Tesco joins hands with Trent Limited, one of the Tata group's two retailing outfits, which currently operates 38 stores, department store retail chain, Westside. It also runs two other chains: Star Bazaar, a hypermarket chain and Landmark which deals in books, music, and leisure products.
Tesco will invest $115m during the next couple of years to build three cash-and-carry outlets in Mumbai, Delhi and Bangalore, which will supply food and other products to local family-run stores and restaurants.
The company had been in advanced talks with Bharti till November, 2006, when Sunil Mittal decided to call off the negotiations saying Tesco was too slow in moving forward and joined hands instead with Wal-Mart– the world' largest retailer based in US. Knowledgeable sources believe the relationship soured since Tesco was unwilling to match Bharti's growth path.
Tesco has been eying the Indian market since a decade and had been working seriously for three years before the talks broke off. "It would have been nice to be here before, but you can't have everything. I'd rather be here than not here," said Phil Clarke, Head of International Development, Tesco. Clarke has been appointed to head the joint venture.
Tesco is world's third largest retailer with 2008 group turnover of £51.77 b ($103b). It operates over 3,750 stores across 13 countries worldwide. It works through five formats that include hypermarkets and small neighbourhood stores. Tesco entered the United States last October with 'Fresh and Easy' label.
According to a two-part deal between the two companies, Tesco will set up a wholly owned 'Cash and Carry' store in Mumbai by end-2008. This will be followed by additional distribution hubs in Delhi and Bangalore, which will further support many more sub-hubs in smaller cities. The business will include the Tesco name.
Metro C&C (Germany) and Shoprite of South Africa are already operating as Cash & Carry companies. In the beginning of 2009, 50:50 cash and carry joint venture of Bharti-Walmart is expected to become operational. Carrefour of France is also likely to begin its cash and carry business around the same time.
'Cash and Carry' stores supply food and grocery items in bulk to small traders and institutional customers, like hotels, restaurants, and caterers. India is estimated to have over 12 million small traders operating across the country.
For the front-end operation Trent will become Tesco's exclusive franchisee in India. The cash and carry business of Tesco will supply everything.. According to Noel Tata, Trent has drawn up plans to scale up 'Star Bazaar' operations from four hypermarket stores at present 50 stores.
Tesco already has a technology centre in Bangalore which employs around 3,000 persons to handle software development and accounting functions. Besides, It procures over $320 m worth of products every year from India. |