Tesco’s cross-channel purchasing tie-up with Carrefour, announced this morning, will help to mitigate the UK’s leading grocer against potential post-Brexit price increases, Euromonitor has suggested.
The ‘long-term’ alliance between the two operators is set to cover strategic relationships with suppliers, as well as own-brand purchasing, and the purchasing of goods not for resale.
Purchasing Power
According to Philip Benton, research consultant at Euromonitor International, “the combined value sales of Tesco and Carrefour gives them a 8% share of the Western European grocery market which dwarfs that of Lidl’s owner Schwarz Beteilgungs (6%) and Aldi Group (5%), providing the scale where they will be able to be aggressive in their pricing strategy for non-fresh food products.
“Tesco may also see this as a safeguarding of risk against possible supplier price rises in the event of a hard Brexit.”
Benton added that Carrefour is also “facing an increasingly competitive sector in their home market of France with rivals Auchan Retail, Casino, Metro and Schiever announcing their own purchasing partnership”.
He noted that the Tesco-Carrefour alliances is the “latest in a series of consolidation between the major grocery retailers in Western Europe”.
Preventing Errors
Elsewhere, Russ Mould, investment director at AJ Bell, said, “Chief executive Dave Lewis seems intent on not only repairing Tesco following previous strategic mistakes such as expanding too much overseas and a high profile accounting scandal, but also fortifying the business for the next stage of its evolution.
“Combining forces on the purchasing side could give Tesco and Carrefour stronger buying power, thereby securing goods cheaper.
“That may be good for the supermarkets but it could be terrible news for suppliers who were already shivering in their boots following the Sainsbury’s/Asda tie-up which itself threatened to put the squeeze on companies supplying goods and services into the supermarket sector.”
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
