Oh la la... Price cuts!

Carrefour tie-up to benefit shoppers

TESCO promised shoppers price cuts after joining forces with a French supermarket giant to slash costs.

Britain’s biggest grocer yesterday announced a “strategic alliance” with Carrefour, one of Europe’s largest retailers.

Bosses said they would use their combined buying power – £130billon of sales – to demand better deals from big brand makers and own-label suppliers.

Tesco and Carrefour said: “The alliance will enable both companies to improve the quality and choice of products available to their customers, at even lower prices, thereby enhancing their competitiveness.”

Investment bank Jefferies estimated it could save the firms £400m.

Experts speculated it may be a step towards Tesco and Carrefour merging, creating an industry Goliath worth £35bn and with more than 800,000 workers globally. However, it triggered concerns that suppliers would pay the price for boosting the firms’ profit margins.

Sainsbury’s and Asda have already vowed to cut prices by 10% by hitting suppliers under a proposed £12bn merger.

Mella Frewen, head of trade body Food Drink Europe, said: “This will have a huge impact on the balance of power along the food chain.”

Patrick O’Brien, of industry experts GlobalData, said: “It should be noted that a key focus of the tie-up is to reduce prices on own-brand products, and this is more of a direct response to Aldi and Lidl whose offers are heavily weighted towards own-brand.”

Jonathan Buxton, partner at Cavendish Corporate Finance, said: “We expect to see more mega deals emerge in the struggling global retail sector.”