Tesco's international business set to boom

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By: Wise Marketer Staff |

Posted on July 25, 2003

More than one-third of Tesco's turnover is expected to come from its international operations by 2010, according to food and grocery industry think-tank, IGD.

The UK-based supermarket chain's global turnover is forecast at over 55 billion by 2010, according to the Tesco International Report from IGD. More than 33% of that figure will come from international operations, compared to the current figure of 18%.

According to IGD, the firm's focused approach means that it is now emerging as one of the winners in international retailing, with a presence in 11 markets worldwide (excluding a single store in France). Initially considered to be relatively late in realising its international ambitions, Tesco has scaled up its operations quickly to capture leading positions in five overseas markets (the Republic of Ireland, Hungary, Poland, Slovakia, and Thailand).

Future potential
Tesco's long-awaited entry into Japan, the world's second largest market, marks a significant step in its international development and indicates future potential for growth in Asia. Tesco's proposed acquisition candidate, C-Two Network, offers the benefit of its background in the wholesale sector, its high degree of investor-orientation, and strong management team.

Tesco's second phase of international development started with its entry into Hungary in 1994, and has been more successful than its first venture into France, from which Tesco withdrew in 1997.

Tesco currently achieves annual sales of 2,689 million in Europe (excluding the UK) and 2,033 million in Asia. By 2010, IGD predicts that Asia will contribute 22% of group sales, while the 'rest of Europe' region will deliver almost 15%.

Global high ranking
IGD currently ranks Tesco as 5th in its Global Retail Index, with the key success factors that put it there being its level of global best practice sharing, a clear and focused global strategy, and home market dominance. However, it is only ranked 7th in the index when examining turnover alone.

To increase its global position, IGD says that Tesco must increase the proportion of international sales in total sales (currently 18%) and possibly develop a presence in the most important world region: NAFTA (the US, Mexico, and Canada), which alone accounts for 29% of the global grocery retail market. The company's joint online venture with Safeway Inc. in the US (launched in January 2002) may prove a good route for it to learn more about this market.

Future options
IGD believes that Tesco will keep its focused international strategy and, with the exception of Turkey, is unlikely to enter any new markets in the short-term. In the medium-term, Tesco is most likely to enter China by means of a partnership with an existing operator.

"In the long term, Tesco's strong management team, clear strategy, and high level of customer focus means that it is forecast to emerge as one of the leaders in global retailing, along with Wal-Mart and Carrefour," said Louise Spillard, business manager for IGD.

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