Major European retailers unite: Tesco and Carrefour alliance targets enhanced supplier leverage

02 Jul 2018 --- Retail giants Tesco and Carrefour have joined forces to create a “long-term strategic alliance” to boost their competitiveness and improve the quality and choice of products for customers. In a joint announcement today, both supermarkets say the alliance will cover the strategic relationship with global suppliers and will relate to the joint purchasing of own brand products and goods, not for resale.

The three-year agreement between two of Europe’s largest retailers is expected to be concluded within the next two months. No formal deal has been signed yet. 

It is anticipated that both companies will strengthen their relationship with suppliers and use their joint buying power to buy products from suppliers and offer better prices to customers. 

However, Tesco, the market leader of groceries in the UK, and Carrefour, one of the largest hypermarket chains in the world and the largest retailer in Europe, will continue to work with supplier partners at a local and national level. 

The move is bound to fuel speculation as to why a major UK retailer would partner with continental Europe's largest supermarket with just 8 months left to go before the UK leaves the European Union.

“I’m 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,” says Dave Lewis, Tesco Group Chief Executive.

Alexandre Bompard, Chairman and CEO of Carrefour Group, outlines the synergies between the two retail giants.

“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,” he says.

“This agreement is a great opportunity to develop our two brands at the service of our customers. This international alliance further strengthens Carrefour allowing it to reach a key milestone in the implementation of its strategy.”

The move follows a series of supermarket deals in Europe. In April, Sainsbury’s and Walmart's UK supermarket chain Asda joined forces in a deal worth £15 billion (US$20.67 billion) to create a dynamic new player in the retail market with a vast breadth of products and multiple channels that are expected to shake-up Britain’s retail space.

And a month earlier, Tesco completed its £4 billion (US$5.5 billion) takeover of Booker Group.

In Europe, several agreements have been concluded in the last three months between Auchan Retail, Casino Group, METRO and Schiever Group. A set of alliances in purchasing called “Horizons” has been created, focusing on moving away from purely transactional negotiations towards a collaborative, balanced and innovative type of negotiations.

By Gaynor Selby