricks Tesco employ
I may be wrong but that's how it feels to me , wold not use Tesco if you paid me
Ive moved to Sainsbury too, but from asda.I may be wrong but that's how it feels to me , wold not use Tesco if you paid me
They all do the silly offers that aren't offers offers, it gets tedious.
http://www.which.co.uk/news/2015/04/which-calls-fo...
Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff