The entry of Tesco into the U.S. last year followed a 14-year progression in international expansion for the retailer, which ranks as one of the world's largest supermarket operators.
However, sales outside the United Kingdom account for only about 20% of the company's total volume, which is estimated at $97.7 billion (U.S.) for the fiscal year that ended in February. Observers told SN they expect U.S. sales to add approximately $2.5 billion in 2008.
Tesco was already a major player in the U.K. in 1993 when it began broadening its horizons through a combination of acquisition and organic growth, using formats ranging from convenience stores to hypermarkets.
“Given the relatively small size of the U.K. market in global terms, expanding into other parts of the world was a necessary longer-term strategy,” Neil Currie, an analyst with UBS, New York, said. “Although there are still opportunities to take domestic share and to expand ranges into higher-margin general merchandise — steps the company continues to make, with success — Tesco has sought growth outside the U.K.'s borders in customary long-sighted fashion.”
Among its expansion moves:
1993: Entered France with the acquisition of Catteau supermarkets.
1994: Entered Scotland with the acquisition of Wm Low Supermarkets; entered Hungary with the purchase of 57% of Global TH.
1995: Entered Poland through the acquisition of controlling interest in Savia; increased its stake in Global to 74%.
1996: Entered the Czech Republic and Slovakia by acquiring 13 Kmart stores, which it converted to the Tesco banner; increased its stake in Global to 97%.
1997: Entered Ireland with the acquisition of the food retailing business of Associated British Foods.
1998: Entered Thailand with the acquisition of Lotus, a chain of 13 hypermarkets; sold Catteau in France to Promodes; and bought a controlling interest in Madex and Minor, two supermarket chains in Poland.
1999: Entered South Korea through a joint venture with Samsung — with Tesco owning 81% — to develop Homeplus hypermarkets.
2000: Entered Taiwan with a single hypermarket.
2001: Entered Malaysia with a single store through a joint venture with SimeCarby.
2003: Entered Japan by acquiring C Two-Network, a 78-store chain; entered Turkey by acquiring Kipa, a chain of four hypermarkets.
2004: Entered China by acquiring 50% of Hymall hypermarkets in Shanghai and Northern China; expanded in Japan by acquiring Fre'c, a 25-unit supermarket chain.
2006: Opened offices in El Segundo, Calif., to establish a U.S. store base through organic growth.
2007: First U.S. stores opened in Southern California and Las Vegas, followed by the Phoenix market.
The U.S. is the most mature market Tesco has entered in more than a decade, Ben Miller, international program manager for IGD, a U.K.-based research firm, pointed out — and that entry poses “a bold challenge [for American retailers] that should not be underestimated,” he said.
“The company has researched the opportunity in incredible detail, and complacent retailers who underestimate this new arrival may come to regret it.”