Research
Tesco may well be a recognised brand name globally, but it doesn’t wash with Chinese consumers.
Last year, Tesco sold a majority stake in its China retail business to local retailer China Resources Enterprises. This month, China Resources has revealed it is rebranding all 135 Tesco China stores under its Vanguard name.
“The decision to change the brand was made based on the overall perception in the market,” CR Vanguard CEO Hong Jie said in an interview with China Business News.
“Tesco is a globally recognised name, but Vanguard is better known and well-received in China,” he said.
China Resources is aiming to turn around the troubled chains profitability within three years after merging the backroom operations into Vanguard’s.
CR Vanguard owns more than 4100 stores in China and entered a joint venture with Tesco in May last year, leaving the British retailer with just 20 per cent of the business.
While the Tesco brand name might be about to disappear, both parties see positive benefits from the continuing partnership. CR Vanguard acquired a usefully-sized bolt-on store network to build its critical mass in the market, which should surpass the combined sales of Walmart and Carrefour in China. It gained advanced FMCG business practices from Tesco.
China remains a strategically important growth market for Tesco, with the joint venture combining Tesco’s ‘best in class’ retail practices, international sourcing and multi-channel capabilities with CRE’s strong local knowledge and brand.
The two companies are in the process of merging their property businesses and plan to launch an eCommerce offer at the end of March.
Vanguard will also sell 761 Tesco own-brand products with some Vanguard-branded lines joining Tesco’s shelves, as the two brand’s supply chain networks are integrated.
Tesco also separately has its international sourcing headquarters based in Hong Kong, from where it sources more than 50 per cent of all clothing and 40 per cent of other non-food items. It buys about £2 billion worth of goods and services from China for the Tesco Group annually.
