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carrefour-tesco-enter-alliance-to-boost-leverage-cut-costs

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Sheetal Sukhija - Tuesday 7th August, 2018

PARIS, France - With the supermarket sector in the region facing fierce competition, two of Europe’s largest retailers - French supermarket retailer Carrefour and Britain’s biggest supermarket, Tesco have now finalized a purchasing alliance.

In a joint statement, the French and British supermarket giants said that the alliance is aimed at increasing leverage with suppliers and will become operational in October.

The deal has emerged as the latest partnership within the European retail industry and comes at a time when retailers are scrambling to reduce supply costs.

Europe’s biggest retailer, Carrefour makes the bulk of its 88 billion euros ($102.5 billion) worth of sales in Europe.

However, in January this year, the company announced plans to cut costs and jobs. 

Yet, it is larger than Tesco and boasts of 12,300 stores in 30 countries as far and wide as Argentina and China.

Meanwhile, with sales of 51 billion pounds ($67.2 billion), Britain’s biggest supermarket, Tesco has been rebuilt by Chief Executive Dave Lewis after a 2014 accounting scandal compounded a sharp downturn in trading.

The group, which has operations in eastern Europe and Malaysia and Thailand, has made recovery efforts, by improving ties with suppliers, while pressurizing domestic rivals with price cuts.

While Tesco remains profitable and has seen rising sales, Carrefour posted a loss of 861 million euros ($995 million) in the first half of the year.

In June, when the plan was first announced, Dave Lewis, Tesco Chief Executive said, “By working together and making the most of our collective product expertise and sourcing capability, we will be able to serve our customers even better, further improving choice, quality and value."

According to experts, Carrefour’s purchasing tie-up with Tesco should help the retailer in its bid to raise the percentage of own-brand goods on its shelves from around a quarter currently to one-third. 

The retailers have stated that their three-year purchasing alliance does not include fresh goods.

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