Supermarket groups Tesco and Carrefour to end three-year alliance

UK retailer denies Brexit influenced the decision to scrap link-up, which was intended to cut costs

Last modified on Mon 7 Jun 2021 03.55 EDT

Tesco and the French supermarket group Carrefour have announced the end of a three-year alliance that was meant to lead to greater choice and lower prices for customers.

The purchasing agreement between the two retail powerhouses, struck in 2018, was expected to strengthen relationships with suppliers, expand ranges of their own-label products and cut prices for certain products by pooling their buying power. However, the decision to part ways suggests the alliance did not offer strong enough savings to warrant an extension beyond 31 December.

In a statement released on Monday, the two supermarket groups said they had “benefited from a number of joint buying opportunities”. However, “both companies have agreed that they will continue this work independently and focus on their own opportunities, building on the experience and the progress made during the alliance period”.

While concerns have been raised about the rising cost of food imports because of Brexit, a spokesperson for Tesco denied that the UK’s departure from the EU had influenced the decision to scrap the partnership.

Tesco’s shares were trading higher by 0.5% at 226p on Monday morning.

Clive Black, a retail analyst at Shore Capital, said the statement suggested there was little to gain from Tesco and Carrefour’s partnership. “For whatever reason, regulatory, cultural, and operational, there would appear to be little notable benefit from the alliance on an ongoing basis,” he said.

Black added that the move was not a great surprise, given that other attempts to pool buying power had delivered minimal gains. “In truth, the outcome is far from clear or impressive for major players; apart from bananas, it was not especially evident in food for Asda in the UK being part of Walmart, never mind other buying groups,” he said.

But despite the failed alliance, Black said Carrefour and Tesco could eventually benefit from a formal merger, if executives were willing to take the plunge. “Their respective categories and geographies remain very complementary, especially given Tesco’s retrenchment over the past decade, with the British Isles remaining an efficient and substantial market of approaching 70 million shoppers,” he said.

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