Tesco has joined forces with one of France’s biggest supermarkets as boss Dave Lewis continues to wage war on suppliers.
Britain’s biggest grocer has teamed up with Carrefour in a deal that will see the two share own-label products and slash prices for customers.
The tie-up will give Tesco and Carrefour greater buying power – spelling more misery for suppliers who will face more pressure to keep a lid on the price of goods on supermarket shelves.
Tesco and other supermarkets are facing an onslaught from discounters Aldi and Lidl.
Sainsbury’s and Asda have already vowed to put the squeeze on suppliers in a £14.1 billion tie-up being investigated by the Competition and Markets Authority.
Lewis, 53, is well-placed to wage war on suppliers having spent 27 years at Unilever, whose brands include Marmite, Dove and Ben & Jerry’s. Nicknamed Drastic Dave for his ruthless cost-cutting, Lewis has even been touted as a potential successor to Unilever boss Paul Polman, who is stepping down this year.
He has been credited with turning around the fortunes of Tesco having taken over in 2014 in the wake of a highly damaging accounting scandal that wiped £2 billion off its market value.
The partnership with Carrefour follows last year’s £3.7 billion takeover of wholesaler Booker. Russ Mould, investment director at AJ Bell, said: ‘Tesco continues to be very proactive in its quest to cope with fierce competition in the grocery market.
‘Dave Lewis seems intent on not only repairing Tesco following previous strategic mistakes, but also fortifying the business for the next stage of its evolution.’
Neil Wilson, analyst at online trading platform Markets, said the Tesco-Carrefour deal showed that the biggest priority for supermarkets was getting the cheapest possible prices from suppliers.
‘Although Tesco has only just completed its acquisition of Booker, management clearly felt that they had to respond to the Asda-Sainsbury’s tie-up, which promised to lower prices for everyday items. Meanwhile every retailer is looking over their shoulder at Amazon and the potential disruption it could still cause in the grocery sector.’
Last week Tesco revealed the launch of the biggest overhaul of its own-label range in its 99-year history as it continues its fightback against Aldi and Lidl.
Lewis has boosted sales of own-label products by phasing out its Everyday Value brand and clearing shelves of thousands of non-Tesco items.
He has also slashed management roles in favour of adding thousands of staff to the shop floor and been credited with improving supplier relationships.
Carrefour is France’s second largest supermarket but operates across 30 countries. It has 12,300 stores and employs around 375,000. Last year it raked in £78 billion of sales worldwide.
Tesco has 440,000 staff at more than 6,800 stores around the world. Last year it made £51bn in revenues and served 80m customers every week.
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 will be able to serve our customers even better, further improving choice, quality and value.’
Tesco shares fell 0.2 per cent, or 0.6p, to 256.1p.