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11 October 1999

How to boost supermarket profits

Big companies boast of their generosity in providing computers for schools. But what's in it for the

By Francis Beckett

I took my daughter to Tesco the other week. Not to shop, but to pick up the computer that her primary school had earned by chivvying all the parents to shop in Tesco until they had enough vouchers. Naomi and two friends had spent much of their break time last term counting the vouchers, so when the store asked for children to collect it, they were chosen.

We were dumped in a dingy staff canteen with pupils from half a dozen other primary schools. The children got a plastic cup of Ribena. Biscuits were promised, but didn’t arrive. The canteen manager said these would have to await the arrival of another functionary, from whose budget biscuits apparently come.

Eventually we were all shepherded to a small, windowless room where we found our local Labour MP, Rudi Vis. A store functionary read a boring speech about what a generous company Tesco was. Vis, bless him, pointed out gently that this generosity increased the company’s sales.

Then each school’s package of children was strategically placed in turn underneath the Tesco logo, between Vis and the store manager, while a certificate was presented and a picture taken. The manager casually held the certificate where it would hide Naomi’s face. We were then dismissed, without the computers. Much to the children’s disappointment, they were still at the depot.

The days are long gone when the public purse provides sufficient computers, books and other necessary aids to teaching. If you don’t dance to the Tesco tune, you can try Sainsbury’s. That, I think, is what is meant by parental choice these days.

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The companies naturally like to pretend that these schemes are something to do with corporate generosity. Ring Tesco’s PR consultants and they will send you a feelgood factsheet – how many computers they have “given away”, the value of this largesse, how many balloons were released to launch the scheme, how many MPs (135) have been dragged in to present certificates, that sort of thing.

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Here’s what it doesn’t tell you. Tesco will “give” your local school an Apple iMac in return for 9,250 vouchers. Each voucher represents £10 that the parents have to spend in Tesco. So the iMac represents parental expenditure of £92,500. Tesco does not reveal its profit margin, but it cannot be far from the average food retailers’ margin of 5.9 per cent. On that basis, each iMac brings in a profit to Tesco of £5,457.

At PC World, you can buy the iMac 333 – newer and better than the one Tesco offers – for just £915, including VAT. Tesco is unlikely to be paying the full retail price. But assume that it is: then Tesco is making nearly six times the value of the computer in profit. And the scheme enables the company to use children as stage props in shabby local PR exercises and to talk sanctimonious rubbish about “putting something back into the community”. No wonder companies are queueing up to “give” things to schools.

Tesco’s great rival, Sainsbury’s, asks its customers to register the name of their children’s schools. A point is awarded to the school for every £10 the parents spend, and the school can purchase necessary items, such as a Canon colour printer for 2,200 points. So parents have to spend £22,000, and the profit, calculated on the same basis as for Tesco, is £1,298. That’s not bad for a £99 printer. But Sainsbury’s is marginally better value than Tesco, where the same printer costs 2,500 vouchers.

Tesco argues that these figures are unfair, because the profits would have been made anyway. It isn’t true. My local Tesco is packed with anxious parents adding up their weekly shopping and then putting something else into their trolley to bring it up to £60, or £70, or whatever the next multiple of ten is. Sainsbury’s is more honest. “Customers do increase their basket spend during the promotional period,” says a spokeswoman.

But you don’t have to shop at Tesco or Sainsbury’s in order to have your children properly educated. You can stuff yourself with Walkers crisps instead. There’s a token on each 27p packet, and 100 tokens buys your school a book up to the value of £4.99; so the £4.99 book costs the parents £27. Food producers’ average profit margin is 7.3 per cent, so there’s only £1.97 of pure profit in it for the crisp company. It’s a better deal than the supermarkets offer.

Or you can shop at WH Smith, read the Times and the Sunday Times and buy your own computer equipment from Time Computers. The three have banded together, according to their press release, to “give away more than £35 million-worth of educational software to cash-strapped primary and secondary schools”. The scheme is structured in a complex way, with variations in the value of tokens according to what you buy, where you buy it, when you register your school and whether you buy on-line. So it’s hard to work out how much parents need to spend for what and how much profit the three partners are making.

The profit is likely to be considerable. Nonetheless, the Education Secretary, David Blunkett, has given the scheme the sort of blessing that only the private sector seems able to wring from him: “an excellent example of a private-sector initiative”.

It would be more straightforward for Blunkett to say that, since he cannot provide schools with the necessary equipment, he has asked parents to pay for it. Parents are not paying directly, through fees, which would be comparatively straightforward and economical. Instead, they are being asked to pay by way of contributions to the profits of some of the biggest companies in Britain; and these contributions are often several times the retail value of the equipment purchased.

It is considerably worse than the scheme for which the London Oratory head, John McIntosh, was roasted last month. He asked parents to pay £30 a month for the first child and £15 for the second. To judge from the coverage, you would think the London Oratory – whose parents include Tony and Cherie Blair – was the first state school ever to ask parents to pay money for essentials. It’s commonplace these days.

The growth of parental contributions creates another disadvantage for schools in poorer areas. So does the growth of voucher schemes for essential equipment. Affluent parents are likely to spend more on their weekly shopping – and have fewer worries about buying things they don’t really need – thus allowing their local school to get its much-needed computer more quickly.

But I think I could put up with everything except being forced to listen to Tesco telling me how generous it is.