The latest wave of grocery tie-ups will put pressure on suppliers and smaller retailers, Moody’s has warned.
The ratings agency Moody’s said in a note yesterday that the alliance between Tesco and Carrefour and the merger of Asda and Sainsbury’s will cause suppliers to lose revenue as the bigger buying powers demand better prices.
This could in turn mean that suppliers make up for the shortfall by demanding better terms from the smaller retailers.
Meanwhile Moody’s expects retail alliances to remain a trend across the industry.
Tesco’s tie-up with Carrefour is the first notable cross-channel deal, but several other partnerships already exist in mainland Europe. Last week Cadino, Metro, Auchan and Schiever announced the creation of a joint buying body.
“Unlike the Sainsbury’s-Asda deal, competition approvals are not necessary for buying alliances and we believe execution challenges are modest,” noted credit officer David Beadle
“Consequently, we believe that Tesco’s agreement with Carrefour will enhance its ability to maximise its price competiveness with the merged Sainsbury’s-Asda as well as German discounters, Aldi and Lidl.”
Rumours of further consolidation in the UK’s grocery sector have also been spurred on by Amazon’s aggressive move into the industry.
The online giant has already bought specialist food retailer Whole Foods and signed a tie-up with Morrison’s. It is also reported to have approached the John Lewis Partnership with a view to buying Waitrose.
But Iceland is unlikely to join forces with the company. Managing director Tarsem Dhaliwal told City A.M. last month it would not turn to a Morrisons-style tie-up, adding “We hate Amazon.”
Meanwhile Ocado has done its own deal by signing an exclusive partnership with Kroger, the US’s second-largest supermarket chain, in May.