06/07/2018 – News / Retail / Supermarket / FMCG / Tesco / Carrefour / UK

Tesco and Carrefour to enter into strategic alliance

The UK’s leading supermarket and one of the world’s largest hypermarket chains have announced their intention to enter into a long-term, strategic alliance.

 

The tie-up between Tesco and Carrefour will cover the strategic relationship with global suppliers, the joint purchasing of own brand products and goods not for resale. It will be governed by a three-year operational framework.

 

In a joint statement, the two firms said the new collaboration “would enable both companies to improve the quality and choice of products available to their customers, at even lower prices – thereby enhancing their competitiveness”. This agreement would also “allow both companies to strengthen their relationships with their suppliers and create significant opportunities for those suppliers. Each company will continue to work with supplier partners at a local and national level”, the statement read.

 

 “I’m delighted to be entering into a strategic alliance with Carrefour,” said Dave Lewis, Tesco’s Group CEO. “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.”

 

The strategic alliance “combines the purchasing expertise of two world leaders, complementary in their geographies, with common strategies”, according to Alexandre Bompard, Chairman and CEO of Carrefour Group. “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.”

 

Extra pressure on major suppliers

 

However, some experts in the food and beverage industry have cautioned that the new deal is likely to place extra pressure on the world’s major suppliers – the likes of Unilever, P&G and Nestle – at a time when those FMCG giants are already being impacted by slowing demand and the rise of start-up rivals.

 

The Tesco-Carrefour alliance will also jointly source own-brand products – sales of which are swiftly expanding across Europe due to the store roll-outs of discount retailers like Aldi and Lidl – offering a further blow to the world’s leading consumer goods firms.

 

However, while undoubtedly putting pressure on prices, the alliance could also offer a foot in the door for smaller suppliers, while allowing those that currently supply to just one of the retail giants to effectively double their business.

 

Tesco and Carrefour have said the alliance will be formally agreed within the next two months.

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