Dean Best

In the spotlight - Carrefour at a crossroads

By Dean Best | 9 July 2010

The plot thickens. Just days after speculation emerged that Carrefour planned to sell up in Thailand, Singapore and Malaysia, the world's second-largest retailer today (9 July) insisted it would keep its stores - but only in two of the markets.

Carrefour refuted the rumours that it planned to close its outlets in Singapore and Malaysia but made no mention of its operations in Thailand.

Earlier this week, the French retail giant was said to be looking to sell off its stores in the three Asian markets, with reports claiming the company raise around US$1bn from the disposals.

The likes of Big C Supercenter, pan-Asian retailer Dairy Farm International Holdings, Japanese retailer Aeon and UK retail giant Tesco were linked to stores in one or more of the markets and the stage looked set for months of speculation of who would buy what Carrefour stores.

Today's partial rebuttal from Carrefour has raised eyebrows among industry watchers.

First, for Carrefour to insist it is keeping its business in Singapore is surprising, given the retailer runs only two stores in the market. Singapore is a tiny part of Carrefour's global business and the retailer, on paper, is present in markets with greater potential.

Carrefour's business in Malaysia is bigger. It runs 22 hypermarkets in the country and the retailer has set out ambitious expansion plans for the market - by 2012, it wants to have 40 hypermarkets in Malaysia. Nonetheless, Malaysia remains a relatively small market for Carrefour.

And what of Carrefour's business in Thailand? Do we assume that Carrefour's silence on that market suggests the retailer is looking to leave that market?

It would not be a surprise if Carrefour did decide to quit Thailand. Citing Planet Retail data, RBS retail analyst Justin Scarborough said Carrefour is not even among the five largest retailers in Thailand, where it runs around 40 stores.

As such, these markets, to varying degrees, look like prime candidates for a company that continues to undergo a period of transformation under chief executive Lars Olofsson.

Since the former Nestlé executive took the helm at Carrefour at the start of 2009, he has taken a fresh look at the entire business.

Olofsson set out plans to cut costs by EUR4.5bn (US$5.71bn), to improve its operations in its so-called G4 markets (France, Belgium, Italy and Spain) and step up investments in high-growth markets like China and Latin America.

The Carrefour chief executive has pressed ahead with breathing fresh life into the retailer's domestic business, through measures including the roll-out of the Carrefour Market store format and the launch of a new entry-level own-label product range.

Carrefour's operations in Belgium and Italy have been restructured, while, in Spain, the retailer has expanded its Carrefour Express format and rolled out the own-label line first unveiled in France.

It is clear, then, that a clear priority for Olofsson and Carrefour are those G4 markets in western Europe.

Carrefour is also sticking with - quite rightly - its operations in China, still a market with huge potential for multinational retailers.

The retailer also appears to be standing by its business in Brazil, another key emerging market, and where it is neck and neck with Wal-Mart and local domestic giant CBD.

Carrefour, which is second place to CBD in Brazil, in terms of market share, earlier this year announced plans to spend BRL2.5bn (US$1.42bn) to expand its presence in the country.

Despite last year's pressure from investors to quit markets in Asia and Latin America, Carrefour is right to stick around in certain key strategic markets.

To stand by markets like Brazil and China, while considering exiting markets like Thailand, is sound business sense - both in the short term and in the long term.

Restructuring the business and reducing costs will help profits in the short term but, to grow in the long term, Carrefour needs a presence in markets like Brazil and China.

Looking at today's announcement, Carrefour clearly believes in the potential of markets like Singapore and Malaysia, too.

However, if the retailer does decide to cut and run from those markets, few should be surprised.

The road to long-term growth for Carrefour is more likely to lead to places like Shanghai and Sao Paulo than Singapore.

Sectors: Emerging markets, Mergers & acquisitions, Retail

Companies: Carrefour, Aeon, Tesco, CBD

View next/previous articles

Currently reading -

In the spotlight - Carrefour at a crossroads

There are currently no comments on this article

Be the first to comment on this article

Related articles

UK: Tesco confirms make-up of UK board

Tesco has confirmed the make-up of a new board that will lead its domestic operations, headed up by UK chief executive Richard Brasher.

Editor's choice: the highlights on just-food this week

Here are the top stories on just-food this week.

just the facts - Retailing in India

French retailer Carrefour this week opened its first cash-and-carry store in India after months of speculation.

Welcome to the home of food information, insight & intelligence

Not a member? Join here

Decrease font sizeDecrease font sizeDecrease font size Increase font sizeIncrease font sizeIncrease font size Comment on this article Email this to a friend Print this page