Tesco's sales are racing ahead

UK sales rose 7.8% on a like-for-like basis during the three months to 22 May, a figure which Tesco said was "significantly ahead of the industry".

But the firm's annual general meeting on Friday attracted protests from farmers and environmental groups.

The protesters accused Tesco of putting farmers out of business by paying them low prices, a claim Tesco denied.

Competition

"I am particularly pleased that our core UK food business has continued to grow market share and to perform very strongly in the first quarter," said the group's chief executive, Terry Leahy.

Non-food sales had gone from "strength to strength", the firm added, helped by a recent sale in clothing.

Tesco has held onto the top spot in the UK in the face of strong competition from Wal-Mart-owned Asda, Sainsbury's and Morrisons - which recently bought out rival Safeway.

With all this power that you have, should you not be treating farmers more fairly? Farmer at Tesco's AGM

The company has introduced price cuts totalling more than �100m to see off rivals such as Asda who have unveiled a string of special offers on goods this year.

Sales at Tesco's international operations increased 24% - or 18% when the effect of currency movements were stripped out - with all countries seeing a rise in business.

The company has growing overseas operations in south-east Asia and eastern Europe and has recently been investigating purchases in China.

Angry farmers

But the company's success has drawn criticism that it is abusing its position.

Farmers used Tesco's annual meeting to criticise the firm for paying what they see as unfairly low prices for products such as milk.

They argued this was contributing to about 4,500 farmers going out of business each year.

Friends of the Earth calls Tesco the "incredible untamed beast"

"With all this power that you have," one farmer told the PA news agency, "should you not be treating farmers more fairly?"

Environmental campaigners Friends of the Earth (FoE) were also protesting at the meeting.

FoE has accused Tesco of abusing its powerful position in the grocery market, damaging smaller retailers and local communities.

Tesco denies the FoE's claims, saying that it is "a responsible company" and proud of its record of serving communities.

At the AGM, Mr Leahy also denied claims that Tesco is harming the UK's farming community, noting that it needed farmers to be successful to ensure a steady supply of goods.

The supermarket group tried to use local suppliers wherever it could, he said.

Pay row

Environmental concerns were not the only protests being voiced at the AGM.

Investor group Pensions Investment Research Consultants (Pirc) was critical of a new incentive scheme being put forward.

Pirc vowed to oppose rules which allow departing directors to claim average bonuses earned in the previous two years, which can add up to the equivalent of a year's salary.

Shareholders were also expected to attack executives' pay and bonus deals for 2003.