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Why I’m Glad Tesco PLC’s Venture Into Destination Dining Turned Sour

Chief executive Philip Clarke didn’t get much right during his curtailed tenure at Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) and now another of his bright ideas appears to have bitten the dust.

Clarke decided that the best way to get customers back into his superstores was to offer them a destination dining experience.

So he bought family friendly restaurant chain Giraffe for £50 million, and ruined coffee chain Harris+Hoole’s artisanal credentials by buying a stake in the company, to the outrage of ethical foodies.

I feared at the time his foray was a mistake, and so it has proved.

Eat Dirt

New broom Dave Lewis has now swept out the man charged with serving up Clarke’s failed foodie strategy.

Michael Holmes, chief executive of new food experiences at Tesco, is the latest member of the senior management team to quit the top table.

Operation destination Tesco is over.

Gulp!

And what a misguided operation it was. At a time when Aldi and Lidl were gobbling up market share, Clarke decided the best way to fight back was to make a trip to Tesco a nice day out rather than a cheap place to stock up on groceries.

I felt it was doomed from the start because big box Tesco stores have never been a desirable destination to me. 

I’ll happily take the kids to Giraffe and I like the occasional hand-crafted coffee, but for me, Tesco isn’t the place to enjoy them.

I go to Tesco stores on sufferance, to buy stuff I need. Then I want to load up my car and get out of there as fast as I can. I’m clearly not the only one.

The food experiences failed to halt the slide in sales, and also lost money on their own terms.

Harris+Hoole blew £13m in a year. I know coffee can be expensive these days but that is ridiculous.

Food For Thought

I’m not just relieved the experiment is over, I’m positively happy it failed. Because I like the businesses I invest in to stick to what they know best, rather than dabble in passing trends. 

Clarke’s decision to drive through this risky strategy at a time when cash-strapped customers simply wanted cheap groceries was a clear sign that he had lost the plot.

Dave Lewis knows what story Tesco needs to tell its customers, and they are listening. Sales have risen for the first in 18 months, up 1.1% in the last 12 weeks.

The share price is up 42% in three months. Eat that, Mr Clarke.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of Tesco. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.