The decision deals a massive blow to Lowe London, Sir Frank's former agency, which has held the account for 20 years.
On Monday night the supermarket confirmed it will move the account in March 2006 to the agency headed by Sir Frank and Paul Weinberger, who has quit as chairman of Lowe to join the start-up.
Frank Lowe retired from Lowe two years ago after being forced out by its parent, Interpublic Group.
Insiders claim Tesco marketing director Tim Mason has been considering the move for some time because of concerns about the way IPG has conducted itself. The network recently announced that it was handing back £3m, attributable to volume discounts Lowe had received from its suppliers, but had not passed on to Tesco.
The move leaves Lowe London in a perilous position. The agency, headed by chief executive Garry Lace, has been trying to recover after a series of big account losses over the past two years. The agency has halted its anticipated takeover of DFGW.
During Lowe's tenure, Tesco has become the UK's biggest supermarket. It is the agency's biggest piece of business, accounting for about £5m in revenue.
The creative team responsible for the hugely successful "Every little helps" campaign are to follow Weinberger.
There are unconfirmed reports that Frank Lowe is preparing to raid two other London ad agencies for his management team.
DDB London chief executive Paul Hammersley and chief strategic officer David Hackworthy are tipped to be going, as is JWT managing director Mark Cadman. Both Hammersley and Cadman worked at Lowe in the past.
All three were unavailable for comment.
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