Tesco (LON:TSCO) has agreed a long-term partnership with France’s Carrefour, the London-listed grocer has said. The move comes with Britain’s biggest supermarket facing severe competition at home with German discounters and US e-commerce giant Amazing pressuring profits at the UK’s ‘Big Four’ grocers.
Tesco’s share price has slipped marginally into the red this morning, having given up 0.08 percent to 256.50p as of 08:52 BST. The stock, however, is outperforming the broader UK market, with the benchmark FTSE 100 index having started July deep in the red, trading 1.01 percent lower at 7,560.04 points.
Tesco and Carrefour plan alliance
Tesco and Carrefour announced this morning that they were planning to enter into a long-term, strategic alliance. The partnership, which will cover the relationship with global suppliers, the joint purchasing of own brand products and goods not for resale, will be governed by a three-year operational framework. The companies expect to formally agree the alliance within the next two months.
“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,” Tesco’s chief executive Dave Lewis commented in the statement.
Analysts weigh in on partnership
“It’s a defensive move,” Bloomberg Intelligence analyst Charles Allen told Bloomberg News, adding that with little growth in the UK or France, the companies were “trying to eke out every bit of saving they can”. The newswire further quoted Berenberg analyst Dusan Milosavljevic as commenting that purchase alliance were “becoming theme du jour in food retail”.
“However, the buying synergies for cross-national deals in food retail have been very difficult to realise historically,” he added, citing the French partnerships between Auchan and cooperative Systeme U, Carrefour and retailer Cora, and Casino and the Intermarche chain.