In part two of just-food’s management briefing on the globalisation of food retail, Glynn Davis looks at three markets where the trend, in different ways, has taken hold – China, India and the US.


Consider that in the north of China the migrant population accounts for 17% of the population; in the south it is 62%. The average age in the north is 42 while it is only 32 in the South, according to surveys from Tesco.

Kantar Retail’s director of retail insights Bryan Roberts adds that there are also “hugely different structures in each province” that can dictate whether retailers can wholly-own local businesses or only engage in joint ventures. 

According to Jim Prevor, an US-based industry analyst and author of Perishable Pundit, “politically speaking, decisions can be changed on a dime”, which perhaps suggests why the price-to-earnings multiples placed on retailers for revenues derived from China will be lower than for those from retailers deemed to be operating in more predictable political climates.

However, the magnitude of the opportunity in China is simply too tempting for the world’s largest retailers to ignore and they are all jockeying for position as the country rapidly develops. China’s GDP is projected to grow at 10% at least until 2014, according to Planet Retail data, and the country is set to be the world’s largest economy by 2030.

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The growth is leading to the rapid development of the hyper and superstore channels, with the current 2,600 outlets expected to mushroom to 3,800 by 2014. Tesco for one is planning to double its hypermarket presence to 200 over the next five years and the other key players Wal-Mart Stores, Carrefour and Metro Group are also continuing to expand in different parts of the country – probably in order to avoid each other and the stronger local players.

Such is the strength of some of these local players, which including the likes of Wumart Stores, that Prevor believes they will ultimately become strong enough to move into Europe and the US and, over time, make their presence felt on the global stage.


The over-riding consideration for global retailers entering India is the ban on wholly-owned foreign multi-brand retailers, which has forced multinationals to think more creatively of ways to gain exposure to this large and fast-growing market.

The typical route into India has involved setting up joint ventures with local operators – hence the tie-ups between Wal-Mart and Bharti Enterprises, and Tesco and Trent (owned by Tata Group), while Carrefour is understood to be planning a similar venture.

It is also possible for outsiders to independently run cash-and-carry operations that supply local Indian-owned shops (called kiranas) and this is the route taken very successfully by Metro Group, which was one of the first global operators into the country.

Andrew Seth, former chairman of Lever Brothers UK and author of Supermarket Wars, says: “It’s largely a cash-and-carry business so it can compete without anybody noticing. They are very good at it and have bought up some competitors. It’s a niche but it’s a bloody big niche.”

The big question in India is when will the government relax its rules on foreign ownership? “There has been lots of speculation and we expect a decision soon. The leading retailers are hopeful and we wait to see whether it will be a tiered/phased approach. The Indian retailers think it’s a positive for the modern retail segment,” suggests Rick Everitt, head of market intelligence at IGD.

The argument from the big operators is that the influx of professional expertise will help raise the standards of retail across the industry within India in areas like food safety and the supply chain for all retailers of any size including even the smallest kiranas.

Whatever Indian retailers think about the opening up of their market to westerners, Seth believes the green light on ownership will not signal a gold rush for the global players as there are some extremely strong local operators. “Tata, Reliance and Mittal have the government in their pockets so they’ll want to lead in the expansion of modern retailing in India,” he suggests.


The strong local competition and the presence of the mighty Wal-Mart represent a deadly cocktail that has contributed to the downfall of many non-US grocers in this massive market and is a sufficient deterrent to others that might have considered entering the country.

“Most overseas players have failed including Marks and Spencer, Sainsbury’s, Carrefour and Auchan while Ahold just manages to hold on. Part of the problem in such a developed market is that it’s hard for an outsider to make it work and for local consumers to embrace them,” says Prevor.

He believes food retail more than many other sectors is local and that this is especially true in the US, with many stores drawing the majority of their customer base from within a 2.5 mile radius. This is why micro-marketing has proven to be a massively important weapon in this extremely competitive marketplace.

This localness is also driven by the huge diversity in areas of the US with big local and state-to-state differences. Roberts compares San Francisco with deepest Minnesota as an example of the significant differences across the country and this is why he believes it is “virtually impossible to roll out a national chain”.

The likes of Kroger, Walgreens, Target Corp., Albertsons and Safeway Inc have strong presences but only in specific regions. Wal-Mart is of course the big exception, along with the Dollar Stores, in being in all the US states, but it is of course a general merchandise retailer as opposed to a specialist food store.

Wal-Mart’s sheer scale provides a powerful disincentive to any regional retailer considering looking at expanding abroad as they need to commit all of their resources to repel its advances. Seth suggests: “Over the last 20 to 30 years it has become so powerful that retailers like Kroger and Safeway are only worried about keeping Wal-Mart at bay.”

Thankfully for these businesses it is not too much of a hardship as the opportunity for organic growth in the US is very impressive. Prevor believes retailers US retailers are “spoiled as the country is so big”. He adds: “It’s easy to expand in the US so why go to India. Retailers from the Netherlands will ultimately end up having to go overseas to grow but this is not the case for US companies.”

Tesco clearly looked at the US as a land of opportunity rather than focusing too much on the presence of Wal-Mart when it decided to open its Fresh & Easy chain on US soil in 2007. Seth says former Tesco CEO Sir Terry Leahy believed the UK’s largest retailer could take a 10% share of the national US market because it thinks it is better than Kroger and Safeway. The upside, he says, is therefore enormous.

But for now it is losing money – a GBP95m loss in the first half of its 2010/11 financial year (to end-August) – and the decision of whether to stick with this overseas foray will be in the hands of new CEO Philip Clarke.