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Is Tesco’s ‘Green’ Position A Sustainable Advantage?

Jim Prevor’s Perishable Pundit, May 2, 2007

The New York Post ran an interesting piece entitled ‘Green’ Grocer Tesco’s Building Its Eco-Friendly Brand In U.S. The article makes two points that are important to be aware of as Tesco comes to America.

The first is a contrast in the way Tesco and Wal-Mart are approaching green initiatives:

Tesco, which plans to build 100 stores here by year end, is taking advantage of a growing environmental awareness among American shoppers to position itself as a truly “green” grocer, complete with eco-friendly stores, trans fat-free foods and a logo that makes ample use of the color green.

The strategy contrasts with the environmental approach championed by rival Wal-Mart, which is testing eco-stores in Texas and Colorado but whose biggest initiatives — those that go beyond the scope of any one retailer — are happening on the supply chain, out of sight of the average consumer.

New guidelines set by the world’s largest retailer require its 60,000 suppliers to reduce packaging, allowing more products to be crammed into fewer trucks at an estimated cost savings of $4 billion to the retailer and $7 billion to manufacturers.

“Where Wal-Mart has been most vocal has not been in the consumer space but in the business space, the place where you are likely to see real solutions proliferate,” said Jon Coifman, of the Natural Resource Defense Counsel. “Tesco, as a new entrant, is looking for a niche and so it makes sense for them to appeal directly to consumers.”

The second point is that Tesco is likely to be able to legitimately brag that it is “greener” than Wal-Mart, Safeway and other competitors — but that much of this is simply a consequence of its building everything new as opposed to being stuck with legacy structures:

Tesco has said it plans to spend $13 million to install solar panel roofing on a distribution center in California, potentially helping to placate environmental activists who are opposed to the project.

“Tesco is clearly a leader in this area,” said Craig Johnson, president of Customer Growth Partners. “What they are doing will put them at the forefront of being green in all senses of the word in the U.S.”

While other large U.S. food retailers have moved to cut energy consumption — Kroger by 20 percent and Food Lion by 27 percent — Tesco has one big advantage over its rivals in that it is starting from a clean slate, analysts said.

“It’s much less expensive when you have a green design baked in from the outset,” Johnson said.

One wonders if “greener than thou” is a sustainable competitive advantage for a retailer?

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