The world’s second-largest retail chain with presence in more than 30 countries, Carrefour intends to open the first cash and carry or wholesale store on its own by the second half of 2009, the officials added.

“Carrefour WC&C India is our 100-per cent subsidiary and will set up the cash and carry business in India. We are planning one or two stores by the second half of 2009 and add more as the business grows,” said Managing Director Herve Clec’h.

“Master Franchise Company, also 100 per cent-owned by Carrefour, will appoint the franchisee for retail trade business. We are talking to five-six Indian groups for this,” Clec’h, who recently took charge of India operations, told IANS.

Carrefour hopes to finalise the Indian franchisee for the multi-brand retailing business, in which no foreign equity is permitted in the country, over the next couple of months, added Gerard Freiszmuth, general manager for Carrefour India.

“We have not finalised the investment plan yet,” Clec’h said, when asked for the amount his group intends to invest in the country,” he added, “We are here for the long haul, so money will not be a constraint.”

India presently permits up to 51 per cent foreign equity in single-brand retail trade business but disallows foreign equity in multi-brand stores in a bid to protect domestic stores, predominantly run as neighbourhood mom-and-pop shops.

The policy, however, permits 100 per cent foreign equity in cash and carry or the wholesale business, as also in the area of extending technical know how, supply chain management and general support services to Indian retail companies.

Carrefour WC&C India will also enter these areas where the Indian franchisee can get the same technical expertise that go into running the retail trade stores of the French company across the globe, the two officials explained.

“The Indian retail stores will also have access to our global brand. They will all be Carrefour stores, even though we will have no equity participation in them, in line with present policy,” Clec’h said.

“But we see the franchising option as a transition to partnership,” he said, adding his group will be interested in acquiring equity in the Indian retail trade venture as and when the Indian government gives permission.

Freiszmuth, who expanded Carrefour’s sourcing operations in India from virtually nothing to a few years ago to a $450-million business today, said his group was more keen on the hypermarket segment of retail trade in India.

“These are stores spread over 5,000-8,000 square metres. The Indian customer can get the same experience of shopping in any of Carrefour’s stores be it Milan or Kuala Lumpur – but with lot of local flavour,” he said.

The two officials said the entry into India’s merchandise trading business does not mark an end to the group’s global sourcing operations from the country. “At present garments account for 90 per cent of our sourcing operations. But fruits and vegetables are also catching up fast,” Freiszmuth added.

The past year has seen keen interest from global players and domestic companies alike to enter the retail trade business in India that is estimated at over $340 billion at present and projected to touch $520 billion by 2010.

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In fact, even a Reliance Retail spokesperson, when contacted, told Indiaretailing that “there is absolutely no such move by the company and it is all in the realm of speculation.”

Expressing surprise over the report, the spokesperson said “there has been no such move till now by the group.”

“Carrefour has held discussions with a large number of retailers in India over the past year and has now shortlisted three of them. The final partner will be announced in January,” the spokesman for Carrefour said.

Though the name of the final partner is still under wraps, the spokesman said the French retailer has formed two companies, Carefour India and Carefour WC and C (wholesale cash-and-carry), which will oversee operations in India with its joint-venture partner.

On the move to have multiple partners—like it has in China, the spokesman said, “China is a huge country and the circumstances are different in the two countries. As of now, we will be having only a single partner.”

Carrefour, which has shortlisted three Indian companies, is expected to announce its partner in January 2008 and launch its first joint-venture hypermarkets in India around mid-2009.

Top executives of the company have been visiting India and engaged in talks with a large cross-section of Indian counterparts to select a partner.

Asked about the plans for the hypermarkets, the spokesperson said, “These would be between 4,000 and 10,000 square metres. Of course, the location of these hypermarkets and other details would be worked out once the company finalises who its partner would be in this country.”

As the spokesman said, “Since India is a growing market and retail is catching up in a big way, it is felt that Carrefour would be able to give value to its customers in this country.”

The trigger was a recent meeting between Carrefour’s top team and a few executives from Mukesh Ambani’s office. Sources also indicated that a top Reliance team led by Mr Ambani’s close associate Manoj Modi is likely to go to France for further talks. “If it happens, it will be a global alliance. But these things take very long time to materialise,” said sources.
The exact contours of a possible Carrefour-Reliance tie-up is still unclear. But sources said that Reliance could well emerge as a potential partner for Carrefour’s cash-and-carry business in India. The deal might be akin to the Bharti-Wal-Mart arrangement, sources added, but this could not be confirmed.

For the past two years or so, Carrefour has opened up dialogue with a range of partners, including DLF, Parsvnath and the Wadia group. After a considerable soul searching on the tenure of its Indian strategy, Carrefour is said to have figured out that its Indian partner must possess three key strengths: a cache of prime real estate, undeniable clout with the government and a long-term interest in retail. Reliance scores on all counts. It has already tied up 30-35 million sqft area across the country.

And its ability to influence policy in the corridors of power remains unmatched. It is also committed to the retail business unlike real estate companies which are merely looking for lease or sell commercial space.

But there’s clearly one issue where, if a deal with Carrefour finally materialises, will come as a surprise. Reliance does not have a track record of partnerships. So far, India’s biggest private sector company has little experience in managing complex joint ventures.
Reliance Retail, when contacted, came up with a terse statement: “We won’t comment on speculation.” Sources said that the initial proposal for a possible alliance between the two giants was mooted by Carrefour and it was for a front-end retail venture in the country. However, it is understood that Reliance has not shown much interest in this and the two companies have decided to jointly explore a mutually acceptable model. “One thing is certain, Reliance Retail will not operate Carrefour-branded outlets,” sources added.

They also said that Reliance would mainly be interested in getting into a partnership with Carrefour on two fronts: strengthening its back-end in India and setting up retail operations in other emerging countries. For Carrefour, Reliance’s real estate bank and considerable clout would help immensely in building a retail operation.

Though Reliance Retail has been aggressive in its rollout of the front-end retail business, it is suffering significant losses due to problems in its back-end and supply chain. Also, the company is yet to open a wholesale ‘cash and carry’ store. If the company is able to strike an alliance with Carrefour in these areas, it can solve its supply-chain problems.

Perhaps, aware that the behemoth cannot single-handedly pull off its ambitions in retail, chairman Mukesh Ambani has already signalled a change in philosophy. In his speech at RIL’s 32nd annual general meeting last October, Mr Ambani had said that joint ventures and partnerships would be key growth drivers for the group in years to come.

He said Reliance Retail is building global partnerships with global leaders in all aspects of retail, including fast-moving consumer goods, health and wellness, apparels, electronic goods, lifestyle products and services, home and furniture, luxury goods and financial and advisory services. For the company, which had initially decided to operate completely on its own, this is a major departure from the past.

Interestingly, last month, a French newspaper had reported that Carrefour was looking at selling its discount supermarket businesses Dia and ED, which was subsequently denied by the Carrefour management.

Talks are on to hire the former Asia-Pacific head of Electrolux Peter Birch to head Videocon’s entire retail businesses. Some of the names being considered for the format are Bold, Next Cash & Carry and Videocon Cash & Carry.

The company may also tie up with a global player in this space, sources close to the development said. All the retail businesses like Next Retail, Planet M and the cash & carry format currently housed under Videocon Industries will also be spun off as Videocon Retail some time in mid-08.

“The growth in consumer demand and the growing share of the organised players in retail is compelling. We see the retail business, which is currently doubling for us each year, as a great value proposition,” said Venugopal Dhoot, CMD, Videocon Industries.

KSA Technopak, Ernst & Young and Price WaterhouseCoopers have been roped in to advise the company on the retail initiative. The company has kicked off the venture by acquiring land in Ahmedabad, Calcutta, Bangalore, Aurangabad and Ahmednagar.
The cash & carry business will retail food, grocery, apparel, footwear, consumer electronics, furnishings, hardware and general merchandise. Videocon plans to set up around 40 large stores, each consisting of 1,00000 to 75,000 sq ft across the country, for its cash & carry business by 2012.

A back-end office for the business is being set up in Navi Mumbai to deal with domestic and other global suppliers. Meanwhile, the company has hired Essar Retail’s COO Subir Ghosh to head the Planet M business. K S Raman is the executive director of all the retail businesses. Videocon Industries has outlined a total investment of Rs 4,000 crore during the next five years in the retail business.

The report said six retailers from the two countries have entered the Top 250 rankings, including Chinese retailer Bailian Group(1), which entered the list at number 101. The highest ranked Russian retailer was X5 Retail Group NV (X5) at number 191.

Dr Ira Kalish, Deloitte Research, said: “This is an exciting time for global retailing. There is evidence of consolidation and modernisation in emerging markets, and the strategies behind the emergence of these new stores reflect a growing maturity among emerging market businesses.”

The total retail sales for the Top 250 rose to $3.25 trillion in fiscal 2006, up eight percent from fiscal 2005 with only 36 retailers seeing declining sales in 2006, compared to 49 in 2005.

The report said the average net profit for the group (based on available figures from 187 companies) was 3.6 per cent, a small increase from 3.5 per cent last year. Just seven of the 187 companies reported a net loss in 2006, compared with 15 of 188 companies in 2005.

World’s largest retailer Wal-Mart continued to top the list, and increased its lead over second placed Carrefour Group (Carrefour). The big mover was Tesco PLC (Tesco), which overtook German retail giant Metro AG to take fourth place, the first movement among the Top five since 2003. In doing so, Tesco also became the second largest retailer in Europe and is gaining ground on Carrefour.

Kalish added: “The Top 10 retailers’ share of Top 250 combined sales continues to inch up. With combined sales of $978.5 billion in fiscal 2006, the world’s 10 largest retailers accounted for 30.1 per cent of Top 250 sales compared with 29.4 per cent in 2005.”

PARIS: Carrefour, the world’s second-largest retailer, said it has agreed to buy a 75 per cent stake in Indonesian group Alfa Retailindo for 674 billion Indonesian rupiahs ($71.47 million). The takeover comes as Carrefour continues its strategy to expand in fast-growing emerging markets, as it tackles competition and price pressure its main French market.

Alfa Retailindo is one of the leading retailers in Indonesia, where it operates 29 stores across the country.

“This acquisition forms part of Carrefour’s strategy to reinforce its presence in key growth markets through a locally adapted multiformat approach,” France-based Carrefour said.

Carrefour shares closed at 48.71 euros on Friday. The stock has fallen by around 9 per cent since the start of 2008, having risen 16 per cent in 2007.

Sixteen energy saving measures, which are mainly related to lighting, air-conditioner use and heat recycling, will be used in this store. At the same time, some advanced facilities have also been introduced by Carrefour from Malaysia. Compared with an ordinary store, the Guanggu store will be able to save 20% of its energy costs with the help of those facilities.

It is estimated that in a Carrefour store with 8,500 square meters of supermarket space and 4,000 square meters of shopping center area, 1,200,000 kilowatts of electrical energy and 50,000 cubic meters of water can be saved.

Carrefour says although it costs more than RMB2 million to open an energy saving store, the expenses for maintaining that store will be decreased over time and the rate of return is also good. In 2008, the company will begin transferring all of its stores in China into energy saving stores.

According to a source close to the deal, the gourmet food format is likely to be integrated with Reliance Fresh “wherever possible,” (upmarket localities) as a shop-in-shop format. This would help M&S get immediate scale in food business. There are 491 Reliance Fresh stores that sell food, FMCG and fruits and vegetables and this figure is likely to touch 1,400 by the end of next fiscal.

“The implications of this particular JV are much deeper. It’s much more holistic in nature and therefore taking long to seal,” the source added.

The $16-billion M&S, operating in the country through a franchisee arrangement with Planet Retail since 2001, is in the midst of charting a new India strategy aimed at accelerating expansion in the domestic market. It recently slashed prices by 20% to attract more footfalls in the stores and taking prime space in malls to open more stores.

Planet Retail was earlier a 51:49 JV between Indonesian NRI VP Sharma and Pantaloon Retail. The JV has now been called off and the brands that it was managing has been divided into fashion (Sharma) and sports (Pantaloon).

Indian government allows foreign retail companies to invest up to 51% in Indian retail companies on the condition that they sell goods under a single brand. It also allows 100% foreign investment in wholesale business. What it still does not allow is foreign investment in companies that sell goods of more than one brand directly to consumers.

The fear is that such a move would kill small grocery businesses – the mainstay of everyday shopping in India. So, while Starbucks, Louis Vuitton and M&S are allowed to come in as they sell goods under a single brand globally, Carrefour and Wal-Mart are not allowed to sell to consumers directly as they sell thousands of brands.

Informed sources said the senior Ambani’s core team has made significant progress in its talks with M&S, which also had preliminary engagements with other Indian corporates like AV Birla group, Mahindras, Trent and even the audit firm Lodha &Co.

Clair Foster, M&S’ spokesperson in London, declined to comment on market rumours. The UK retailer operates more than 20 stores in India out of the 760-strong network globally. M&S recently set up a business development team in Bangalore under senior executive Spencer Sheen to rework the India gameplan.

Sources said M&S would settle for a 50:50 JV with Reliance, in a marked departure from its earlier stance that it would like to keep the maximum permissible 51% stake under FDI regulations in single-brand retaiing. Troubled by stagnant growth in matured markets, M&S is looking to rapidly scale up operations in expanding economies like India and China.

M&S may have found a match in Reliance, which is carrying out one of the most ambitious retail rollouts in this part of the world. For Reliance, the UK retailer’s stature as a leading global mid-market fashion trend-setters will augment its key apparel retailing vertical.

In context, it may be mentioned that Reliance has adopted a pragmatic approach of floating joint ventures that may help bring in critical domain expertise or a definitive brand edge. Its JV with Citigroup for retail financial services, and another one with US home improvement company Lowe are pointers in this direction.

So far, Carrefour has donated RMB23 million to the disaster areas. It is also the largest amount contributed by a French company in China. Duran says that the Wenchuan earthquake is a big disaster to Sichuan and the Chinese people. The rebuilding after the earthquake needs a lot of manpower, materials and financial resources and it is a long-term process. Carrefour Group will try its best to support the rebuilding efforts of the local people.

On the day the earthquake hit Sichuan, Carrefour immediately donated RMB2 million to the disaster areas. After that, Luo Guowei, president and CEO of Carrefour China area, announced that the group would donate another RMB1 million through Chengdu Youth Development Foundation to rebuild schools after the earthquake. On May 23, the group decided to donate for the third time and the total donation reached RMB23 million.