Tesco turning Japanese no longer

Tesco has historically pursued aggressive expansion plans in many markets outside of the UK, including the US and Asia. Notable acquisitions in Asia have included the $1.9bn purchase of Eland Retail Corporation in South Korea in 2008, the increase from a 50% holding to 90% of Hymall in China and a number of acquisitions in Thailand.

In addition to this Tesco made two acquisitions in Japan back in 2004. Initially Tesco acquired C Two Network for just under $300m and then, using C Two Network, acquired Fre’c in the same year, the value of the deal being small, at just over $3m. These two acquisitions gave the group access to just over 100 stores across the Greater Tokyo region and now that number is closer to 130 stores.

However, yesterday Tesco announced that it had finally decided to give up on its attempts to crack the Japanese market, having finally admitted that profitability in this market is hard to achieve let alone build and I quote from the press release “we cannot build a sufficiently scalable business”.

So where will Tesco continue to focus its efforts now? The US business Fresh & Easy is still causing headaches in terms of not yet moving into profit, and Japan is not the first Asian market that Tesco has explored and subsequently backed out of after finding it wasn’t quite to its taste. In 2005 the company admitted defeat in Taiwan and agreed to hand over and pay Carrefour for six stores in Taiwan in return for Carrefour’s stores in the Czech Republic and Slovakia.

Never normally short of buyers for its goods, it remains to be seen who will come forward with their Clubcard to purchase the Japanese business.