Tesco’s recent sale of business to CP worries smaller retailers

by asiafoodbeverages
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Tesco has completed the sale of its businesses in Thailand and Malaysia to CP Retail Development Company Limited, the acquiring entity of the Charoen Pokphand (CP) Group and its affiliates.

The US$10.6 billion acquisition has worried the smaller grocery retailers, wholesalers as well as wet market operators in Thailand as they believe the country is heading towards a monopolistic retail environment.

CP Group, Thailand’s largest conglomerate, already owns around 12,000 7-Eleven convenience stores, about 130 branches of cash-and-carry wholesale store Makro and some 400 branches of the hypermarket chain CP Freshmart. The company is also a major food producer and distributor, which means it controls its own supply chains.

The acquisition will give CP control of over 70% of Thailand’s Bt 994 billion (US$33 billion) modern grocery retail segment. It will also give CP Group the added strength from the consolidation of 2,000 Tesco stores in Thailand and 74 branches in Malaysia under its wings.

Thailand’s trade regulating body, the Office of Trade Competition Commission (OTCC) cleared the deal recently under certain conditions and these include a ban on further mergers or acquisitions in the modern trade sector for the next 3 years; a prohibition on the merged entities from sharing trade secrets; and a requirement for the company to maintain contracts with its current distributors and suppliers for 2 years. However, many view the conditions as too lenient and not considering its long term impact on the smaller traders.

Earlier, CP Group highlighted that the acquisition will support SMEs and suppliers of agriculture products by expanding distribution channels. However, there is a possibility that CP Group might demand high ‘entrance fees’ from the suppliers as there were too few competitors in the market.

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