Blog: A retail of emerging markets
Catherine Sleep | 19 June 2006
Last week, just-food attended IGD’s seventh annual conference on global retailing in London. The event saw representatives from major retailers, including Carrefour, Tesco and Ahold, come together to discuss a variety of strategic issues with delegates from leading food and drink companies, such as Coca-Cola, Cadbury Schweppes, Danone and Kraft.
Inevitably, the potential of emerging markets was high on the agenda. Speakers expressed a wide spectrum of views on the subject – from the advice of Robert Leechman, MD global and key customers at Coca-Cola, to “just go” to the more cautious approach adopted by Tesco’s director of international operations Philip Clarke, who warned of the need to look before you leap and research the particular market thoroughly. Nonetheless, the consensus was clear: provided food manufacturers and retailers enter emerging markets in the right way, their potential is vast.
The difficulties and challenges associated with managing the global supply chain in emerging markets might surprise those non-retailers among us: listeners were regaled with horror stories of Russian bribes (and guns), Indian truck drivers who turn off the freezer when they’ve left the store, and the near impossibility of transporting goods across China’s vast and poorly connected expanse.
Bert Swartsenburg, MD of Ahold’s European buying desk, highlighted the need for suppliers and retailers to work together as partners. But as we heard in a Q&A session with leading manufacturers, this is not always an easy task – especially given the emergence of private label, when retailers become both competitors and partners. The answer for branded manufacturers, Brian Hodous, executive vice president and group director of global sales at Cadbury Schweppes, said, is to drive product innovation and avoid lowering prices or face the risk of becoming a commodity.
In his key note address, Carrefour’s CEO José Luis Duran, warned that international expansion presented pitfalls as well as opportunities. Duran spoke of the widely publicised and much analysed difficulties that Carrefour now faces as a result of ‘overstretching’ itself and losing focus on key markets by unbridled international expansion. This has caused the world’s second largest retailer to retreat from a number of markets and focus its attention on delivering retail innovation in its home market of France, which delivers 55% of sales.
Just-food has focused on a number of other retail issues this week – including the current hot topic, which takes a look at Wal-Mart’s bid to enter the premium end of the market and appeal to more affluent customers. The world's number one retailer has come to dominate the global retail scene with its warehouse style discount stores. Now, it wants a slice of the premium pie too - and as it increases pressure on suppliers to deliver organic offerings and opens test stores to experiment in up-market formats, it looks as though Wal-Mart could be well placed to do just that.
Also of interest last week, the UK’s Competition Commission defined the scope of its inquiry into the grocery sector, confirming that it would examine the retailer-supplier relationship. The interaction between retailers and food manufacturers has always been crucial to the success of either, but under the close scrutiny of the CC the debate looks set to heat up. Look out for more on this in the coming week.
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