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Tuesday, 19th June 2012
In Business In Japan,

Tesco to quit Japan

Tesco has announced plans to quit Japan following a deal that will see it sell its operations in the country to Aeon.

The Britain-based supermarket giant failed to establish its brand in Japan, with its stores seemingly unsuited to the Japanese market, despite heavy investment that saw it set up 117 outlets in the country.

Intense competition with domestic firms alongside a thin concentration of stores across the country and an inability to understand the tastes of Japanese consumers have all been named as reasons behind the company's failure.

"The fact is that Tesco's supermarket format and product mix, even toned down, did not suit a market that is dominated by convenience," said Jon Copestake, the chief retail analyst at the Economist Intelligence Unit in an interview with the Wall Street Journal.

Other foreign retailers, including the French firm Carrefour and Metro from Germany have also been forced to pull out of Japan in recent years because they were unable to penetrate the market.

To leave the country, Tesco is effectively paying Aeon to take over its operations, after it revealed a two-stage exit strategy that will see control transferred from one company to the other.

Tesco will begin by selling 50 per cent of the shares in its Japanese business to Aeon for a token sum. This will create a partnership between the two firms, after which Tesco will invest £40 million as a venture partner to finance restructuring of the business.

Once this is completed, the retailer will cease to have any financial involvement in the chain of Japanese stores.

Philip Clarke, Tesco Plc chief executive, thanked those colleagues who have worked in Japan for their hard work.

"We are very pleased to announce this deal with Aeon today, and are confident that this will deliver the best outcome for our staff, for our customers in Japan and for our shareholders," he said.

Written by Susan Ballion