The yiddishe roots of M&S and Tesco

By Alex Brummer, September 16, 2010
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By the standards of much of the retail sector, the changing of the guard at Tesco has been a relatively low key affair.

There were the inevitable tributes to Sir Terry Leahy who will retire next year and short profiles of the chosen successor Phil Clarke who, like Leahy, started at the very bottom.

But there has been none of the fuss and football-style transfer fees which, for instance, accompanied the arrival of Marc Bolland as chief executive of Marks & Spencer.

The roots of Marks & Spencer (M&S) and Tesco are as Jewish family businesses. But in recent times they have moved in very different directions. In its first 115 years, M&S had just six bosses, most of whom were scions of the founding families or had worked alongside them -- culminating in Sir Richard Greenbury, who left in 1999. In the last decade, however, there have been no less than seven chairmen and chief executives at M&S, as the family culture broke down.

Tesco, founded in 1932 by the late Sir John Cohen, has not been around for so long. But despite becoming a far larger business than Marks & Spencer, making £3bn in profits against the £600m or so at M&S, it has somehow managed to maintain a family-style culture.

In a recent conversation Leahy was adamant that one of the grocer's strengths has been the fact that it has "never looked outside for help".

He points out that there have only ever been five leaders: Jack Cohen; his two sons-in-law, Leslie Porter and Hyman Kreitman; Ian MacLaurin; and himself.

This, Leahy believes, has provided "tremendous stability", and each has left something behind for his successors. He notes that when the group went into superstores, it could not find the market funding. So Leahy's predecessors took the risk by "selling Jack's high street stores to pay for it". Leahy believes he was left a great legacy in the shape of stores the company owned and no debt.

In a decade at the top, Leahy has taken the company to an entirely different place. It is under his stewardship that it moved from one format - essentially supermarkets selling food - to any number of product categories and services, and went overseas.

Indeed, in his last months in office Leahy is still proving as active as ever in developing the group. In the US he is seeking to stabilise Fresh & Easy, its chain of convenience stores in the American West which have taken far longer to make decent profits than shareholders had hoped for.

Leahy is relatively sanguine. He knows the rest of the business is of sufficient size for him to take risks without gambling the company away, and is also a firm believer in long-term investment.

He notes that it took nearly half-a-century for Proctor & Gamble, the consumer products group, to establish itself as a leader for branded products in Japan.

Elsewhere, Leahy - together with his international chief and anointed successor Clarke - are seeking to consolidate their position as the top Western retailer in Asia. They are among a list of bidders for Carrefour's 60 Asian stores (mainly in Thailand and Malaysia) and would improve the group's already considerable share in those markets.

"We're very arguably the leading international retailer in the whole of Asia. I don't think there is another British company that can claim to have the leading position in its industry in Asia," he asserts.

Closer to home, Leahy's other great vision is based around the marketing tool of the Clubcard. The market information on the card makes it ideal to promote a range of services from undertaking to banking.

The thrust into finance may prove the most opportune. The company recognises that in the wake of the credit crunch, there are opportunities for a new, consumer focused banking. To this end it already has bought a £1bn telephone centre in Newcastle and is thought to be interested in buying Northern Rock - when the government eases its grip.

Leahy's own personal background, one of four brothers brought up on a council estate in Liverpool, could not be more different than those of Tesco's founding dynasty. The son of an itinerant greyhound trainer, who was wounded in the Second World War, Leahy broke free of his working class background by attending St Edward's, an old Catholic grammar school in the area, before going on to university.

He believes that the seeds of his later commercial success were learned at school and blended with the Tesco he inherited. "I learnt the Catholic values of service and respect. So the idea of focusing on business, on serving customers, working with fellow staff on the basis of respect and trust were not alien concepts in any way."

But Leahy is not short of Jewish insights either.

His wife Alison, a hospital doctor (having previously been a GP), is the daughter of Jewish refugees from Germany. "They escaped from Hanover to Amsterdam and then escaped again before setting up a manufacturing business in London.

"So I have seen quite a lot of their history," he says.

Now the Leahy Foundation, run by himself and Alison, is seeking to give as much back to Liverpool as possible by supporting Catholic and other causes in the city. So while Leahy brought a different background to Tesco, there has been no shortage of insight into the yiddishe kop.

Alex Brummer is City Editor of the Daily Mail

Last updated: 10:21am, September 16 2010