UK retail giant Tesco will now take on US rival Wal-Mart in India. Tesco on Tuesday said it intends to develop a wholesale cash-and-carry business in India, with an initial investment of up to ?60m in the first two years. Tesco also entered into an exclusive franchise agreement with Trent, the retail arm of the Mumbai-based Tata group, as it seeks to catch up with Wal-Mart, which two years ago partnered New Delhi-based Bharti Enterprises in a wholesale cash-and-carry venture.
Under the terms of the agreement, for which Tesco will receive a fee, Trent can draw on Tesco?s extensive retail expertise and technical capability to support its hypermarket business, Star Bazaar. Trent currently has four hypermarkets, with plans to launch 50 stores over the next five years.
Addressing a press conference here, Philips Clarke, Asia-Europe IT director, Tesco, said, ?Tesco plans to set up three wholesale cash-and-carry centres, each of 2 lakh sq ft, in Mumbai, Delhi and Bangalore. These centres will be branded as Tesco. Our initial investment plans in the wholesale cash-and-carry business in India would be Rs 480 crore.?
Clarke added, ?Having Trent as a customer of our wholesale cash-and-carry business will enable us to rapidly develop supply-chain infrastructure and processes, which will also benefit farmers, small manufacturers and other suppliers.? Under the agreement for the hypermarket segment, Trent will be Tesco?s only customer in organised retail.
Clarke said Tesco would not enter into an equity partnership with Trent Ltd nor form any joint venture. ?This is because, we want to 100% own the risk of running the wholesale cash-and-carry business in India. There are about 15 million kirana stores in India, apart from hotels and various institutions, whom we are looking at supplying products to through wholesale cash-and-carry stores.?
Noel Tata, MD, Trent Ltd, said, ?We are extremely excited about our association with Tesco. The franchise agreement will enable us to access Tesco?s retail knowledge and expertise and will play an important role in our endeavour to offer a world-class shopping experience to customers across the country. Tesco?s wholesale cash-and-carry business will provide us with an opportunity to tap into a highly efficient supply chain, thereby delivering more choices at even better prices to our customers.? Currently, organised retail is 5% of the overall $365 billion Indian retail, he added.
Tesco?s wholesale business will supply merchandise to Star Bazaar?s four stores located in Ahmedabad, Bangalore and Mumbai (two stores). Tesco already sources over ?170 million worth of Indian products each year, with sourcing offices in Delhi, Bangalore and Tirupur. It also employs nearly 3,000 Indian staff at its Hindustan Service centre in Bangalore.