UK supermarket group Tesco will overtake both Metro and Ahold to claim third place in the global grocery retail league by 2010, according to a new report.

The report, Tesco: Driving Global Capability, from food and grocery think tank IGD, predicts that Tesco’s global sales will grow from £30.8bn today to £58.9bn (US$113.4bn) by 2010 (an annual growth rate of 9.6%), at which time the UK will account for 71% of Tesco’s global sales, Asia 17%, and the rest of Europe 12%.

Tesco’s international business has increased from £1.3bn to £6.1bn over the past five years, and IGD expects this figure to reach £17.3bn by 2010.

“Tesco’s international success has been driven by a clear policy of identifying the right business in a given market and ensuring that all areas of that business are as efficient as possible, to underpin future growth,” said IGD chief executive Joanne Denney-Finch.

“Its recent move into China is a great example of this strategy. Tesco explored China for three years before completing the joint venture with Ting Hsin, owner of the hypermarket operator Ting Cao. The partnership is still in its start-up phase, yet IGD believes the scale of the opportunity in this market is so great that China will drive Tesco’s long-term international growth alongside Turkey and Japan. A deep understanding of the customer and a clear focus on its four pillar strategy are also drivers of Tesco’s success,” she added.

The number of international markets in which Tesco is present has more than doubled over the last seven years from six to 13.  It is currently focusing on start-up operations in China, Turkey, Japan and Malaysia, and IGD considers that an underdeveloped retail environment will be a critical factor in selecting future market entries. Therefore IGD believes that Tesco may consider Russia, Indonesia, Vietnam and further markets in Eastern Europe, such as Romania, for entry in the next six to ten years. 

“Although trading internationally is not without its challenges, Tesco has managed to grow its international business by more than 350% in sales terms in the past five years establishing itself as the fastest growing retailer in the global top ten in 2003. IGD believes that other key international trading opportunities include developing its position as a key global account for suppliers and rolling out retail services, such as financial services and internet home shopping, to international operating markets in order to broaden and deepen Tesco’s relationship with its customers,” said Denny-Finch.