Tesco loses the plot in its battle with Aldi and Lidl

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Kantar data showed food inflation hit a record 16.7% in January, adding an extra £788 to annual shopping bills.

Aldi was the fastest growing grocer for the fourth straight month with sales up nearly 27% from a year earlier, compared to the industry average of 5.7%. Lidl was hot on the heels of his arch-rival with a 24-block jump.

Sales at both are rising at their fastest pace in years, and the pair now own 16.3% of the market, compared to Sainsbury’s, which saw its share drop to 15.4%, and Asda, which also lost ground and now has 14.2%.

Tesco controls 27.5 percent, up from 27.9 percent a year ago. Not surprisingly, this comes as stressed families buy an increasing number of their own branded goods and put fewer items in their baskets in an effort to cope with the rising cost of food.

Maybe a coincidence. But it is understood that as news of the Paperchase acquisition spread, Tesco was unveiling plans for a major shake-up of its stores.

The remaining butchers, fishmongers and hot food counters will be excluded; cut back the number of store managers; a handful of pharmacies closed; And some post office and department store hours are reduced — an overhaul that leaves more than 2,000 jobs hanging in the balance.

The swoop on Paperchase might be hailed in some quarters as a potential masterstroke. Murphy will no doubt argue that there is a slight downside. Tesco picked them for a song and the assets would require little integration other than freeing up some shelf space for a few hundred greeting cards.

Maybe, but it’s also very unlikely to move the disc. It’s a deal that smells of desperation. Overpaid management consultants are fond of saying “there are no bad ideas” but it’s a move that suggests Tesco and the rest of the sector – Sainsbury’s, Asda, Morrisons, Waitrose and Ocado – lack ideas when it comes to stopping customers fleeing to Aldi and Lidl.

The same can be said for the decision to send hundreds of fresh food counters into the history books. Cutting costs is rarely a sign of a company in poor health.

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