Global retailers have continued to expand into emerging markets, in spite of the political and economic turbulence seen in many of these countries and the challenges to profitability.

According to forecasters from McKinsey & Co., emerging markets are likely to play an ever-greater role for global retailers despite near-term headwinds seen throughout Asia, the Middle East, Latin America and Africa.

"Over the course of the next decade, the global face of the retail industry will change dramatically. Emerging markets will continue to see spectacular growth, both in regard to new shoppers and per capita spending," McKinsey & Co. suggests.

However, how companies grow in developing markets – and which markets they are targeting – is evolving.

Researchers at AT Kearney suggest China remains the most promising emerging economy for international retailers and the country ranks number one on the firm's 2015 Global Retail Development Index. While the weakness of the stock market – which has dented consumer sentiment – and rapidly evolving consumption patterns continue to present a challenge, China is a market global retailers will continue to explore.

Elsewhere, AT Kearney flags the potential on offer in South America, with Uruguay, Chile and Brazil all making the index's top ten. High GDP per capita, strong retail spending and stable economy also mean Middle Eastern markets like Qatar are now firmly on the radar. Political instability and a turbulent economic outlook mean Russia has become an increasingly difficult environment in which to operate. Nevertheless, as AT Kearney observes: “With the world's sixth largest economy, Russia is too big to ignore.”.

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By GlobalData

Throughout August came fresh evidence of how international food retailers are tackling these challenges and increasing their reach in some of the most promising global consumer economies. Retailers are taking a long-term view of developing markets and making more strategic and targeted investments. Here are some of the highlights.

Casino restructures in LatAm

French retailer Casino revealed it will restructure its Latin American operations, centralising the group's organisation across markets such as Brazil, Colombia, Argentina and Uruguay. The combined business will generate annual sales of EUR26.5bn (US$29.66bn) and EBITDA of EUR2bn.

Speaking during a conference call to discuss the move, Casino management revealed the company anticipates annualised run-rate synergies in the region of EUR145m, when the restructuring is fully implemented. These will include EUR45m from purchasing synergies in both private-label and branded food as well as cost and capex synergies.

Bernstein Research analyst Bruno Monteyne stressed the new arrangement will carry accounting benefits for Casino. "This deals with major imbalance previously in Casino: cash was made in subsidiary companies (with leakage to minority shareholders if repatriated) but debt sat in France. Analysts gave full value to the debt but not the cash; FX eroded assets but not debt," he wrote.

This deal is as much about growth as savings and Casino will be able to use its more aligned financial structure to fund investment in expansion in Latin America. With the financial stress of French debt removed, Casino is free to invest in organic growth as well as buying up local rivals. Additionally, the company expects to benefit from higher sales as it adopts best practice and successful formats from across its operations in the region. Casino highlighted the "enhanced growth potential" for its integrated business "thanks to cross-fertilisation opportunities".

7-Eleven to enter Vietnam

7-Eleven Inc, the US subsidiary of Japan's Seven & I Holdings, struck a franchise agreement that will see Seven System Vietnam Co. operate 7-Eleven stores in Vietnam.

The expansion marks the company's first expansion in the Pacific Rim since its 2009 entry into Indonesia. The retailer said it is the 18th country or region where the 7-Eleven banner operates, markets that also include the UAE, where its first store will open this autumn.

The convenience retail format is well-placed to serve the needs of the rising number of urban Vietnamese consumers. With limited storage space and access to cars, out-of-town stores are less suited to the requirements of Vietnam's urban population. The space is dominated by traditional 'mom and pop' retailers and 7-Eleven said it intents to "contribute to modernising small retailers in the world's thirteenth most populous country".

Auchan hit by Russia inspections, continues Asia push

The difficulty of operating in Russia was all too evident for French retailer Auchan throughout August, as the company was hit with a series of inspections by the Rosselkhoznadzor on behalf of the Ministry of Agriculture.

Firstly, the Russian authorities accused Auchan of selling meat products contaminated with horse meat. In a statement, Auchan responded: "Suggestions that horse meat had been found to be present in some recipes was rapidly refuted by the inspection body itself. These results were explained by the fact that some analyses of meat mixtures (pork in beef and vice-versa) were conducted using extremely sensitive DNA profiling methods capable of detecting minute quantities (resulting from contact with knives, mincers, etc)."

The Rosselkhoznadzor also announced its intention to apply for a legal ban on Auchan selling some cuts of meat in its stores. On that, Auchan said no action had been taken.

However, it was currency exchange – and the devaluation of the Russian rouble – that ultimately did for Auchan's first-half performance in Russia. The company reported a 6.4% drop in revenue from its central and eastern European operations during the period – in spite of a 10.6% rise in revenue in local currencies.

Elsewhere, Auchan hailed a "strong growth trend" in Asia where it operates primarily via its jointly-owned subsidiary, Sun Art Retail. The company said it is continuing to drive expansion in China and highlighted its investment in new channels and online growth through Feiniu and the acquisition of Fields, a specialist in online food retailing in China.

Wal-Mart upbeat on international despite profit warning

US retail giant Wal-Mart remained upbeat on the long-term prospects for its international business despite issuing a profit warning in the wake of a disappointing second quarter.

The company lowered its full-year earnings outlook to a range of $4.40 to $4.70, from a previous range of $4.70 to $5.05. Net profit fell to $1.08 per share in the second quarter from $1.21 per share a year earlier. Operating income fell 10% to $6.1bn in the three months. The company chalked the drop up to investments it is making in its workforce and developing e-commerce capabilities.

At Wal-Mart's international arm, the group saw the strong dollar take its toll with sales down 9.6%. However, excluding currency exchange, international sales increased 2.8% and the business delivered what CEO Doug McMillon described as "solid comps" in a call to discuss the result.

Wal-Mart's UK arm Asda is under pressure but McMillon remained upbeat on Wal-Mart's prospects overseas, in particular singling China out as a market where the company plans to grow. "We're excited about the opportunities we see in China, despite slower economic growth and currency pressures. Our position is improving — we’re gaining market share in the hypermarket category, Sam’s Club continues to perform well, and we have great opportunities in e-commerce."

Metro expands in Asia

German retailer Metro Group is another global heavy-hitter that has set its sights on growing in Asia. In particular, Metro believes it can expand its wholesale base by supplying the high-end hotels and restaurants in the "mega cities" that have sprung up in the region.

Last month, Metro agreed to acquire Classic Fine Foods Group (CFF) from private-equity firm EQT for and EV of US$290m.

"Metro Cash & Carry aims to strongly expand its foodservice operations. With the acquisition of CFF we strengthen our value proposition and enlarge our wholesale market presence fuelling future sales and earnings growth", said Metro chairman Olaf Koch.

CFF's geographical footprint covers 25 predominantly Asian cities, such as Singapore, Dubai, Hong Kong, Bangkok, Kuala Lumpur, Ho Chi Minh City and Jakarta. CFF has a presence across 14 countries and the deal will increase Metro Cash & Carry's presence from 26 to 36 countries, the group revealed.

Bernstein's Monteyne said the deal aligned with Metro's "revised strategy" of "returning to investing in growth opportunities".

He noted: “This provides access to two growth channels: firstly into more Asia cities… Metro also talked of rolling the unit out to its European operations. Selling to hotel restaurants and catering customers is the main growth area for cash and carry in western Europe; CFF's appeal to high-end hotels and restaurants will compliment this.”