Tesco shuns US retail graveyard for China

By Anita Awbi

- Last updated on GMT

Related tags Tesco Supermarket Wal-mart Retailing

Tesco CEO Sir Timothy Leahy has ended months of speculation by
revealing expansion plans that rule out the notoriously difficult
US market in favour of the unregulated Far East.

In an interview with the UK's Observer newspaper, Leahy said the company would expand further in China, on the back of last year's £140 million investment in the country's Hymall chain.

Tesco, the world's third largest food retailer, currently holds a 50 per cent share in Hymall - jointly operating 50 Chinese hypermarkets in Shanghai and neighbouring regions.

The retail giant now plans to extend its presence in southern China and Beijing, embarking on a growth plan that may keep the company occupied for many years to come.

And rumours regarding imminent Indian expansion suggest Tesco's pioneering approach centres around unexplored territory and unsaturated retail markets.

"We will have to scale up in China, it's such a big place that you either have to ease out or commit quite a bit,"​ Leahy explained, adding that this would take a long time to achieve.

Tesco's planned US expansion is now officially on hold, as the company hasn't found a suitable inroad to challenge Wal-Mart's infamously impenetrable North American market.

Although it still has a 65-strong team of top executives over there to case out development opportunities, Leahy expressed caution in the region.

Investors have praised this stance, as many have long viewed the US as a potential graveyard for British retailers.

Leahy said: "People have talked about businesses in the US that could be bought, but I don't think they are right for us."

Tesco's preference for unregulated markets comes as British and European law closes in around supermarket dominance, and retailers and suppliers queue up to complain about the company's ability to distort the supply chain.

By consolidating its hold on domestic market leadership, Tesco has captured almost half of the £25 billion increase in the grocery market in the past five years, according to latest research by market analysts Verdict.

A massive 30.3 per cent of all money spent in UK supermarkets goes to Tesco, which has an annual turnover of £37.1bn, owning around 600 Express stores and 700 supermarkets.

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