The UK’s biggest retailer has joined forces with France’s biggest retailer in announcing an intention to enter into a long-term, strategic alliance. The alliance between retail giants Tesco and Carrefour, set out in a statement circulated this morning, aims to increase their leverage with suppliers and deliver a competition boost with the ability to cut prices even further. The alliance would cover strategic relationships with global suppliers as well as the joint purchasing of own brand products and goods not for resale. It will be governed by a three-year operational framework and it is anticipated that the alliance will be formally agreed within the next two months.
Sainsbury’s and Asda
The announcement comes less than three months after Sainsbury’s and Asda announced plans for a £12 billion mega merger that could topple Tesco from its long-term position as the UK’s biggest grocer in terms of market share. In addition, earlier this year Tesco completed its £3.7 billion acquisition of wholesaler and convenience store operator Booker.
Tesco and Carrefour together to improve quality and choice of products
In its statement, Tesco and Carrefour said their alliance would enable both retailers to improve the quality and choice of products available to their customers, and cut prices even further. The alliance also aims to strengthen the retail giants’ relationships with their suppliers, as well as continue to work with supplier partners at a local and national level. By working together, we will be able to serve our customers even better, further improving choice, quality and value, Tesco chief executive Dave Lewis said. Carrefour chairman and chief executive Alexandre Bompard added: This strategic alliance between Carrefour and Tesco is a major agreement as it combines the purchasing expertise of two world leaders, complementary in their geographies, with common strategies. This agreement is a great opportunity to develop our two brands at the service of our customers.
The analysts’ opinion
Euromonitor International’s consultant Philip Benton sees the new partnership as a sort of insurance for Tesco against the risk of sudden price increases caused by Brexit. The experts at Jefferies, on the other hand, estimate that the two big retailers will save a total of more than 450 million euros, compared to a joint purchasing power of almost 90 billion euros per year.