Tesco and Carrefour to Join Supply Networks
The two retailing giants, with combined sales of more than $160 billion, are set to create a strategic alliance with the aim of reducing supply side costs and increasing inventory.
The Alliance will cover the strategic relationship with global suppliers, the joint purchasing of own brand products and goods not for resale. Each company will continue to work with supplier partners at a local and national level under a three-year operational framework.
It is expected that the two groups will use their combined buying power to try to lower purchasing prices from suppliers but also to join up supply networks to cut costs. The move also makes strategic sense as the two groups largely do not compete geographically, despite the size of their sales, and will push combined market share above fierce competitors Aldi and Lidl.
The partnership fits into a wider trend of consolidation among major grocery retailers worldwide, including the recently announced match-up between Sainsburys and Asda, and between Auchan Retail, Casino, Metro and Schiever in France. This has been caused by fierce price competition among traditional players and also from these retailers keeping a close eye on encroaching digital giants.
It is anticipated that the Alliance will be formally agreed within the next two months. Following formal agreement, both parties will start to work towards realising the benefits outlined above.
Dave Lewis, Tesco Group Chief Executive, said: “I’m delighted to be entering into a strategic alliance with Carrefour. 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.”
Alexandre Bompard, Chairman and CEO of Carrefour Group, said: “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. This international alliance further strengthens Carrefour allowing it to reach a key milestone in the implementation of its strategy.”