Tesco imports its suppliers

Tesco's new venture in the US will apparently be supplied, at least in part, by its UK suppliers, according to Financial Times. A couple of key suppliers are opening up US operations based on Tesco's new distribution center in Riverside county, California.

Tesco, the UK's biggest supermarket chain, is taking two of its favoured British food suppliers along on its bid to open a new chain of small-sized supermarkets in the western United States next year.

Natures Way Foods, which produces prepared salads and lettuce for Tesco, and 2 Sisters Food Group, one of Britain's leading poultry processors, are both planning to establish sites adjacent to Tesco's planned distribution centre in southern California.

The logic seems to be that using established suppliers provides the benefits of familiarity, as well as meeting established quality standards.

Tesco's decision to rely on established relationships with British suppliers rather than new relationships in the US is believed to reflect both its desire to avoid unpleasant surprises and a belief in the industry that the prepared meals business in the UK and Europe delivers higher standard products than are currently seen in the US.

Prepared meals – including salads and cooked chickens – are expected to be play a significant role in Tesco's plans to open about 150 small neighbourhood market stores around Los Angeles, Las Vegas and Phoenix.

I would imagine this is not good news to US suppliers in those categories who saw an opportunity with a big new customer, and instead get new competitors.