In a joint statement on Monday, the supermarket groups said the alliance will cover the “strategic relationship with global suppliers, the joint purchasing of own brand products and goods not for resale” under a three-year framework.
The partnership will allow the companies to improve the quality and choice of products at lower prices, they added.
Tackling tough competition
The UK’s so-called big four – Tesco, J Sainsbury plc (LON:SBRY), WM Morrison Supermarkets PLC (LON:MRW) and Asda—have been responding to rising competition by expanding their business beyond food retail and buying rivals.
Meanwhile, Sainsbury’s expanded its product offering through the acquisition of Argos in 2016 and has agreed a merger with Asda, which is currently being investigated by the UK Competition and Markets Authority.
Neil Wilson, chief market analyst at Markets.com, said the partnership between Tesco and Carrefour is yet another sign that squeezing the cost base is the biggest priority for supermarkets as they seek to contain the discounters and protect margins.
"On both sides of the Channel rising costs are putting pressure on margins," he said.
"Meanwhile every retailer is looking over their shoulder at Amazon and the potential disruption it could still cause in the grocery sector."
Tesco and Carrefour to create 'more choice, quality and value'
Tesco and Carrefour said their alliance is expected to be formally agreed within the next two months.
“By working together and making the most of our collective product expertise and sourcing capability, we will be able to serve our customers even better, further improving choice, quality and value,” said Tesco chief executive Dave Lewis.