The world's major international food retailers are looking to invest in emerging markets, with the BRICM (Brazil, Russia, India, China and Mexico) group of five viewed as the prime development areas. Ben Cooper examines how critical the modernisation of food retailing is to the overall development of food markets in the BRICM economies.

At a recent analysts' conference, retail giant Wal-Mart said it was looking to increase investment in China and Brazil. Already majority owner of the largest retailer in Mexico, Wal-Mart launched a joint venture in India with Bharti Enterprises last year, while its plans to enter the Russian market are well known.

This litany of prime emerging markets is familiar. In fact, it is mirrored in the investment strategies of many other multinational corporations. The current economic turmoil may be keeping CEOs of global food companies awake at night right now, but looking further ahead it is the development of the BRICM (Brazil, Russia, India, China and Mexico) markets that they are dreaming about.

Having been identified almost universally as the world's key growth markets, the five nations have increasingly been seen as a group, and BRICM investment has become something of a buzzword. Of course, it goes without saying that while they are often viewed collectively, no one would suggest they are a homogeneous group. The disparity across various economic measures and the wide cultural and political differences, not to mention the varying rates of market development, means any generalisation has to be carefully qualified.

But there are plenty of unifying characteristics too, and the significance of retail development - as underlined by the inward investment of global food retailers like Wal-Mart - to the overall development of these countries' food markets is certainly among them.

As with many other indicators, the extent of retail development across the five countries varies significantly, and itself represents a key point of difference. A series of reports on the BRICM markets published by just-food has ranked the countries in terms of their investment potential for food companies. To compile this investment index, key statistics have been compared, including population growth, GDP growth, packaged food market value in 2007, and packaged food market growth. This analysis, perhaps not surprisingly, puts China first, followed by India, Brazil and Russia, with Mexico in fifth place.

While Mexico's position as the fifth-ranked country may owe more to its smaller population and significantly lower GDP growth, it is interesting to note that it also has a comparatively well developed retail infrastructure. Wal-Mart has been present in Mexico since 1991, while it is only just addressing some of the other BRICM markets and is yet to make its long-anticipated entry into Russia.

Wal-Mart de Mexico, which has just posted a 13% increase in revenues and a 12% rise in operating income for 2007, is Mexico's largest retailer and a significant retail enterprise in its own right. It is majority-owned by Wal-Mart but is also listed on the Mexican Stock Exchange.

In 2006, Mexico was ranked in 19th place in AT Kearney's Global Retail Development Index, but by 2007, it had risen to ninth position. Retail sales per person are rising year-on-year along with per capita GDP, according to the just-food report, Branded foods in Mexico - forecasts to 2013. Indeed, the report adds that the Mexican retail sector is "approaching saturation".

Of course the other BRICM markets also have some powerful retail concerns, such as X5 in Russia and Bailian Group and Wu-Mart in China, and their retail sectors are developing fast, but retail development to a degree is a proxy for market maturity, and Mexico is without doubt among the most developed retail environments of the five. Brazil also has a developed food retail sector; hypermarkets and supermarkets there accounted for around two thirds of total grocery sales by value in 2007, according to just-food's Branded foods in Brazil - forecasts to 2013.

Mexico's maturity is further underlined by the scale of its packaged food market which was valued at US$57.9bn in 2007, according to the just-food Mexico report, compared with $13.4bn in India.

While China has the largest packaged food market of the five, valued at $96.2bn in 2007, it of course has a population ten times that of Mexico's. Just as per capita GDP is a key indicator of economic development, packaged food sales per capita can be seen as a useful indicator of retail development. The Mexico report adds that growth in Mexican packaged food sales has been slowing, further suggesting market maturity.

In contrast, China's packaged food market is forecast to grow by
73.6% between 2008 and 2013 to reach $194.5bn, according to just-food's Branded foods in China - forecasts to 2013. China's grocery retail market is expected to grow by about 61.5% over the same period, to reach a total value of CNY2.1 trillion. Inward investment by international retailers is viewed as a key catalyst for the continued development of organised retail in China.

Indeed, the pace of inward investment has increased in recent years following the relaxation in 2004 of rules governing investment by overseas retailers. In this instance, it has been French retail giant Carrefour which has taken the lead. But the other usual suspects are also moving in. "China is attracting a lot of interest from global retailers and will become a focus of investment from major multinational multiples such as Tesco, Wal-Mart and Metro Group over the next five years," the China report forecasts.

However, as in Russia, domestic retail groups have been asserting themselves, keen not to let the international groups take all the spoils. "The early success of hypermarkets with Chinese consumers prompted leading domestic players to jump on the larger store format bandwagon," the report states.

Meanwhile, while India has a lower penetration of modern retail formats, the just-food report, Branded foods in India - forecasts to 2015, describes the potential for food processors and retailers in the country as "a veritable commercial goldmine".

On the back of increasing affluence and the expansion of India's middle class - 300m and growing - larger commercial food chains are increasing their share of a traditionally fragmented retail environment dominated by smaller local grocery stores, the report states.


just-food has published five reports covering the BRICM (Brazil, Russia, India, China and Mexico) markets.  For more information or to download the reports, go to /store/product.aspx?id=72202&lk=rotw_arch