Tesco and Carrefour form an alliance to offer products at lower costs

Two of the most prominent supermarket chains in Europe, Tesco and Carrefour recently announced their plans to form a strategic, long-term association aimed at improving the quality of products delivered to consumers and offering them at lower prices. The two companies will be covering their partnership with global suppliers and will jointly purchase own brand products, sources mentioned.

Dave Lewis, the CEO at Tesco commented on the alliance saying they will be able to better serve customers by working in tandem, making the most of their cumulative product & sourcing proficiency to increase choices and add to the value of the products.

Concurrently, the CEO of Carrefour Alexandre Bompard stated that the partnership with Tesco would help to combine the purchasing expertise of two retail giants having a complementary geographical presence and following similar strategies.

Tesco and Carrefour expect to complete the deal within two months.

Reports suggest that Tesco and Carrefour shares performed well as compared to weaker stock markets in Paris and London, with some analysts alerting shareholders regarding a potential price war that would benefit consumers but could be unfavorable for them.

According to a source at the broking firm Hargreaves Lansdown, the supermarket behemoths can use their influence in the supply chain to reduce prices and propel the sales, possibly gaining a slightly more margin themselves. On the other hand, an all-out price war has a subsequent risk of lowering profits across the industry if it goes out of hand, the source further predicted.

The Tesco-Carrefour deal follows the acquisition of Walmart’s Asda by one of U.K.’s major supermarket chain, Sainsbury’s, giving it access to the superior buying power of Walmart. The venture is expected to save up to £500 million ($658 million) for Sainsbury’s annually, also allowing it cut prices of numerous products by 10%.

Experts affirm that such arrangements are an indication of European supermarket and retail groups trying to compete against online platforms like Amazon.