Tesco PLC is forming a purchasing alliance with French retailer Carrefour SA to increase its leverage with suppliers in a consolidating and price-squeezed supermarket business.
The alliance between two of Europe’s largest retailers will manage purchasing for branded goods and private-label items, the companies said in a joint statement yesterday.
They said they expect to conclude the agreement within the next two months and that it would last for three years.
European supermarket operators have engaged in a flurry of acquisitions and alliances in an effort to reduce supply costs.
In the UK, grocer J Sainsbury PLC plans to buy Walmart Inc’s Asda, while France’s Auchan Retail International SA, Casino Guichard-Perrachon SA and Schiever Group last week said that they had combine forces with Germany’s Metro AG in purchasing.
That adds to deflationary pressures that food producers, such as Nestle SA and Unilever, are facing, as UK grocers wrestle with the added effect of a weak pound stemming from the vote to leave the EU.
Tesco bought wholesaler Booker Group PLC, which supplies thousands of convenience stores, in March.
Under Sainsbury’s US$10 billion bid for Asda, Walmart would keep a significant minority stake, allowing the UK grocer to harness the US retail giant’s purchasing strength in an effort to trim prices on essential items 10 percent.
Under CEO Alexandre Bompard, who took over last summer, Carrefour has moved to beef up its e-commerce operations and to reduce the company’s dependence on suburban big-box stores. Competition in France has been heating up, with Casino in March announcing a deal to sell products from its Monoprix stores via Amazon.com Inc’s Prime service in the Paris area, following a deal last year between Casino and grocery e-commerce technology provider Ocado Group PLC.
Tesco and Carrefour said their alliance would let the companies improve the supply of goods available in stores.
The agreement will also cover purchasing of goods not intended for resale, the companies said.
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