Tesco is planning a “strategic alliance” with French retailer Carrefour, reports the BBC. The move is in line with other retailers' strategies to outmaneuver Amazon.
Tesco is the largest retailer in the U.K., employing 440,000 people with reported sales of £57.5 billion; Carrefour, the largest in Europe, operates 12,3000 stores across 30 countries, reporting sales of €88.2 billion.
Though a formal agreement has yet to be signed, the companies aim to confirm the deal within the next two months.
The move comes after Tesco purchased wholesaler Booker (in April 2018), and the announcement that rival retailer Sainsbury was in advanced talks to buy the Asda chain from Walmart. It also speaks to increased competition in the space, as supermarket chains compete with fast-growing budget chains such as Lidl and Aldi and online retailers like Amazon.
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“Another price war is now looming in the UK supermarket sector,” Laith Khalaf, senior analyst at Hargreaves Lansdown, told the publication. “The latest Tesco partnership looks like a direct response to the threat posed by the proposed merger of Sainsbury's and Asda, who will have access to the global buying power of Walmart as a result.”
A focus of the tie-up will be to “reduce prices on own-brand products, and this is more of a direct response to Aldi and Lidl, whose offers are heavily weighted towards own-brand,” said Patrick O’Brien, U.K. retail research director at GlobalData, as own-brand ranges allow for greater control and potentially higher margins.
On the agreement, Tesco chief executive Dave Lewis commented: “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.”
