Tesco has started Wimbledon week by serving up a Serena Williams-style zinger for the grocery sector.
Whether it will turn out to be an ace remains to be seen, but the three-year “strategic alliance” announced with Carrefour, that will see it teaming up for the purposes of buying branded and own-label product, as well as goods not for resale (plastic bags and other equipment), will surely have their rivals scampering along the baseline.
After its merger with wholesaler Booker, Tesco boasts net sales of just under £65bn. France’s uber-grocer Carrefour has €80bn (£70bn), which demonstrates just what sort of a buying monster is being created here.
It’s not just Serena. It’s her combined with Martina Navratilova, and a bit of Steffi Graf too.
The tie-up is, of course, being sold as a win for all; customers, suppliers, old Uncle Tom Cobley and all, as these things always are.
Apparently there will be “new opportunities” for suppliers.
In reality, if you’re Tesco chief executive David Lewis’s old employer Unilever, and you’re under pressure to boost returns, you’ll greet that with bitter laughter.
Remember Marmite wars, when Tesco threatened to remove the horrible stuff from its shelves after Unilever tried to juice the price, earlier this year? Well, you ain’t seen nothing yet.
These two are going to expect negotiations to start with, “So, how much of a discount would you like?” – or else.
Unilever isn’t the only supplier that will be coughing and spluttering and wondering what they did to deserve this, either.
As for Asbury’s, the bosses of its two halves are already feeling the pinch. If the latest figures for Kantar Worldpanel are to be believed, both Asda and Sainsbury’s are losing market share, and the latter is losing sales too.
The papers to create “TesCa”, as analyst Nick Bubb calls the Tesco and Carrefour linkup, are set to be signed in two months (assuming Europe’s competition watchdogs don’t raise issues and they probably should). Their proposed merger will still be stuck in the regulatory changing room.
But the harsh reality is that Asbury’s is about as much concern to Tesco as Britain’s descent into nationalistic pettiness is to the EU. They both have bigger problems.
(In the grocers’ case it’s Aldi, and Lidl, and probably Amazon in time, with global supply chains and buying operations that facilitate their keen pricing and competitive vim.)
This is an attempt to lob them and ensure the pair can more easily compete on price (and Carrefour is getting closer than Tesco currently is).
Asbury’s will doubtless seek to argue that the development shows how competitive the sector is in its submissions to competition regulators. If they were honest they’d say: “Look, we’re already two sets and a break down, now pretty please with sugar on top, Competition & Markets Authority, don’t destroy us before they do!”
Well it might work.