India foray: Tesco to set up wholesale outlets, provide back-end support to Tata's retail arm Trent

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The world No.3 retailer said it will set up wholesale outlets nationwide and in exchange for a nominal fee, provide Trent's hypermarket chain, Star Bazaar, with its extensive retail expertise and technical capability to support the development of its hypermarket business.

Trent currently has just four such hypermarkets but has plans to grow to 50 stores by 2012.

Tesco's move comes close on the heels of its bigger rival US-based Wal-Mart which has partnered with India's Bharti Enterprises (which owns India's largest mobile services operator Bharti Airtel) to tap into India's $350 billion retail industry, where less than 5 percent constitute of large, organized retailers and which, analysts forecast, will double in size by 2015. Wal-Mart said it planned to set up its first wholesale outlet by the end of this year and roll out 10-15 more in a phased manner over the next seven years.

The supermarket group said it would make an initial investment of £60 million ($120 million) in the C&C business over the first two years. It said it plans to open at least three large "hubs" in Delhi, Mumbai and Bangalore and set up smaller ones in satellite towns and cities.

The wholesale outlets will be designed for the Indian market following local research. They will offer a range of fresh food, grocery and non-food products to small retailers, restaurants, mom-and-pop stores and other business owners.

"The business will provide farmers and other suppliers with a highly efficient route to market. Based initially in Mumbai, the business will benefit from over a decade of experience of setting up local businesses in international markets," Tesco said.

"This is another exciting development for Tesco. It complements our entries into China and the United States, giving us access to another of the most important economies in the world. Our wholesale cash-and-carry format will bring improved value, range and service to thousands of Indian businesses," Terry Leahy, CEO, Tesco, said.

"We are delighted to be working with Tata, one of India's largest and most respected business groups. Our agreement will enable us to share our international retail expertise, supporting Trent in the development of their Star Bazaar hypermarket business and benefiting Indian consumers," Leahy said.

"Having Trent as a customer of our wholesale cash-and-carry business will enable us to rapidly develop supply chain infrastructure and processes that will benefit farmers, small manufacturers and other suppliers," he said.

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