Awake in the early hours of this morning, I went through my social media feeds and didn’t have to travel far before a post from Reuters popped up that flagged the upcoming profit announcement from Tesco, which as a BIG retail business currently holds a 27% share of the U.K.s grocery market.
You’ll probably agree that £3.3 Billion is a lot of money. But to be fair (I thought), if you were to roll that out against the number of people and the number of shopping trips per week, it would probably only be something like a quid (£1) – which on a £100 a week shop would surely seem very reasonable.
To be fair, I wasn’t convinced.
I decided to do the maths. And once I’d gone through a quick recap of formulas for MS Excel (because I couldn’t get the calculator to work easily with figures in the billions), I had a quick dig around for the latest figures I could find on UK population (67 Million in 2021) and the average number of people per household (2.4).
To make it easier on my early hours and flu ridden brain, I decided to narrow the figures down to the equivalent of one weekly shop per household. The purists amongst us would argue that it needs to be more precise (I use a Tesco Express as well as the local superstore and am sure many others do to). But for the purposes of getting some perspective, the results are pretty much the same.
What I ended up with (and please feel free to correct me if my 2am mathematics was out) is that of the households that shop weekly at Tesco, an average £8.38 of the cash price of that shop or the payment is pure profit for Tesco. Or, rather, that is the money they pay to their shareholders via dividends at the end of their company year.
My guess is, that’s plus or minus the equivalent of 10% of most of our shopping bills. When you put it into this context, it seems rather a lot.
And that’s before thinking about what all the big corporate interests that sell goods to Tesco make, when they are big enough and have clout enough to dictate to a retailer of this size and with this level of market share what the prices and margins will be.
However, the question ‘What is an acceptable level of profit?’ does become cloudy when we add the perspective that a local farm shop or food trader at a local farmers market may not be able to function with a percentage profit margin, that for a very SMALL business is likely to be catastrophically low.
The issues around our food supply and how we make production sustainable across the UK whilst also making it secure and fully accessible to all are very complex indeed.
Adam Tugwell 