I last saw Sir Terry Leahy in 2013, two years after his messy divorce from Tesco. He agreed to a chat about retail on the condition he wouldn’t have to talk about the supermarket juggernaut he helped to create or his successor, Philip Clarke, who’d begun to question the state of the business he’d been left.
It’s a mark of the man that despite a brief joke about Fergie’s legacy at Manchester United he stayed true to his word.
It’s hard to underestimate just how big a figure Sir Terry was for more than a decade in British business.
And it makes his return to the grocery sector, at the helm of the private equity consortium that now owns Morrisons, all-the-more intriguing.
Not least because Britain’s supermarket sector is on the cusp of an almighty structural change.
One of Sir Terry’s more famous remarks during his time masterminding Tesco came when he called Ocado a “charity”.
Back then the fledgling online grocer was throwing millions at automated warehouses and going deeper into the red.
How times change.
Fast forward a decade and Ocado is in the FTSE 100. And now it’s Ocado chief executive Tim Steiner casting shade from on high at upstarts such as Getir and Gorillas, rapid delivery companies looking to make money by whizzing a box of eggs to your door in ten minutes.
Whether the likes of Getir can make the kind of money their investors believe they can remains to be seen.
But it’s clear that Covid-19 has accelerated a fundamental shift into online ordering.
The internet’s share of total UK grocery spend leapt from 7 per cent to 15 per cent in the pandemic. While it’s come off a bit, it still sits at around 12 per cent as older couples in particular stick with new-found discoveries like click and collect.
One entrepreneur told me home shopping may account for – wait for it – 50 per cent of the total grocery
market by the early 2030s.
Few would agree. But at levels above 20 per cent it causes serious problems for those with mammoth superstores.
Execs fear there will be a “tipping point”, where so much is being sold online that it poses serious questions about the economics of a big box store, with all the lighting, refrigeration and staffing costs that go with it.
It’s already caused some big decisions.
Few noticed the announcement when it came but a year ago, Sainsbury’s – the one-time home of Jamie Oliver – axed its meat, fish and deli counters. The argument was that it would “make the stores simpler to run”.
Asda has looked at licensing space within its big box stores to other high street brands such as The Entertainer and Decathlon.
And Tesco has carved out space in some of its Extras for dark stores that purely cater for online orders. One of them hosts none other than Gorillas themselves.
That’s fine for now, but there will be some huge calls down the line for boards staring at bits of a property portfolio they could frankly do without.
As if this wasn’t enough, there’s the small matter of the mother of all price wars on the cards.
Inflation is typically good for supermarkets as they can make money sitting on their hands.
But veterans believe Tesco is gearing up to go “nuclear” on price in the New Year – to take advantage of the changes we’re seeing.
As well as Morrisons, Asda is now also in the hands of private equity.
There’s a growing view that Tesco could seek to challenge both ownership groups – and test how deep their pockets really are – by launching a savage round of price cutting in a bid to win customers.
Tesco’s current chief executive Ken Murphy hinted at what may come when he said Britain’s biggest grocer was keen to protect or grow market share in its “next chapter”.
And they would want to go before Aldi, who cleaned up after the credit crisis.
As one observer said: “Tesco has a once in a lifetime opportunity to take customers off its big rivals.”
How Sir Terry copes when Tesco parks its tanks on his new lawns will be intriguing.
It’s going to get heated in the aisles.