Sir Terry Leahy: The 'Robert Mugabe of retail' bites back

It's not exactly how you would expect to find the boss of the world's third biggest retailer. After 20 minutes' train journey into the indeterminate hinterland just outside London you walk a few hundred yards to a rather seedy industrial estate. It announces itself with a garage offering MOT testing and repairs. Barely a hundred yards beyond the car bashers looms a low-slung concrete block. This is the global headquarters of Tesco: annual sales £51.8bn, yes, billion.

The single receptionist sits beneath a sign reading: "Every Little Helps". Two minutes later Sir Terry Leahy is in the reception to take me upstairs to a fittingly unpretentious office. Leahy has been chief executive of Tesco for 11 years of uninterrupted success, but has given only a handful of interviews. In a retail sector not short of big egos, Leahy delights in personal obscurity. His chief passion – outside Tesco – is Everton football club, to which he is an adviser, but according to its chairman, Bill Kenwright: "Terry almost never sits in the directors' box. He prefers to be with all the other fans."

Terry Leahy, born in 1956, was brought up in a prefabricated maisonette on a Liverpool council estate, and was the only one of four sons of Irish Catholic immigrants not to leave school at 16. As all his friends testify, he has not forgotten his roots – not for a second. I ask him whether this, in part, explains the surroundings in which he chooses to work.

"It certainly helps a lot in staying in touch with our customers. It's hard to stay in touch from Berkeley Square. The thing about ordinary Britain – or ordinary anywhere – is that the lives of 60 million people are quite different from the lives that people lead in the centre of the capital."

The national newspapers are all ensconced in the centre of that capital, and Leahy believes this is in part why some – out of touch with "ordinary Britain" – take a delight in attacking Tesco. Currently he is engaged in a ferocious battle with The Guardian, which accused Tesco – wrongly, as it has now admitted –of avoiding £1bn in corporation tax. It's not just in its home base that Tesco is in a pitched battle with the media, however. It is also suing two critics in Thailand, with a criminal libel suit that could see journalists jailed and facing fines running into many millions of pounds. Isn't this an example of the ruthlessness of which Tesco is often accused?

"Tesco is not ruthless. We have faced, in the UK, pretty full-on criticism for three or four years. We've only ever sued people twice. Once in Thailand; once in The Guardian. The reason was similar: the egregiousness of the lie was such that it couldn't be left alone. For The Guardian to say that Tesco avoids a billion pounds of corporation tax cannot be left. We worked very hard with The Guardian over a period of months in advance of the article explaining that they had got hold of the wrong end of the stick, we had senior partners in tax firms write to them to say that. We gave them every opportunity. They still printed not just an article but half the newspaper on the thing. All we want from The Guardian is a full and unconditional apology."

"On the front page?"

"Absolutely the front page. Now, on the matter of Thailand, there has been a campaign against foreign firms including Tesco, and the individuals in question persistently and publicly alleged that we evaded taxes, and were damaging the country, which in Thailand means a great deal. In Thai law, libel cases are presented in an aggressive way. But all we want is an apology. An apology costs nothing."

Yet the criticism of Tesco and Leahy's approach to business remains constant – he has even been described as the "Robert Mugabe of retail". Does he take it personally?

"I'm not interested personally in general approval. But it troubles me for the people working in Tesco, because if you're working hard on the checkout or stacking shelves why do you want to pick up the newspapers to see someone is saying you're part of a monster? And I do worry a little bit for British society because when you boil it down, every single criticism of Tesco which has been exhaustively looked into [by the regulatory authorities] has been found to be without foundation. Every single thing. So what are you left with? You're left with the fact that we are successful because we give ordinary people power. We serve them. And they choose. Some people in society don't like that. They like to be the people who decide what's good for the masses."

These people seem to include Gordon Brown, who last week launched a Cabinet Office paper which criticised the supermarkets for their three-for-two offers and other discount bulk buys. Brown seemed to think this was linked to "food waste". Leahy is unimpressed, describing this initiative to me as "well-meaning but wrong-headed".

"We waste hardly anything. Our waste is just 1 per cent. That's not thrown away, it's just sold at a reduced price. Do people then waste the food they buy? I don't think they do because why are they so careful about prices, to then just throw it away? They certainly don't waste the kinds of figures that are being bandied about. Are we encouraging over-consumption? In the end people have got to be able to lead the lives they want to lead. Our job is to offer them information, choice, make it affordable – and then they have to decide. If the overall effect of that is damaging society in some ways, which in terms of climate change it is, I think we are part of that modern mass consumption and we would need to play our part, which we are in terms of changing how people consume so it's done in a lower-carbon way. So I do believe in changing consumption; but I can't see how we can dictate to people to consume less."

By the end of last week Hazel Blears, the Secretary of State for Communities, had launched her own initiative – designed to "give small shops protection against competition from out-of-town supermarkets". This was announced after our interview, but I had already asked Leahy about the widespread view that the likes of Tesco had wrecked British village life and created "clone towns". His impatience with this thesis was palpable.

"It's a completely bogus analysis. The world that they imagine existed before, never existed. It might have existed in a handful of villages in certain parts of the UK, but for the great majority of British people it never existed. For them, food was expensive to the point of being unaffordable, monotonous and not always safe. Being generous to this argument, this concern comes from a sense of the effects on a local place from globalisation. Tesco sometimes gets caught up in that, as other successful companies do. But you can't get your iPod made in the local village; Toyota don't manufacture their Hybrid just down the street. And I'm afraid the IT system wasn't bashed up in the local car mechanic's yard ... You can't have it both ways. You can't have safe little village England where nothing has changed for 50 years, but also expect to be a society that leads the world in science and medicine and everything else."

The British Government has also made rumbling noises about firms with links in Zimbabwe, where Tesco has a £1m contract – tiny in its terms – with a local farmer. Having forcefully declared that it would continue buying from Zimbabwe, Tesco suddenly and most uncharacteristically backed down. Why?

"We hoped that there would be an election [in Zimbabwe] and also for the British Government to say clearly what it expected firms should do. And the Government didn't do that. It gave – very disappointingly – very mixed messages about what was the right thing to do."

It is not just in its home market that Tesco is drawing fire from politicians at the highest level. A fortnight ago Barack Obama's office released a letter which the Democrat presidential candidate had sent to Terry Leahy complaining about the way Tesco's new US chain, Fresh & Easy, had dealt with the United Food and Commercial Workers Union (UFCW).

Leahy deadpans in his soft Liverpool accent: "The letter [I got] from Barack Obama was perfectly polite. As was the one from Hillary Clinton. How these letters get written is as much about American politics as anything else."

At a somewhat lower political altitude, Tesco has recently been savaged by the chairman of the House of Commons Parliamentary Beer Group – there is such a thing – because of its alleged role in encouraging teenage drinking through the rock-bottom pricing of booze. John Grogan MP declared: "I charge Terry Leahy as being the Godfather of British binge drinking." Guilty as charged?

"It's impossible for us to manipulate our prices because in this market if you price up unilaterally, it's commercial suicide. Therefore the industry would have to do it collectively, but it can't because that would be collusive behaviour. So I spoke to the Prime Minister and said we would be happy to participate in discussions including the issue of the price at which alcohol is sold.

"But when people use language like this, attacking modern supermarkets, whether it's about waste, or food sourcing, or the high street, or drink, what they are actually attacking is the people using supermarkets. The danger is that you end up saying that they're idiots in how they live their lives. And in all my experience, they are not idiots ... and if you go too far on this tack, well, I'm not a politician, but politically it doesn't get you anywhere." Which Gordon Brown has just discovered – as Terry Leahy did not need to add.

One of the most high-profile critics of the supermarket industry – speaking for allegedly squeezed farmers – has been the Prince of Wales. Leahy gave a broad grin when I mentioned this.

"He's a supplier of Tesco. I think we're good payers [for his products]."

But isn't it true that Tesco squeezes its suppliers' margins eye-wateringly tight?

"The next time you hear a supplier complain about us, just ask them: do you supply Tesco yourself? I guarantee you will not hear a supplier of Tesco peddling those stories."

"Because they are too frightened?"

"Not because they are too frightened. But because they do too well out of it."

When was the last time that Terry Leahy put his wellingtons on and went down to a farm?

"I do know the farms. It happens that my mother was from farming stock in Northern Ireland. I lived on a farm for a number of years. I perhaps know more about farming than some people imagine."

In fact, one could imagine Leahy down on the farm, doing the heavy stuff. He has a powerful physique and big hands. They probably served him well in his first job at Tesco, as a shelf-stacker.

"Yes, it was a holiday job. I was 17. You couldn't even get casual work in Liverpool in the 1970s so I came down to London and worked in Tesco in Wandsworth – which was a lot less smart than it is now."

He then went to university – reading management sciences – but immediately afterwards returned to work full-time for Tesco. It has made him a millionaire many times over, but, as the cliché goes, it has not changed his way of life – or that of his wife, who works full-time as a doctor in the NHS.

One of Leahy's friends has described him as "a Scouse lad who has done exceptionally well and never forgotten it". Is that a fair summary?

"Yes, it is. My roots matter a lot. I'm an immigrant in a way. My parents are Irish Catholic, but I grew up in Liverpool; there I benefited from a free education, an outstanding Catholic education. Some people leave a place like Liverpool and never want to go back. I'm not like that. I'm quite loyal. One religion, one football team, one wife, one firm."

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