Scandal-ridden Ahold can’t afford any more nasty surprises, so it’s focusing on mature markets. For a healthier firm, however, Ahold’s South American businesses are a strong opportunity. Emerging markets specialist Tesco understandably decided in March not to buy out the struggling Dutch company – but its Brazilian unit could be another story.
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Ahold has announced plans to sell its subsidiaries in Argentina, Brazil, Paraguay and Peru. The troubled supermarket chain will focus on its mature operations – chiefly the Netherlands and the US.
It could also be seen as a reaction to the economic problems in South America – particularly Argentina, where Ahold’s Disco chain has 236 stores. Disco’s sales plunged from €2.1bn in 2001 to €762m in 2002, almost entirely because of the Argentinean peso’s collapse in value.
So, should supermarkets avoid trouble by staying out of troublesome emerging markets? The answer depends strongly on the company. Investors and bondholders will not lightly forgive Ahold the serious accounting problems at its US unit – and further nasty surprises could hit their confidence further. As a result, it wants to stick to stable markets.
But it’s an opportunity for healthier operators. Only the brave would commit money to Argentina at the moment, but Ahold’s main other Latin American operation – its Brazilian unit, which reported revenues of €1.3bn in 2002 – is a far more interesting prospect.
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By GlobalDataFrench firm Carrefour is Brazil’s largest retailer, and Pao de Acucar (part-owned by Casino) is the next largest player. Wal-Mart, however, has had trouble because the market is heavily food-based – which means that its global supply chain advantages are less significant.
Given the opportunities in Brazilian retail, Ahold’s sale could be an opportunity for a major food player with emerging markets experience. For example, one that recently reported 26% growth in its emerging markets-focused international operations, that is locked in a price war and a regulatory battle in its home market, and that is known to be look for bid targets.
Reports last month that Tesco would bid for the whole of Ahold looked outlandish: the company would have been hard to digest, particularly its US operations. However, Ahold’s South American business could be a different story altogether.
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