India’s rise should give Tesco a new frontier

 
Elizabeth Fournier
FOR grocery firms eyeing up international expansion, it’s obvious that emerging markets are the place to be.

Though the US is expected to hang onto its position as the world’s second biggest grocery market for the next few years, it’s only a matter of time before the rapidly advancing Bric nations overtake.

According to the IGD projections, the US market will grow by just 18 per cent in the next four years – below the 46 per cent growth expected in China and the 51 per cent rise in third-place India – a growth rate that would put it well ahead of the US by 2028.

The numbers make Tesco’s recent decision to abandon its struggling US venture Fresh and Easy look even more sensible, despite the £1bn hit it had to shoulder.

But a booming market doesn’t mean that breaking China is easy. In 2010 the retailer pledged to quadruple sales in the country to hit £4bn by next year, but has since slowed down its expansion. Despite having 130 stores in China, last year it took just £1.4bn of the potential market.

Meanwhile India is looking more hopeful for the grocery giant, particularly after the government changed its rules last year to allow international supermarkets to establish multibrand stores.

Earlier this month chief executive Philip Clarke returned from trade talks in New Delhi “reassured” by the plans – and promising investors they’d be hearing more on the firm’s Indian expansion plans soon.

With a potential $1 trillion market to be tapped over the next 10 years, shareholders won’t want to wait for long.