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Tesco buys Giraffe: Has TSCO got more money that sense?

Has Tesco plc (LON:TSCO) more money that sense? The supermarket group is buying ideas rather than thinking of them itself. Or is it just ashamed to be Tesco?

The country’s leading retailer is apparently buying the Giraffe restaurant chain. The price tag of up to £50m is not for the 47 branches however, it is for the goodwill of the brand so that it can be rolled out into Tesco stores. There’s nothing wrong with giving the shoppers another service, but is the group with 500,000 staff really unable to think of a name itself for its dining areas?

The planned deal follows Tesco’s acquisition of half of the Harris + Hoole coffee shops and an investment in the Euphorium bakery. Surely a company with sales of £72bn can create its own coffee bars and bread shops?

Tesco has moved from groceries into clothes, electrical goods and financial services as it expands its range. But those moves were organic: it didn’t need takeovers. It has occasionally bought rival supermarket chains – but that was to gain sites, not brands. It already has bakers, coffee shops and snack bars: it is sad if Tesco no longer thinks it has the expertise to run these without buying minnows.

We’ve seen big brands buy upstarts before – Coca-Cola acquiring Innocent smoothies, Cadbury purchasing Green & Blacks chocolate or McDonalds investing in Prêt a Manger. But unless these are crude attempts to eliminate competition (not in Tesco’s case) or the acquisition of innovation (ditto) it looks like a management running out of ideas or running away from its image.

Giraffe, like Harris + Hoole and Euphorium, is too small to be well known to most of the supermarket’s customers. So using their brands does not, by itself, bring in significant business. The retailer is effectively hiding being their names to provide a customer service. It doesn’t matter what the brand is, it is simply “Not Tesco”.

Has management lost its ability to innovate? Or has the horsemeat scandal hit Tesco so hard that it is ashamed of its own name?

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