BREXIT ALLIANCE: Tesco and Carrefour team up for French-English shopping partnership

Tesco is firming up its relationship with European suppliers by teaming up with Carrefour

Tesco is firming up its relationship with European suppliers by teaming up with Carrefour

It is anticipated that the alliance will be formally agreed within the next two months. Suppliers said it posed a threat to their survival. Carrefour, France's biggest supermarket chain, has more than 12,300 stores in 30 countries, and British giant Tesco has 6,800 outlets in eight countries. The deal will initially run for three years.

In a joint statement, the companies said they were hoping to improve the quality and choice of products available to their customers "at even lower prices thereby enhancing their competitiveness". Tesco itself recently completed the purchase of wholesaler Booker, and in April, Sainsbury's said that it was in advanced talks to buy Asda from USA retail giant Walmart.

The proposed link between Tesco and Carrefour reflects the two companies' own retreat from worldwide expansion.

Sainsbury's is set to report a dip in first quarter sales this week, with boss Mike Coupe expected to be questioned on the progress of the supermarket's £12bn merger with Asda. Last year, it had sales of €88.2bn (£78bn).

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Tesco, with sales of 51 billion pounds ($67.2 billion), has rebuilt itself under Lewis after the discovery of an accounting scandal in 2014 compounded a sharp downturn in trading, which strained relations with its suppliers at the time.

In January, Carrefour announced a major transformation plan that involved making cost cuts of €2bn by 2020, and investing €2.8bn in e-commerce by 2022.

The group has cut costs, invested in stores and bought wholesaler Booker to be able to expand into supplying restaurants, cafes and local stores.

Jonathan Buxton, head of Consumer and Retail at M&A advisory group Cavendish Corporate Finance, said the partnership was created to contain discounters, defend margins and counter any future move by Amazon. "However, we do not see the potential tie-up as a "game-changer" and do wonder if a formal alliance of two national market leaders is enough to pique the interest of European regulators?"

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