Tesco has been urged by investor and America’s most revered businessman Warren Buffett to take a hard look at its struggling Fresh & Easy business in the US.
Buffett, who holds a 3% share in Tesco and is boss of investment firm Berkshire Hathaway, believes Tesco was foolhardy in its attempts to enter the world’s largest grocery market, according to The Times.
Berkshire’s vice-chairman Charlie Munger said Tesco’s West Coast launch was ill-advised, saying: “I could have told [Tesco] if they had asked me, but they didn’t.”
Buffett, speaking at a shareholders’ conference in Omaha, Nebraska, said: “They should look hard at their operations there, which I’m sure they are doing.”
He did acknowledge that the sales trend had been improving and that in Tim Mason, boss of Fresh & Easy, it had “a smart guy at the top”.
His comments will cause a stir at Tesco’s HQ in Cheshunt. New chief executive Phil Clarke admitted last month that some changes needed to be made to the Fresh & Easy model but that the retailer was making those changes. He has not fully committed to the chain though.
Munger, a director of US firm Costco, said one of the biggest problems was that it launched in California where it faced hard competition from Trader Joe’s.
“Tesco is God Almighty in England. But you come into southern California and you have Trader Joe’s and Costco, that’s tough competition. It’s a different world. Those Trader Joe’s stores are very clever and they are already there. They have 550 stores.
“It’s very hard to displace a competitor in their own market, in their niche.”
When asked if Tesco should cut its losses and pull out of the US, Munger said: “I don’t know. Maybe they are skilful enough so that they can make it work.”
Buffett said he was not contemplating selling or adding to his Tesco holding at present prices, but at the right price he “would probably want to hold a lot more”.