THE first time Phil Clarke visted India, he had to search hard to find a supermarket. On that trip a decade ago Clarke, Tesco’s international and IT director, found only one – the Nilgiris store in Bangalore. These days, there is an abundance. “Today, you can’t drive more than three kilometres in one of the big cities without finding a supermarket,” he said.

If Tesco gets its way, there will soon be lots more. Last week Britain’s biggest grocer announced a long-awaited deal to expand into India for the first time. It is linking up with the retail arm of Tata, one of the country’s biggest conglomerates and owner of businesses that include Jaguar cars.

Because of government restrictions on foreign ownership, the deal stops short of allowing Tesco to open supermarkets under its own brand. Instead, it will develop a chain of cash-and-carry centres supplying Tata’s Star Bazaar hypermarkets, as well as many other independents. It is to invest £60m over the next two years.

Separately, it agreed a deal under which the two companies will exchange information. Tesco will provide Tata with an inside look at its systems – the nuts and bolts that make it such a formidable competitor – while the British group will gain insight into the Indian retail market.

And what a market it is. Estimates suggest that the sector is worth up to £150 billion a year, and western companies have been falling over each other like shoppers at the start of the sales to grab a slice.

Metro, the German retailer, broke into India five years ago and established a chain of cash-and-carry outlets, while Wal-Mart has been in the country for nearly two years after forging a partnership with Bharti, a conglomerate with which Tesco nearly signed.

Clarke shrugs off concerns that Tesco may be too late to the party. “We’ve thought long and hard about where we spread our resources,” he said. “India, China and America are three countries with plenty of scope for growth, which is what shareholders want. Judge us in three years’ time whether or not we’re too late.”

He remains equally unconcerned that the company lags Wal-Mart. “Our objective is not to catch people. If I worried all the time about what our competitors were doing, I wouldn’t spend any time on the business I am building.”

Tesco says it is too soon to predict how important India will become to its international operations. But the potential is enormous, whether or not the laws change sufficiently to allow Tesco to open the type of outlets for which it is best known.

Clarke said: “India is a market we know we have to be in because of the long-term potential. The contribution [to the group] will be small over the next five years or so. If the cash-and-carry business takes off, it can be in lots of places and become a very nice contributor in its own right.”

It is a strategy that may require some patience, but that is a quality Tesco has in plentiful supply.

“This deal is typical Tesco,” said Tim Attenborough, food retail analyst at Exane BNP Paribas, a stockbroker. “It’s very forward looking and this gives it a decent toe-hold in the country with substantial long-term growth prospects.”

While warmly received by City analysts, Tesco’s announcement did not go down well everywhere. Yogesh Katira, president of the Shopkeepers’ Welfare Association, which represents the interests of small store owners in Mumbai, predicted that Tesco’s arrival would bring unemployment.

He said that when Tesco eventually wins permission to open supermarkets, it would force smaller businesses to close. And there are a lot of smaller retailers who stand to lose out if the multinationals begin to take over.

The sector is dominated bykiranas, small convenience stores, the majority of which are family-run – there are about 12m across India.

Tesco hopes to convert many of them to become cash-and-carry customers, but it will regard the kiranas as fair game if it is allowed to move into traditional retailing.

“These kiranas, they might be shopkeepers but they are really entrepreneurs,” said Clarke, in response to the nascent backlash. “If it’s not food, they will sell something else. It’s a very entrepreneurial society.

“What we have to do is open cash-and-carries that bring quality and value to our business customers. They will get to respect and understand our brand. We can happily coexist.”

Despite the protests, it will come as a relief to many that Tesco has finally been able to get into India. It came close to a deal with Bharti almost two years ago but discussions fell apart when news of the talks was leaked to the press.

Asked why Tesco had chosen Tata, Clarke said the two organisations had much in common. “We felt comfortable and relaxed and easy the whole way,” he said.

If some of the local store-owners have their way, Tesco won’t find life quite as smooth when it sets up.

HOW THE INVADING GIANTS COMPARE

Tesco

Market value:£29.6 billion Annual sales:£51.8 billion Operating profit:£2.8 billion Number of staff:440,000 Number of stores worldwide:3,729 Number of countries where Tesco has a presence:13 (including India)

Wal-Mart

Market value:£125 billion Annual sales:£201 billion Operating profit:£11.8 billion Number of staff:2m Number of stores worldwide:7,200 Number of countries where Wal-Mart has a presence:15

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