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Tesco and Carrefour partnership adds fuel to price war fire

It comes amid a wave of consolidation in the sector and concerns over the impact on suppliers

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Tesco and Carrefour partnership adds fuel to price war fire

Supermarket giants seemed to be gearing up for battle as Tesco announced a ‘strategic alliance’ with French retailer Carrefour.

 

It comes amid a changing retail landscape and further consolidation in the sector.

 

Consolidation

 

Tesco purchased wholesaler Booker last year and more recently, Asda and Sainsbury’s signalled a merger in which the retailers promised to make 10 per cent cuts to the prices of ‘everyday items’.


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Online retailers were bolstering their offering, with Amazon building on its move into fresh food delivery in 2016.

 

Tesco chief executive Dave Lewis said the Carrefour partnership would allow them to serve their customers ’even better, further improving choice, quality and value’.

 

But, with the key focus of the tie-up to reduce prices on own-brand products, GlobalData UK retail research director Patrick O’Brien said the deal was more of a direct response to Aldi and Lidl, who were increasing market share across Europe.

 

“Tesco and Carrefour have both struggled to match the discounters on quality and price, and the alliance should help it compete,” he said.

 

He added for suppliers it was a signal of battles ahead.

 

Buying power

 

“Sainsbury’s and Asda have made it clear that it will target its largest suppliers for cost reductions by flexing their increased scale, and Tesco and Carrefour will look to do the same while reducing the number of branded products they sell as they increase their own-brand ranges.”

 

According to Kantar WorldPanel data, Carrefour currently has 20.1 per cent of the French market share with Tesco on 27.7 per cent of the UK grocery market.

 

A formal agreement could be reached within two months but both have claimed they will continue to work with supplier partners at local and national levels.

 

The NFU reacted with caution and said it would be examining the details closely.

 

Minette Batters, NFU president, said: “As this would be the first cross-border purchasing partnership involving a major UK retailer, we need to be clear what the impact of this relationship will be to fresh food.”

Dave Lewis, Tesco Group chief executive, said: “I am 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.”

 

A formal agreement could be reached within two months but both have claimed they will continue to work with supplier partners at local and national levels.

 

Alexandre Bompard, chairman and chief executive 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.”

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