Carrefour and Tesco join forces to boost purchasing power

PARIS / LONDON (Reuters) – The French group Carrefour ( CARR.PA ) and Britain's Tesco ( TSCO.L ), the two largest supermarket groups in Europe , provide alliance to reduce costs in the face of competitive pressure.

The agreement is the latest partnership in a European retail industry in which the American giant Amazon ( AMZN.O ) made incursions in recent months.

"This strategic alliance between Carrefour and Tesco is a major agreement because it combines the purchasing expertise of two world leaders, complementary in their geographies, to common strategies," said Carrefour's CEO. , Alexandre Bompard.

The alliance will cover strategic relationships with global suppliers in areas such as marketing or data collection services as well as the joint purchase of own brand products and goods used in their own business, said Carrefour.

The alliance, which will be formally accepted in the next two months, will exclude fresh food products, while each company will continue to work with supplier partners at the local and national levels.

The financial terms of the alliance were not disclosed,

Tesco, the largest UK supermarket with sales of 51 billion pounds ($ 67.2 billion), was rebuilt by CEO Dave Lewis after a 2014 accounting scandal compounded by a sharp slowdown in trade .

As part of this recovery, the group, present in Eastern Europe and in Malaysia and Thailand, improved its supplier relationships, while exerting pressure on its domestic rivals with decreases in revenue. price. "By working together and making the most of our collective expertise and supply capacity, we will be able to better serve our customers, further improving choice, quality and value," said the CEO. from Tesco.

Tesco faces a threat to its leading position in Britain's plans of Sainsbury's ( SBRY.L ) to buy Wal-Mart ( WMT.N ) Asda, the number three player.

Carrefour, Europe's leading retailer, generates most of its 88 billion euros (102.5 billion dollars) in sales in Europe, while Brazil is its second largest market after France. The agreement with Tesco excludes China and Poland.

In April, the outlook for this year was cautious after a slowdown in sales growth in the first three months, as the persistent weakness of the French core market suggests that the supermarket chain is still recovering.

DEALS IN THE EUROPEAN SECTOR

The shares of Carrefour and Tesco have only slightly increased, the European stock markets being under pressure. [.EU] [.L]

"At this point, we can assume that the total savings of 400 million pounds / 450 million euros could be the initial ambition," said Jefferies analysts .

They also noted that the "operation" could also lead some to speculate that it is the precursor to a return to cross-border mergers and acquisitions in space. "

In January, Carrefour announced cost and employment cuts for investment in e-commerce and the search for a partnership in China, in an effort to increase profits and revenues and beat the national rivals in the race for the development of digital shopping products.

Carrefour announced at the beginning of the year a five – year buying alliance with the French company Systeme – U supermarkets to make Carrefour the biggest buyer in its competitive domestic market.

Competition in France was fierce, with a smaller competitor of Casino ( CASP.PA ). The chain Monoprix becomes in March the first local retailer to sell groceries via Amazon in the Paris region. This follows an agreement reached last year between Casino and the Ocado Group Plc e-commerce technology supplier ( OCDO.L )

Recent transactions in the retail sector have Auchan Retail, Casino, Metro and Schiever unveil In March, Tesco bought Booker, creating a new power station in the British food market worth £ 200 billion a year. "A cordial agreement between the two UK and French retail giants is another sign that cost containment is the top priority for supermarkets as they seek to contain discounters and protect margins," said analyst Neil Wilson. chief for Markets.Com.

"Meanwhile, all retailers are looking over their shoulder at Amazon and the potential disruption could still cause in the grocery sector," he added.