French retailer Carrefour has struck a five-year purchasing alliance with peer Système U, stealing a march over rivals in a deal that will make Carrefour the biggest buyer in its competitive home market.
On Wednesday, the companies said that they were in talks to jointly negotiate purchases with their main multinational food and non-food suppliers, in a partnership that also intends to favour French agricultural producers.
The deal is the latest alliance within the French supermarket industry, which has seen US Internet giant Amazon make inroads over the last year.
In January, Carrefour announced plans to cut costs and jobs, boost e-commerce investment and seek a partnership in China, in an effort to lift profits and compete with Amazon.
Competition Intensifies
Earlier this month, French retailers Casino and Auchan said that they had begun talks on forming a partnership regarding the purchase of food and non-food items, as competition intensifies in France. Système U had been widely expected to join that alliance.
"If Système U had joined that alliance, it would have made Casino the biggest buyer [in France]. That competitive advantage now goes to Carrefour," said Bernstein analyst Bruno Monteyne.
Carrefour shares rose 0.3% in early trading.
Unlisted supermarket operator Leclerc has a 21% share of the French market, Carrefour has 20.7%, and Système U 10.2%, according to industry data from Kantar.
Purchasing-Power Advantage
Analysts said that the deal with Système U will give Carrefour an advantage in purchasing power over Leclerc.
Carrefour and Système U said that they will aim to offer "fair compensation" to French farmers – a powerful voice in the country's political system – who have lobbied President Emmanuel Macron to do more to help them.
Macron has promised €5 billion in agricultural investment, as well as minimum farm prices, to prevent producers from selling at a loss.
Nevertheless, French farmers and their FNSEA lobby group remain concerned about issues ranging from trade talks with South America's Mercosur bloc to a land-buying spree by Chinese investors.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
