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Tesco chief admits DNA testing for horse meat will hit margins

TESCO chief executive Philip Clarke has admitted costs due to increased testing of its products for horse meat and other contaminants will hit margins this year.

The biggest UK grocer will absorb the cost of testing products for horse meat and pledged to sell more British meat.

"The total cost of the testing will be borne by Tesco," Mr Clarke said. "The total cost isn't that great, but in the scheme of things, our margin will come down a touch."

Tesco was one of the first supermarkets hit in mid-January when one of its value burgers was found to contain horse meat.

The scandal has since spread across Europe, forcing supermarkets to remove frozen burgers, lasagnes and other beef products from their shelves.

Tesco has dropped some of its suppliers and said it will carry out DNA tests on all its meat.

The company's technical director Tim Smith told a UK parliamentary committee on January 30 that the testing could cost the supplier as much as £2m (€2.3m) a year.

Mr Clarke also said he cannot guarantee that sourcing more meat in the UK will not push up prices.

"We are going to have to make sure with the farmers that everyone can make a living out of it," he said.

That may curb some of Tesco's revival in the UK market, according to Clive Black, an analyst at Shore Capital.

"With its current underperformance, Tesco needs both a more loyal supply and customer base," he said. "So, in the big scheme of things we do not anticipate a lurch down in UK margins, but equally recent events may cap their ongoing expansion to some degree."

Tesco's market share in the UK grocery market slipped to 29.7pc in the 12-weeks to February 17 from 30.1pc a year earlier, data from Kantar Worldpanel showed on Tuesday. (Bloomberg)

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