Tesco, the largest British retailer, is entering India through a franchisee agreement with the Tatas.
Twenty months after the world’s largest retailer Wal-Mart teamed up with the Bharti group to start wholesale stores in India, the Tata group company Trent is tying up with Tesco to grow its hypermarket (discount stores) business. The world’s No 3 retail chain was started by Johh Kohen as a tiny store selling groceries in London’s East End in 1919.
Star Bazaar, Trent’s branded discount store, will get marketing as well as technological support from Tesco. In other words, a typical Star Bazaar outlet will function like Tesco’s outlets. “Star Bazaar’s front-end services and supply chain functions will imbibe the best practices followed by Tesco,” said Noel Tata, Trent’s 51-year old managing director and Tata group chairman Ratan Tata’s half-brother.
Trent will also source products for its hypermarket business from Tesco’s proposed wholesale stores in India. The announcement moved Trent shares up 9.61 per cent to close on Rs 545.85 at the BSE on Tuesday, when the benchmark Sensex was down over 1.88 per cent to close at 15,212.13.
“It’s very interesting. Tesco‘s entry brings in a new dimension to the Indian retail market,” said Kishore Biyani, CEO, Future Group, which runs the rival Big Bazar stores. “Tesco’s model is very successful across the world.“
Trent, which currently operates three hypermarket stores in the country, plans to invest over Rs 2,000 crore to open another 50 stores in the next five years. Its rival Big Bazar already has 100 stores.
Tesco plans to set up a wholesale cash-and-carry business in India that will source directly from farmers and supply to a range of outlets from mom-and-pop stores to hypermarkets.
The company said it would make an initial investment of up to $114 million (Rs 480 crore) in the cash-and-carry business over the first two years. “We will open the first store in Mumbai towards the end of next year,” said Philip Clarke, director Asia and Europe, Tesco.
“The wholesale outlets, which will be designed for the Indian markets, will sell fresh food, grocery and non-food products to small retailers.”
Tesco’s sourcing from India started in 1924 when its founder John Kohen started buying tea for its private label business. Tesco’s wholesales stores will have products sourced from India. Currently, it sources products worth Rs 1,400 crore for its UK retail operations alone.
Tesco, which already employs 3,000 people at IT back-office operations in Bangalore, plans to recruit local staff for the wholesale store business very soon.