Tesco To Refrain From Providing Plastic Packaging For Multipacks

The United Kingdom based Supermarket chain, Tesco PLC will remove plastic packaged items and prohibit the sale of shrink-wrapped multipacks of beans, soup and tuna. These items would be removed from the aisles of the supermarket chain as part of a drive to limit their use of plastic in packaging.

These staples are the most popular selling items in the supermarkets of the United Kingdom. Shoppers have been spared of any rise in price and won’t have to pay extra, as the packs would be replaced with permanent multi-buy deals on individual tins. Major brands such as Heinz, Green Giant, John West along with Tesco owned products which come in similar packaging will be replaced.

From March onwards, these changes made by the company will be quite evident as Tesco will not keep plastic-wrapped multipacks in its stores. However, US Food giant, Heinz shall continue to provide plastic-wrapped multipacks to other supermarket chains. The US Food giant might need to give the packaging a thought if this initiative is welcomed and scaled across the industry.

The Supermarket chain has initiated the removal of excess non-recyclable packaging from its business, however; in some cases where the use of plastic cannot be avoided, the use would be minimal. Earlier, the company had said that it would not partner with the brands that use this kind of packaging in a move to reduce plastic usage of over 300 tonnes per year. The main objective behind this idea of the group is to get rid of superfluous and non-recyclable plastic and to remove 1 billion pieces of plastic in 2020.

As of now, the company is only targeting tinned products, and later this policy shall be extended to other products like vegetables, chocolate bars, drinks and other items which are still sold in wrapped multipacks. According to media sources, the company is planning to get rid of 67 million of plastic waste from its stores from March onwards. This move was planned long back and could have been exercised earlier by the marketeers and retailers, but they were not sure of consumer response which was found positive later.

The packaging alternatives might not necessarily include packaging substitutes or cardboards. But, finding simple packaging alternatives might not help the cause, as common substitution can do further damage to the environment like increasing carbon impacts or remaining non-recyclable in nature. The UK’s recycling infrastructure needs a boost to promote recyclable products use in the entire FMCG segment. Meanwhile, the other companies operating in this sector are planning to switch to new alternatives in the longer term and limiting the use of plastic in their supply and distribution.

Resources and packaging items such as paper or cardboard cannot always be biodegradable and reusable; hence other solutions need to be devised in the longer term. This might also need intervention from the government as only companies might not be able to produce this transition quickly.

According to some media reports, many companies have come together and have made a significant investment in the packaging front to reduce the use of plastic packaging. The retailers are encouraged to avoid the use of plastic in packaging on their products and make a shift to packaging that is recyclable in nature.

In an effort to cut back and reduce the massive carbon footprints of the plastic, big companies across the globe have already started doing away with single-use items, enacting sustainability initiatives and getting rid of plastic packaging is going to be the next big step in that direction.

Business overview: Tesco PLC

Britain-based retail group and one of the world’s largest retailers of consumer goods, Tesco PLC (LON:TSCO) has operations primarily segregated in two operating segments. The group mainly operates as a grocery retailer but also provides insurance and retail banking services. The Retail segment of the company includes retailing and associated activities. Other line of business is Tesco Bank, which comprises of banking and insurance services.

TSCO Recent business performance for Q3/ Christmas trading

Tesco announced its trading and Christmas Update for the third quarter on 9th January 2020. The group during the Christmas period performed well in terms of value and volume and delivered a strong performance in the fresh food segment. The group’s 'Festive 5' vegetable offer and plant-based foods were complemented well by improvement in quality and price. The customers were benefited from low prices.

The group witnessed improvement in customer satisfaction with its shopping trip. The online grocery business across the 19 weeks delivered more than 14 million orders. The group launched Clubcard Plus in November and saw a positive response from its customers.

The group reviewed its Malaysia and Thailand businesses, which include evaluation for sale of businesses as well. The Tesco bank sales went up by 0.1 per cent in the third quarter, 1.6 per cent during the Christmas period and 0.5 per cent for the 19-week period. Though the UK environment remained full of challenges, the group had been able to outperform the market due to its strong operational delivery and attractive customer offer.

Tesco PLC Stock price performance

Daily Chart as on 24th-January-20, before the market closed (Source: Thomson Reuters)

On 24th January 2020, TSCO shares were clocking a current market price of GBX 247.70 per share, while writing at 09:35 AM Greenwich Mean Time. At the time of writing, the company’s market capitalisation was hovering around at £23.83 billion.

The company’s shares were trading at 4.88 per cent lower from the 52-week high price mark and 17.56 per cent higher than the 52-week low price mark at the current trading level, as can be seen in the price chart. On 16th December 2019, the shares of TSCO have touched a new peak of GBX 260.40 and reached the lowest price level of GBX 210.70 on 27th August 2019 in the last 52 weeks.

The stock’s traded volume was hovering around 1,606,484 at the time of writing before the market close. The company’s 5-day stock's daily average traded volume was 12,019,381.20; 30 days daily average traded volume- 16,030,631.03 - and 90-days daily average traded volume – 19,047,678.29. The volatility of the company’s stock was slightly higher as compared with the index taken as the benchmark, as the beta of the company’s stock was recorded at 1.02 with a dividend yield of 2.78 per cent.

The shares of the company have delivered a positive return of 0.37 per cent in the last quarter. The company’s stock plunged by 4.78 per cent from the start of the year to till date. The company’s stock has given investors 8.68 per cent of a positive return in the last one year.Â