Tesco and Carrefour declared on Monday that they are planning a long-term strategic partnership, covering their association with around the global suppliers and combined procurement of products for private brands.
In a joint statement, the companies said they expect to improve the quality and choice of products available to their customers “at lower prices, thereby increasing their competitiveness.”
Tesco CEO Dave Lewis said, “By working together and using our experience in products and resources, we can better serve our customers, advance choice, value, and quality.”
Carrefour CEO Alexander Bompard said that the alliance will combine the experience of buying two world leaders with additional geographic coverage and a common strategy.
The fact is that European supermarket groups are trying to strengthen their protection against digital competitors, such as Amazon. It also follows Sainsbury’s agreement to acquire the Walmart Asda network, a project that will bring out a new market leader in the UK.
Sainsbury’s said it expects to receive an annual savings of £ 500 Million from the deal. He plans to cut prices for many renowned products by flat 10%.
Shares of Carrefour and Tesco outstripped the weak stock markets in London and Paris on Monday, but analysts warned that the alliance could announce another price war that would be positive for consumers, but negative for shareholders.
“The last Tesco partnership seems to be a direct response to the threat posed by the proposed merger of Sainsbury and Asda, which will have access to Walmart’s global purchasing power,” said senior analyst at Hargreaves Lansdown, Laith Khalaf.
“Theoretically, large supermarkets can use more firepower in supply chains to lessen prices, produce more sales and possibly even save a little more margin for themselves. However, the risk is a price war of control and ultimately reduces the rate of profit throughout the industry,” he added.
Tesco and Carrefour officially expect to agree to the alliance within two months.
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