Tesco and Carrefour ‘strategic alliance’ gives suppliers the jitters

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Retail giants Tesco and Carrefour have announced a “long-term, strategic alliance” that is causing nervousness among some suppliers.

The alliance will cover the strategic relationship with global suppliers, the joint purchasing of own-brand products and goods not for resale.

The move is widely seen as a response to the growing competitiveness of supermarket retailing, not least the challenges presented by Aldi, Lidl and possibly Amazon.

Tesco Group Chief Executive Dave Lewis said: “I’m delighted to be entering into a strategic alliance with Carrefour. By working together and making the most of our collective product expertise and sourcing capability, we’ll be able to serve our customers even better, further improving choice, quality and value.”

Chair and CEO of Carrefour Group Alexandre Bompard said: “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. This agreement is a great opportunity to develop our two brands at the service of our customers.”

Tesco and Carrefour claim the alliance will enable them to strengthen their relationships with their suppliers and create even more opportunities for them. “Each company will continue to work with supplier partners at a local and national level,” a Carrefour statement said.

But news of the alliance drew a cool response from some suppliers, concerned that it could put an even greater squeeze on their businesses.

“Buying alliances have a detrimental effect on the whole food supply chain,” said Mella Frewen, who is Director General of FoodDrinkEurope, the trade organisation for Europe’s food and drinks suppliers. “They increase the buying power of the retailers in the alliance, thus putting the manufacturing industry, and other suppliers, under increasing price pressure.

“On top of the recent Sainsbury’s-Asda alliance, this will have a huge impact on the balance of power along the food chain, to the detriment of all suppliers, regardless of size.”