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TescoGate: Supermarket is rudderless and 'fighting fires' in wake of suspensions

Published:  17 October, 2014

The suspension of Dan Jago, head of wine, and seven other directors at Tesco has left the retailer rudderless and "fighting fires" as it heads into Christmas and the busiest trading period of the year.

The suspension of Dan Jago, head of wine, and seven other directors at Tesco has left the retailer rudderless and "fighting fires" as it heads into Christmas and the busiest trading period of the year.

Leading City and retail analysts have told that in the wake of the financial scandal, the UK's biggest supermarket now has "no over-riding strategy" and faces "operational paralysis".

TescoTesco is lacking strategy in the wake of senior staff being sidelinedA number of wine suppliers say business is continuing as normal for now, but query what the longer-term impact might be.

The financial scandal ripped into the UK drinks industry this week when Jago, global head of its beers, wines and spirits division, was sent home on Tuesday as part of the ongoing investigation into the £250 million accounting blackhole at the retailer.

Jago's suspension has left wine suppliers up in the air over trading plans in the vital weeks leading up to Christmas. understands executives on its major commercial teams have had to hand over laptops and postpone supplier meetings as investigations into the accounting crisis continue.

While a number of wine suppliers contacted by said there has been "no change in the day-to-day" business, or that it is "business as usual", they stressed that it was "too early to tell" what the longer term impact might be. Earlier this week Robin Copestick, co-founder of Copestick Murray, described events as "unsettling" for suppliers and hoped for a speedy resolution.

Cantor Fitzgerald analyst Mike Dennis told that while day-to-day trading was ongoing at Tesco, discussions of matters such as commercial margins across categories and retention of loyal customers were being ignored. In a note published earlier this week, he said: "The forensic investigation could, in our view, create operational paralysis for Tesco ahead of the very busy Christmas build up."

David Sables, chief executive of Sentinel Management Consultants, which offers commercial skills training to many suppliers, including some within the BWS sector, told that there is a power vacuum. In the absence of key senior staff, he said: "I think it is a stretch. They won't be able to bring somebody in to replace [senior directors] in time, so senior people will be acting up or down, helping the business to 'tick along'.

"I think they will have enough resource to cover it, but they won't be doing anything strategic. They will be putting out fires rather than thinking cleverly."

Andrew Marsden, a veteran of the supply trade who has held senior marketing roles in Britvic and Danone and now works as a retail and marketing consultant, told Harpers that while Tesco's Christmas programme would be long "done and dusted", ironing out details could cause suppliers headaches.

"Those people relying on the promises of certain people to deliver certain things - that's the difficulty. If something goes wrong, who do you deal with?"

He said that in many cases suppliers would have no written contracts, excepting maybe "soft contracts" through emails, which would lead to a lot of "who said what's".

Tesco told it is making no further comments until it provides an update on the investigation, together with its interim results, on October 23.

In the meantime experts fear that the investigation could continue beyond next week. Dennis said there was a possibility that the investigation could be prolonged, "if they feel there's more to it" than what has gone in in the last six to 12 months.