bUsINEss REVIEW

building brands

To be a creator of highly valued brands

Tesco has been an industry leader in branding for many years using our broad appeal, wide product assortment and global supply chains to develop businesses that deliver reliable, innovative and great value brands for customers. The creation and spread of a number of strong brands has helped us to become a growth company, trusted by customers, valued by staff, respected by communities and profitable forshareholders.

A brand is a promise, a set of fundamental principles that define a product or business. it is an intangible representation of what a company stands for in the minds of its customers and other stakeholders.

Retail brands

Product brands

Pillar brands

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TescO VAlUe AnD FinesT in The UK

customers appreciate the quality and breadth of our range and we are continuing to innovate in this area, particularly with our pillar brands. The popularity of our pillar brands with customers has meant that Tesco Value has become the second largest food brand in the UK ahead of coca-cola with sales of more than 1 billion a year. Tesco Value is only pushed into second place by Tesco Finest. more than half of our customers buy from the Finest range on a regular basis, from Finest spectacles to Finest Restaurant collection ready meals, making it an important component of our sales mix.

Overview

Both Finest and Value now sell more than 1bn each year

1bn

Business review Governance Financial statements

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bUsINEss REVIEW

building brands

Homeplus
received South Koreas Most Admired Company award in October 2010

Why are we building brands?

Building brands enhances the value of our business by benefiting all of our stakeholders, including customers, staff, communities and shareholders. Being viewed positively by our stakeholders supports the creation of a successful, sustainable and profitable long-term business.

and the UK Tesco Great school Run, were known to be a good neighbour. By benefiting local communities, our brand has taken on new meaning among stakeholders that of a responsible retailer. By developing a brand reputation for offering great value and service to customers and being a responsible member of the community, we can attract great people to work for us. As a responsible and flexible employer with a track record of developing talent within the business, Tesco is also seen as a great place to build a career. The increased emotional and functional loyalty from customers, staff and communities generated by our brand building has contributed to Tesco becoming a profitable, sustainable growth opportunity for shareholders to invest in. Investment provides us with further opportunities to build and develop our brands across the Group, in turn allowing us to diversify to the benefit of customers, staff, communities and shareholders.

Whats the benefit to both our stakeholders and our Company of building brands?
By building strong brands through our own products, we offer customers increased value, choice and quality. customers trust our brands. They are loyal to our brands because they know what to expect from them and what they stand for. With wine, for example, the Finest logo helps customers to pick out a good quality option without having to be a connoisseur. strong product and pillar brands give us a key point of differentiation from our competitors and enable us to continue to meet the changing needs of our customers. Once customers understand the values that our brands stand for, they are more likely to trust in our ability to diversify into new service areas. In financial services, for example, with Tesco Bank weve brought straightforward and good-quality banking solutions based on the needs of our customers to a market characterised by complexity and poor customer service. Wherever we operate we support local communities, their causes and the environment. Through initiatives such as our community champions programme, Get Healthy with Tesco lotus in Thailand

The increased emotional and functional loyalty from customers, staff and communities generated by our brand building has contributed to Tesco becoming a profitable, sustainable growth opportunity forshareholders.

F&F

We launched our clothing brand F&F in the UK in 2001 with the aim of offering unbeatable value for money, not compromised by quality, design or provenance. F&F is now available in over 450 stores across the UK and is also available online.

As awareness and popularity has grown in the UK, weve also extended the brand launching F&F in nine other markets across europe and Asia. F&F is already the market-leading clothing brand in the czech Republic, hungary and slovakia. As the brand continues to develop, we opened our first stand-alone F&F store (above) in prague this year.

As customers have begun to gain confidence in the F&F brand, we have also broadened our range with sub-brands such as F&F Basics, F&F couture (above) and F&F petite and extended the brand into homeware with a good, better, best hierarchy under F&F home Basics, F&F home and F&F home collection.

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eVOlUTiOn OF The TescO BRAnD

When entering new markets across the world we have broadly followed the same model, adapting where necessary to reflect the local culture and sentiment.

Overview

Ex ten di ng

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bu ild ing

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Business review Governance

BUilDinG The neTWORK

When entering a new market, building highquality stores in great locations is a priority. Our founder, Jack cohen, developed the first store in the UK, which culminated in the 1980s with the Tesco superstore still a core part of Tesco today. Weve since gone on to develop hypermarket format stores and smaller formats such as metro and express. its important that our stores meet customers expectations. A multi-format store offer, from express to extra, provides customers with different shopping trips to suit their varied needs. in europe, we are introducing extras, offering customers more products and services, from phone shops to pharmacies. A crucial part of building an efficient network is the creation of centralised distribution centres to serve the store network quickly and efficiently. in Thailand this year, Tesco lotus built its first Fresh Distribution centre, handling over 230,000 cases of food every day. in china, we opened three distribution centres to serve our growing network.

BUilDinG The BRAnD

Once a network has been built in a market, we can begin to evolve a collection of stores into a Retail brand and to develop product and pillar brands. Through the introduction of pillar brands, in food, for example, we provide customers with great choice, value and quality. We work hard to make sure that each of our brands is distinguishable and lives up to our customers expectations. This builds the crucial element of trust in our brands. it also enables us to differentiate ourselves from other retailers, particularly in less developed markets. clubcard provides us with unique insight into our customers shopping habits so that we can continuously work to meet their needs. clubcard gives our customers a sense of belonging and says thank you by rewarding them for their loyalty. As a result, customers trust in and feel committed to the Tesco brand.

exTenDinG The BRAnD

Once Retail, product and pillar brands are present in a market, customers have an understanding of what our brands stand for they trust in them. This means that our customers have confidence in our ability to deliver different products and services, allowing us to extend the Tesco brand into new areas. in many cases, the extension of our brand accompanies changes in our customers lives. changes such as the growth of the internet have led to the creation of new platforms for our brands with tesco.com, for example. Were also innovating for our customers, offering new innovative products, such as our successful Tesco Bank Fixed Rate saver. Were now beginning to extend the brand in a number of our international markets. in south Korea, we have a number of co-branded credit card offers to which 1.3 million customers have signed up, demonstrating the strength of the homeplus brand.

Financial statements

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