Tesco enters Indian Retail with Tata Trent

Presented By:

Karishma Seth

PGDM07028

Introduction to Tesco

Tesco Public ltd. Co. is a British-based international grocery and general merchandising, retail chain.

It was founded in 1919,in East London, by Jack Cohen. It has its headquarters at Cheshunt,England, UK. The largest British retailer by both global sales and domestic

market share with profits exceeding £2 billion. In 2008, the company overtook German retail giant Metro AG

to become the world's fourth largest retailer, the first movement among the top five since 2003.

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Its key people are David Reid (Chairman) and Sir Terry Leahy (Chief Executive).

Originally specialising in food and drink, it has diversified into areas such as clothing, consumer electronics, consumer financial services, retailing and renting DVDs, CDs, music downloads, Internet service, consumer telecoms, consumer health insurance, consumer dental plans and software.

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Introduction to Tata Group

The Tata Group is one of India's oldest, largest and most respected business conglomerates.

Its name has been respected in India for 140 years for its adherence to strong values and business ethics.

The Group's businesses are spread over seven business sectors.

It comprises 96 companies, operates on six continents and employs 350,000 people.

Revenues in 2007-08 were $62.5 billion (around Rs251,543 crore), of which 61 per cent is from business outside India.

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The business operations of the Tata Group currently encompass seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals.

The Group’s major companies are beginning to be counted globally: Tata Steel became the sixth largest steel maker in the world after

it acquired Corus. Tata Motors is among the top five commercial vehicle manufacturers in

the world and has recently acquired Jaguar and Land Rover. TCS is a leading global software company, with delivery centers in the

US, UK, Hungary, Brazil, Uruguay and China, besides India.  Tata Tea is the second largest branded tea company in the world,

through its UK-based subsidiary Tetley.

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Tata Chemicals is the world’s second largest manufacturer of soda ash.

Tata Communications is one of the world’s largest wholesale voice carriers.

Tesco entering India with Tata

Tesco, the largest British retailer, is entering India through a franchisee agreement with the Tatas.

The Tata group company Trent is tying up with Tesco to grow its hypermarket (discount stores) business.

“Star Bazaar” is an established player in the hypermarket business in the country having four stores located in Ahmedabad, Bangalore and Mumbai (2 stores).

“Star Bazaar” will get marketing as well as technological support from Tesco.

Trent will also source products for its hypermarket business from Tesco’s proposed wholesale stores in India.

Trent, which currently operates three hypermarket stores in the country, plans to invest over Rs. 2,000 crore to open another 50 stores in the next five years.

Tesco plans to set up a wholesale cash-and-carry business in India that will source directly from farmers and supply to a range of outlets from mom-and-pop stores to hypermarkets.

The wholesale outlets, which will be designed for the Indian markets, will sell fresh food, grocery and non-food products to small retailers.

Tesco, which already employs 3,000 people at IT back-office operations in Bangalore, plans to recruit local staff for the wholesale store business very soon.

It is a one stop shop offering a wide range of products including fresh foods — fruits, vegetables and non-vegetarian products, dairy, home care, health and beauty products, apparel, home décor, gifts and household items. 

Investments

The company said it would make an initial investment of up to $114 million (Rs 480 crore) in the cash-and-carry business over the first two years.

Strategies

“Star Bazaar” was recently transferred to a 100% Trent subsidiary,Trent Retail for sharper management focus and improvement in operations.

This was done to beef up its large box format through local sourcing arrangements as against national sourcing.

This was done because as the Trent Retail was unviable, especially in food and groceries, due to infrastructure bottlenecks, tax inefficiencies and high freight costs.

Another reason for hiving off Star Bazaar was that it could have tie ups with international retailers to enhance its know-how.

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Apart from accessing the $99.5-billion Tesco’s marketing,stock management, retail information systems,cold-chain infrastructure and front-end services expertise,Trent will source merchandise for Star Bazaar from Tesco’s wholesale outlets in India.

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