European retail giants Tesco, Carrefour end purchasing agreement after a three-year stint

EUROPE – British multinational grocery retailer Tesco and French retailer Carrefour have split after terminating a three-year alliance initially designed to trim costs. 

A statement from both companies revealed that the collaboration which started back in July 2018 will formally end at the end of this year.  

During the unveiling of the agreement three years ago, the retailers had said their coming together would boost their competitiveness and improve the quality and choice of products for customers. 

At the time, both supermarkets said 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. 

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It was thought that the purchasing alliance would allow the retailers to demand better terms from suppliers, including the likes of Nestlé, Procter & Gamble and Unilever. 

When the alliance was first agreed, Alexandre Bompard, chairman and CEO of the Carrefour Group, outlined 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 said at the time. 

Besides the joint statement both retailers are remaining tight-lipped about why the alliance has not been extended. 

The retailers however noted that since 2018, Tesco and Carrefour have benefited from several joint buying opportunities across food and general merchandise categories, enabling access to new suppliers, new sources and new products. 

However, the fact the alliance has not been renewed past its initial three-year framework suggests that it didn’t offer strong enough savings. 

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Speculation has also been mounting that Brexit has played a part in the decision. However, neither retailer has confirmed this. 

Meanwhile, Tesco has reportedly revealed plans to axe its international wholesale business, which exports its own-brand range across the world. 

The Big 4 grocer will wind down its international export arm with the aim of shutting down the division completely by the middle of next year. 

Despite the business “performing well” last year, Tesco made the decision to shut it down after a “thorough consideration of its scale and the future growth potential”. 

Tesco’s international export business has been in operation for about a decade and exports the retailer’s own-brand products to 20 partners in countries such as Australia, Saudi Arabia and in Europe. 

“This was a difficult decision to make, but we believe it’s the right one, and we are committed to supporting our partners through the transition period ahead,” Tesco chief product officer Ashwin Prasad said. 

Tesco has however denied that the decision to close the international wholesale arm was connected to the recent agreement to end its buying partnership with French supermarket giant Carrefour after three years. 

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