Tesco allowed the trust of its millions of customers to be "eroded", Sir Terry Leahy has said in his first detailed comments on the crisis at the retailer.
The former chief executive said it had lost its reputation for low prices.
Sir Terry told BBC Panorama there was a "failure" of leadership under his successor, Philip Clarke.
The programme also found that cosmetics giant L'Oreal threatened legal action over a disputed payment of about £1m demanded by Tesco.
Sir Terry was the man widely credited with building Tesco into one of the world's largest and most successful retailers, presiding over 14 years of growth in profits and sales.
'Shopped around'
He said losing the reputation for low prices was very damaging for Tesco - Asda is now 6% cheaper.
"Tesco is the biggest, people expect it to have the best prices and know they can trust Tesco to deliver that and not have to shop around and check that they're getting the best deal.
"I think that some of that trust has been eroded, which has meant that people have shopped around."
On the failure of Tesco and the departure of Mr Clarke, Sir Terry said: "People tried very hard to do the right thing, it clearly has not worked.
"In the end that's a failure of leadership, not a failure of the business, not a failure of the people who work hard every day in the business.
"When you're the CEO, if it goes well, you get credit, if it doesn't go well, you must take responsibility and Phil Clarke has taken that responsibility and paid the price with his job."
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