Overview 2
Catalyst 2
Summary 2
Insurgent budget stores put Tesco under pressure 5
Tesco response: Threat from German entrants is serious, not disastrous 5
Unilever dispute reveals cost pressure Tesco must respond to 6
Tesco own brand takes on Aldi, Lidl and Asda by price matching 7
Tesco slimmed down business to stay competitive 9
Foreign ventures have been sold off to streamline business 9
Selling in-store services refocuses attention on core market 10
New brands launched to repel low-cost alternatives from rivals 11
Tesco needs megastores, but doubt surrounds their long-term future 13
Shopping habits have changed, placing the idea of the megastore under pressure 13
Tesco makes big stores cheaper to run to pay for price cuts and remain competitive 14
Tesco trials Currys PC World brand in megastores to boost profitability and entice footfall 14
Merging with booker is a risky move, if it happens 15
Attention from regulators raises uncertainty over multi-billion-pound deal 15
Some shareholders are not happy with proposed merger, increasing pressure on Tesco board 16
Amazon Fresh creates new threat to Tesco dominance 17
Amazon Fresh brings fast delivery and low overheads: Tesco responds 17
Tesco trials 1-hour delivery service in London, taking on Amazon and rival brands 18
Conclusions 19
Tesco has changed much to meet growing budget store threat, but there is no guarantee of success 19
Appendix 20
Sources 20
Further Reading 20
Ask the analyst 21
About MarketLine 21
Disclaimer 21

List of Figures
Figure 1: Tesco revenue (£bn) 2005-2016 5
Figure 2: Empty shelves at Tesco during Unilever dispute 6
Figure 3: UK food prices, Detailed indices of food consumer prices, Jan 2014 – Jan 2017 (Jan 14’ = 100) 7
Figure 4: Fresh & Easy losses (£m) 9
Figure 5: Giraffe restaurants, formerly owned by Tesco 10
Figure 6: New ‘farm food’ brands at Tesco 11
Figure 7: UK online grocery retail ($bn) 2011-2016 13
Figure 8: Booker Group Operating Profit (£bn) 2006-2016 15
Figure 9: Amazon Fresh 17