Tesco and Carrefour say ‘strategic alliance’ will cut prices | BBC News

Harder fight
“Another price war is now looming in the UK supermarket sector,” said Laith Khalaf, senior analyst at Hargreaves Lansdown. “The latest Tesco partnership looks like a direct response to the threat posed by the proposed merger of Sainsbury’s and Asda, who will have access to the global buying power of Walmart as a result.”

Patrick O’Brien, UK retail research director at GlobalData, 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”.

Own-brand ranges give supermarkets greater control and the potential for higher margins, he added. Across the British supermarket sector there is a shift towards more own-label products, suggesting the big brands will have to fight harder for shelf-space.

The potential squeeze on suppliers is a big worry for FoodDrinkEurope, the trade organisation for Europe’s food and drinks suppliers.

“Buying alliances have a detrimental effect on the whole food supply chain,” said FoodDrinkEurope’s director general, Mella Frewen. “They increase the buying power of the retailers in the alliance thus putting the manufacturing industry, and other suppliers, under increasing price pressure.

“On top of the recent Sainsbury’s-Asda alliance, this will have a huge impact on the balance of power along the food chain, to the detriment of all suppliers, regardless of size.”

The chairman of the Federation of Small Businesses, Mike Cherry, said some small businesses would be worried about Tesco’s planned deal.

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Tesco and Carrefour say ‘strategic alliance’ will cut prices – BBC News.