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Friday, August 21, 1998 Published at 08:07 GMT 09:07 UK

Business: The Company File

Esso fuels Tesco's expansion

Esso and Tesco plan to drive profits by forming a partnership

The UK's largest supermarket group Tesco is planning to join forces with Esso, the country's largest petrol retailer, to open a chain of its Express convenience stores.

Tesco is hoping to set up a 'limited number' of trial convenience stores on Esso's petrol forecourts.

Retail roll out

If the joint venture proves a success, Tesco could look to roll out the stores nationwide over the next few years.

Esso already has around 1,000 convenience stores at its petrol stations.

Tesco said: "We believe that the combination of Tesco expertise in grocery retailing and Esso's expertise in petrol retailing makes this a great deal for customers who will get top quality products at low prices in convenient locations."

"When a final decision has been made by the two companies to proceed, further details will be given," the company added.

[ image: Supermarkets and petrol retailers have called a truce]
Supermarkets and petrol retailers have called a truce
The partnership would signal the end to the bitter battle of the petrol pumps which has raged between supermarket groups and petrol retailers throughout the 1990s.

Supermarkets such as Tesco fired the first shot by slashing petrol prices, but Esso fired back with its 1996 "Price Watch" campaign, where the group pledged to match the lowest petrol price within the local area of its petrol stations.

End to hostilities

The ensuing price war massacred petrol retailers profits, until a truce was finally called.

Now petrol retailers and supermarket chains are vying to team up with each other to improve earnings.

Safeway and BP recently announced their own joint venture, Somerfield has joined forced with Elf, Budgen's with Q8 chain, owned by Kuwait Petroleum and Alldays operates around 150 Total shops.

Esso is part of the US oil giant Exxon and accounts for almost a fifth of the UK petrol retailing market.

The deal will have to be sanctioned by the Office of Fair Trading, which has the task of assessing whether the tie up will create competition concerns.

It is unclear whether Esso will run Tesco's 288 petrol stations.

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