News: Tesco's India advantage

(Forbes 13/10/2006) London - With a population of 1.1 billion people and a retail industry expected to explode over the next few years, Western store giants like Wal Mart, Tesco and Carrefour can't help but look longingly at India. The foreign retailers are barred from setting up shop there now, but one could soon be getting a foot in the door via a joint venture.

To date the Indian government has only allowed single-brand retailers like Britain's Marks & Spencer (other-otc: MASPY.PK - news - people ) to enter its market. Until the barriers for foreign retailers are relaxed, overseas merchants are reduced to busying themselves in India's wholesale sector, as does Germany's Metro (other-otc: MTAGF - news - people ) or forming joint ventures with the likes of FieldFresh.

FieldFresh, which uses the tagline, "Linking Indian fields to the world," is itself a fifty-fifty partnership between Bharti Enterprises and ELRo Holdings India, an investment company founded and owned by Sir Evelyn de Rothschild and Lady Lynn Forester de Rothschild, of the Rothschild banking dynasty.

Considering FieldFresh's ostensibly British connections, or the fact that it reportedly already supplies some food to Tesco, it already looks likely that Bharti will choose the U.K. candidate over Wal-Mart Stores (nyse: WMT - news - people ) and Carrefour. Shore Capital analyst Clive Black believes Tesco has an extra edge over those rivals because it has a major administrative office in Bangalore, giving it access to middle class consumers through its own employees. "Tesco is very experienced now in trading in very diverse markets, from Ireland to Korea, to the Czech Republic," Black said.

However, research conducted by IGD, a not-for-profit food-industry research organization, earlier this year suggested that Wal-Mart in fact be the first to enter the Indian food and grocery retail market, either with its hypermarket format, or at least with cash and carry operations in the unrestricted wholesale sector.

"Tesco is unlikely to enter India in the short term, while it concentrates on other key markets like the US and China, and Carrefour is currently focused on optimizing the performance of its existing portfolio," IGD said in a press release.

But Shore's Black believes Tesco will still manage. "I think Tesco is over the period of greatest risk. It can keep all its plates spinning, and certainly has done so up until now."