Robot-driven supermarkets, upmarket convenience stores and a tenfold increase in plant-based ready meals will all fuel growth at Tesco, the company has said.
The UK’s biggest supermarket chain, which accounts for nearly a third of all groceries sold in the UK, told investors and City analysts at a presentation on Tuesday there was still room for it to open additional small stores in Britain including more than 100 One Stop outlets.
The company has 169 One Stop franchises, in addition to 776 fully owned Tesco outlets and more than 1,000 Tesco Express stores.
It is also considering testing convenience stores that only sell its upmarket Finest own-label products, taking on the likes of Marks & Spencer’s Simply Food and Little Waitrose.
A mocked-up picture of a Finest store featured a sleek grey front, with lots of glass, fresh fruit and vegetables on prominent display and cafe tables outside.
The supermarket will also tap into the popularity of shopping locally after its acquisition of Booker, the wholesale group that sells to more than 90,000 independent retailers.
Tesco is aiming to eventually increase Booker’s sales by £2.5bn, from £6bn at present, partly by adding services for its clients including online ordering, finance and phone contracts.
Small stores are also a key part of future growth overseas, including 750 new outlets in Thailand.
But the future for Tesco’s discount Jack’s chain is less clear. The retailer did not discuss plans for expanding the nine-store business, which first opened last September and has sold £24m of products so far.
Instead, it highlighted the latest Jack’s outlet in Rawtenstall, Lancashire, which is more like a cash-and-carry than a discounter, directly challenging the likes of Aldi and Lidl.
The store, which is much bigger than previous Jack’s stores, combines own-label products with branded items and offers discounts for goods bought in bulk.
Technology would be another key part of expansion, with Tesco saying it hoped to improve profit margins further than the 3.4% to 4% previously promised, as greater efficiency offset cost inflation.
Ideas including testing out mini hi-tech distribution centres in the back of stores, in partnership with the robotic supermarket specialist Takeoff, in an attempt to deliver groceries ordered online more quickly and efficiently.
The retailer said it wanted at least one of the robot-run facilities in place within a year. It is also trialling robots that can deliver shopping to homes and check for gaps on shop shelves.
Self-scanning handsets and mobile apps, which enable shoppers to pay without using a till, are also expected to help Tesco save £68m in costs as it aims for all self-scan transactions to be cashless in two years and all self-service checkout payments to be cashless within five years.
Bruno Monteyne, a retail analyst at Bernstein Research, said Tesco had “almost bamboozled” investors with numerous examples of potential avenues for expansion and cost savings. “It’s about showing Tesco can continue to grow with reasonable sales growth of 3% to 4% and stable margins,” he said.
Shares in the company rose nearly 4% as investors welcomed the ideas being discussed.