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Tesco in U.S. online deal
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June 25, 2001: 3:55 a.m. ET
UK's biggest grocery chain teams up with Safeway Inc. for Net venture
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LONDON (CNN) - The UK's No. 1 grocer Tesco said on Monday it will link up with the U.S.'s Safeway Inc. to bring Tesco's online shopping system to the U.S.
Tesco said in a statement its Tesco.com service would operate through GroceryWorks, Safeway's online grocery channel. Tesco will take a 35 percent stake in the Internet business, which will be overhauled.
The UK company's Tesco.com unit will provide intellectual property, technical resources and an initial $22 million to the venture, a statement said.
Tesco's online shopping business is the most successful in the UK and turns a profit. It has almost 1 million registered customers, receives 70,000 orders per week and posted annual sales last year of £300 million ($420 million).
Safeway Inc.'s (SWY: Research, Estimates) GroceryWorks unit will temporarily suspend operations on Tuesday, the companies said.
When the service resumes it will operate under the Safeway Inc. banner, with a new Web site and deliveries coming from stores rather than warehouses, the statement said.
GroceryWorks has been operating only in the state of Texas since January last year. The new Safeway-Tesco operation will develop online grocery shopping throughout the U.S., where the market is still smaller than in the UK.
"Retailing services are a key part of the Tesco strategy for growth," said Tesco Chief Executive Terry Leahy. "We have developed the best online grocery home shopping system in the world which we know can be of use to other retailers."
Tesco (TSCO) said on June 15 that in-store sales at its UK chain jumped almost 10 percent in the 12 weeks to May 19, as it announced a new round of price cuts in the nation's ongoing supermarket price war.
Tesco, which ranks ahead of Sainsbury [LSE: SBRY], Wal-Mart's (WMT: Research, Estimates) Asda and Safeway (SFW) among UK chains, has continued to build a lead in in-store and online market share over its rivals.
It announced on April 10 that its annual pretax profits rose above £1 billion ($1.4 billion) for the first time.
Tesco (TSCO) shares rose 0.4 percent to 265 pence in London trading on Monday. 
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