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* New CEO Lewis, from Unilever, first external CEO in 95 yrs
* Unilever a big Tesco supplier, Lewis close to Tesco execs
* Predecessor Clarke dumped after second profit warning
* Lewis needs to rebuild management team after departuresunder Clarke
By James Davey and Kate Holton
LONDON, Aug 1 (Reuters) - When Tesco needed a newchief executive to rebuild the world's third-biggest retailer itturned to "Drastic Dave" Lewis, a turnaround specialist who isprobably as close to being an insider as an outsider can be.
The 49-year-old earned the nickname during his 27 years atUnilever, where he turned around a string of operationsincluding the consumer giant's British business, cutting costsand energising staff with innovative marketing campaigns.
In October, with no direct retail experience, he takes onthe job of running Britain's biggest private sector employer,which is battling its sharpest slowdown in four decades. He willbe the first external CEO the group has appointed in its 95-yearhistory.
Lewis was most recently global president of Unilever'spersonal care division, responsible for brands such as Lifebuoyand Dove soaps and TREsemme shampoo. That brand experience willbe tested by the task of putting the shine back on Tesco'simage.
He is also credited with having built a strong managementteam at that division, and he will certainly need to flex thesame muscles at Tesco.
The veterans who ran the company under long-time CEO TerryLeahy all left in the three-and-a-half-year reign of PhilClarke, who was unceremoniously pushed out on July 21 after asecond profit warning and with the stock at a decade low.
Four former senior Tesco executives told Reuters that Clarkeclashed with directors and was reluctant to take advice.
Three of the four said they knew Lewis and believed he hadthe right attributes to get the retailer back on track.
Most importantly, he has a contact book stuffed full ofcurrent and former directors and managers of Tesco, which is oneof Unilever's biggest clients.
"Unilever and Tesco have had a fabulous relationship," saidone former Tesco director of its British business, who asked notto be named. He said executives from both firms would oftengather for golf trips and other social events.
"There was a very tight-knit relationship; it went waybeyond simply being a supplier. Dave Lewis would be at the heartof that. He knows the business very well."
Analysts, drawing parallels with Tesco's current plight, saywhen Lewis returned to Unilever UK in 2005 it was suffering fromdeclining market share, had an uncompetitive cost base and aweak image with customers. Nine years on it looks verydifferent, having delivered its 27th consecutive quarter ofgrowth in July.
Interviews with several people who know Lewis describe himas "very bright", "tough as old boots" and "entrepreneurial",yet "unpretentious" and "self effacing". At dinners withanalysts, he seeks their views instead of doing all the talking.
"The fact that he's not a shopkeeper and he hasn't got ahistory of being in retail will partly be to his advantage andpartly will be his challenge. He will be a breath of fresh air,"said a second former director, who asked not to be named.
LOSING GROUND
Tesco, with a market valuation of 22 billion pounds ($37billion) and over 500,000 staff, had been the darling of thesector during two decades of uninterrupted earnings growth.
But it started losing ground in its key home market in thefinal months of Leahy's 14 years at the helm. In January 2012,10 months after Clarke took over, it issued a profit warning.
Like Britain's three other leading grocers - Wal-Mart's Asda, Sainsbury's and Morrisons - Tescois being squeezed between hard discounters Aldi andLidl and by Waitrose and Marks & Spencer at the premium end.
It was slow to react to the rapid change in the sector andhas also struggled with costly mistakes abroad.
"Not all of it was his fault, and he was inevitably dealtsome cards that were going to be awkward. But even if you've gotan awkward hand you can play it with care," said the secondformer Tesco director.
Clarke declined to comment, but defenders of his recordwould point to the tough economic conditions he had to deal within several markets and the substantial re-positioning of Tescohe oversaw in a grocery market changing faster than ever before.
Those changes were most pronounced in the UK, where thepopularity of discounters increased sharply and where consumersshopped more online and deserted big out-of-town stores infavour of local convenience shops.
A third former director said the most damaging aspect ofClarke's tenure was not the firm's decline in market share butits haemorrhage of management talent.
Comparing the country managers and members of Tesco'sexecutive committee now to those inherited by Clarke from Leahyhe said: "There's a shocking contrast in terms of ability,quality and experience. It's a profoundly weaker team."
Leahy had run Tesco with a leadership team of about 20,which included a cadre of five key executives - Clarke, TimMason, David Potts, Richard Brasher and Andy Higginson.
Under Leahy, senior executives would spend much of Thursday,Friday and Saturday in stores around the country, looking forchanges in the way Britons shopped. The senior team would thenmeet every Monday afternoon to discuss how to respond.
They would also spend at least two weeks a year in a depotor the back of a store to properly understand how the businessoperated and how it could improve.
While Clarke remained close to the shop floor, by December2012 the other four had left Tesco - they didn't get on withhim, according to all three former directors - taking a combined109 years of experience with them. Only a couple of Leahy's 20remain today.
CATCHING UP
Lewis could rip up the leadership structure only put inplace by Clarke in June, which introduced a chief customerofficer and a chief creative officer to Tesco's executivecommittee, and has been criticised for being unwieldy anddysfunctional.
Analysts anticipate reversion to a simpler organisationalstructure with shorter lines of communication and cleareraccountability.
The British executive also wondered whether Mason, whoselast Tesco job was running the ill-starred Fresh & Easy businessin the United States, and former UK and Asia chief Potts couldbe lured back.
As well as strengthening management, Lewis also has torestore Tesco's winning culture and the motivation of its vastUK workforce of more than 310,000 people, which the formerdirectors said was undermined by micro-managing and endlessinitiatives to improve the business under Clarke.
Lewis has big decisions to make on whether to go head tohead with the discounters in a full-blown price war, on what todo with Tesco's huge underperforming out-of-town stores and onfurther retrenchment from its 11 international markets.
"He knows the culture, he's been around the business a longtime," the former British executive said of Lewis. "Thesupertanker is two degrees off course. Supertankers do take timeto get back on course again because they're such big monsters,but big businesses have lots of tools in the tool kit."
Tesco and Lewis declined to comment for this story. ($1 = 0.5943 British Pounds) (Additional reporting by Martinne Geller; Editing by WillWaterman)
