Jul 2, 2018

Tesco and Carrefour team up in face of competitive pressures

The tie-up is regarded as a response to perennially competitive conditions in the grocery market, rather than a specific event such as J Sainsbury's proposed merger with Asda in the UK, other retailers forming buying alliances in France, the continued expansion of the German discounters, or the possibility of a big move by Amazon into the grocery market. According to Euromonitor International, Tesco and Carrefour have a combined 8 per cent share of the western European grocery market. Tesco made operating profit equivalent to €1.44bn last year; Carrefour reported €1.6bn. But food analysts at Société Générale questioned how much overlap there was in the supply base, and said that much of the impact would probably be felt by privately owned food producers. Mr Lewis has won back some of the market share that Tesco lost, but at the expense of margins, which have fallen from above 5 per cent to below 3 per cent over the past decade. In 2016, Tesco launched a range of "Farm brand" own-brand fresh products aimed at winning back market share from discounters, while last year's takeover of wholesale group Booker helped increase buying power without invoking the wrath of regulators.

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