Tesco broadcasts global ambitions with move to supply Indian stores

Tesco is to supply thousands of India's smallest shopkeepers withsuper-market products after Britain's biggest retailer revealed plansfor its first foray into one of the world's fastest-growingeconomies.
Tesco ended months of speculation yesterday by announcing plans toopen a wholesale cash-and-carry business in India and to work withTata to develop the Indian conglomerate's hypermarket chain.
Tesco's first cash-and-carry will open in Bombay at the end of nextyear and the group will spend an initial £60 million on the ventureover the next two years. Tata will pay Tesco an undisclosed fee forthe supermarket giant's advice and expertise as it rolls itshypermarket chain - Star Bazaar - across India.
Sir Terry Leahy, chief executive of Tesco, said: “This is anotherexciting development for Tesco. It complements our entries into Chinaand the United States, giving us access to another of the mostimportant economies in the world.”
Tesco has been eyeing India for the past decade. Talks with BhartiEnterprises over a potential joint venture in the country broke downtwo years ago. Under Indian law, foreign retailers must partner Indianrivals when setting up a store network, but they can retain 100 percent control of a wholesale business.
Tesco's decision to launch a cash-and-carry chain means that itsinitial success will depend on the type of small shopkeepers that havebeen squeezed out in Britain by the unrelenting march of thesupermarket.
India's £185 billion grocery sector is still dominated by 12 millionkiranas, mom-and-pop-style family-owned shops, which are protected bythe country's strict legislation on foreign direct investment.
Modern hypermarket formats have only a 4 per cent share of the marketbut their sales are growing at about 30 per cent a year as the rapidgrowth of the Indian economy fuels greater wealth among the middleclasses. Tata operates four Star Bazaar hyper-markets but plans toincrease the number to 50 over the next five years.
Phil Clarke, Tesco's international and IT director, said he wasconfident that the company's Indian venture would be a success. “Themarket is so underdeveloped and growing so fast that it has got a hugepotential for a business like Tesco that focuses on customers,” hesaid.
“The kirana stores will judge us, not by what we say, but what we do,and hopefully they will become loyal customers of ours. We will getout there, give them prices they don't expect and quality they cannotbelieve.”
Tesco will supply a range of fresh produce and non-food items,including clothing and electricals, through the cash-and-carryoutlets. Some will bear the Tesco label.
Mr Clarke said there were no plans to stock ready-made meals,including curries. He said that it could take 18 months for the firstsignificant revenues to flow, but did not think this would place Tescoat too much of a disadvantage to Wal-Mart, which struck a deal withBharti a year ago.
He added: “We have handed the advantage to Wal-Mart. It would havebeen nice to have been there before, but you cannot have everything.”
The TimesOnline