Fashion

Fashion

Walmart to buy Carrefour Brazil for 9 billion dollar?

Lars Olofsson, Carrefour's CEO, is travelling to Brazil to “motivate and reassure his Brazilian management”, according to an official statement. That might be necessary, as despite repeated denying, rumours about selling the Brazilian branch to Walmart keep getting stronger.

"6 to 9 billion dollar"

Now the transaction also has a price tag on it: between 6 and 9 billion dollar – but much like any other information about this case, it too has already been denied as it can not possibly be profitable for Walmart. The latter would be much better off opening their own hypermarkets in Brazil, while Carrefour would be crazy to completely leave one of the most important emerging markets in the world.

"UBS asked to prepare takeover"

Another – already denied – rumour was that Walmart has asked business bank UBS to prepare a possible takeover. The Americans have been active in Brazil since 1995 and are the third largest player in the distribution market after taking over Brompeco in 2004. The two bigger groups, Carrefour and Pão de Açúcar, had been in a soap-like series of courting and betrayal until Pão de Açúcar owners Casino (Carrefour's arch rivals) vetoed their possible merger just a few weeks ago.

Looking forward to 31 August

Avid followers of this soap series already look forward to 31 August, when Carrefour will release its semi-annual results. Judging by the profit warning in June, they will not be good and they will probably plunge Carrefour's shares even deeper – and they are already down 38% since January. The only advocate of Walmart taking over Carrefour Brazil is probably investment group Blue Capital, holding 14% of Carrefour shares and earlier already advocate of separating from Spanish branch Dia.

 

During the announcement of Carrefour's results, new director of the French branch Noël Prioux will explain his plans to relaunch Carrefour on its home market, while Lars Olofsson will present his “team of war” and strategies for emerging countries China and... Brazil. 

 

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Fashion

Carrefour to sell Brazilian activities to Wal-Mart?

After the definitive cancellation of its Brazilian merger plans with Pão de Açúcar, rumours have spread that Carrefour wants to swing the other way and sell its Brazilian activities. These rumours also say that Wal-Mart would be an interested buyer, shooting the American chain's shares sky-high on Wall Street... even though Carrefour denies the rumours vigorously.

Aiming for the #1 spot in Brazil 

The Brazilian financial newspaper Valor Econômico was the first to spread the 'news' that Carrefour was holding negociations with Wal-Mart about the sale of the former's activities in Brazil. Wal-Mart is at present Brazil's number three, but a takeover of Carrefour's Brazilian activities would take them straight to number one.

 

Kevin Gardner, Wal-Mart spokesman, says that his company will not respond to rumours. According to VE however, Wal-Mart's senior vice-president international business John Peter Suarez has declared last June that his group was looking for takeover opportunities to conquer the market leader spot in Brazil. 

Important markets 

Carrefour too is looking to grow in emerging markets like Brazil, Indonesia and China to compensate for its home market disappointments. Also in June, CEO Lars Olofsson said that there was no way Carrefour was going to sell its activities in emerging markets as they were too important for the group. After Carrefour's takeover of  Pão de Açúcar failed, CFO Pierre Bouchut repeated the same message. 

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Fashion

Tesco seeks legal action after being fined €12 million

British supermarket group Tesco threatens with legal actions against the British Office of Fair Trading, after the Office fined them 10.4 million pounds (11.8 million euro) for price fixing in 2002 and 2003. 

Big Four implied in price fixing scheme

With the fines, the OFT concludes an investigation into a price fixing scheme involving all of the British “Big Four”: Tesco, Sainsbury's, Wal-Mart's Asda and Morrisons (via their Safeway daughter). They are found guilty of exchanging their selling prices through IT-systems of dairy producers Arla, Dairy Crest, McLelland, The Cheese Company and Wiseman. The OFT had calculated that British consumers paid up to 310 million euro too much because of this scheme – but did not include that figure in its final report.

All but Tesco receive leniency as total fine drops 57%

Dairy producer Arla Foods received no fine as they were the whistle-blowers on this case, and seven of the eight others received considerably lower fines than originally planned due to lack of evidence and pleading guilty. Only Tesco was stuck with its original fine of almost 12 million euro – still lower than Sainsbury's 'lenient' fine of 12.6 million. Even though only Tesco received its original high fine, OFT chairman John Fingleton says these fines prove that his office takes the battle against price fixing seriously. The total fine for the nine companies is 56 million euro, a long way down from the original 132 million.

Legal action against OFT

Tesco's reaction was one of fury and denial. The Guardian quoted Lucy Neville-Rolfe, director of corporate & legal affairs at Tesco, saying to be “disheartened and disturbed that the OFT continues to pursue this costly and time-consuming case at the expense of both the taxpayer and UK business. We have always said we did not collude on prices on cheese and we stand firm in our rebuttal of these ongoing allegations.” Tesco denied having fixed dairy prices and promised to defend its position "vigorously" and "through the courts if necessary". Should the OFT maintain these fines, Tesco will again call for the Office to be dismantled completely.

 

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Fashion

Russia's largest retailer introduces "reversed" franchising

X5 Retail Group, Russia's largest retail holding, chooses the system of “reversed franchise” to make expansion of their retail network easier. This new simplified system of franchising has a lower threshold for franchisees (lower costs, no monthly licence fee, no own purchase investments), but lets the franchisee keep a commission of 13 to 18% of his business's turnover. This reversed franchise system had been announced in April last year and has been tested since November. 

Like a store manager

From a Western point of view, such a “reversed” franchisee is more like a store manager than like a real franchisee, but in the Russian market this could be a huge step to fully introducing the franchise system. It is very possible that entrepreneurs want more after experiencing this system's success and turn their business into a “hard franchise”. 

Merger in 2006

The rapidly growing X5 group was formed in 2006 by a merger of soft discounter Pyaterochka and supermarket chain Perekrestok and was expanded in 2008 with hypermarkets Karusel and again in 2010 with Kopeyka.  20% of the chain's 3400 stores are managed by (hard) franchisers, The group wants to use the new system mainly to expand in the region around Moscow and in the city of Nizhny Novgorod, 400km to the east of the capital. 

Paul Martins joins

These expansion ambitions also reflect in changes in X5's management team, as the group announced that Paul Martins, ex-Casino and now Tesco, will join the board of management next Saturday as commercial director. 

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Carrefour CFO Bouchut pays price for Brazilian failure

After the failure of its Brazilian takeover plans, Carrefour has replaced their instigator - and its Chief Financial Officer - Pierre Bouchut with ex-Philips CFO Pierre-Jean Sivignon, aged 54 and last year's “CFO of the year” in the Netherlands. 

From Philips to Carrefour

Sivignon will take his new office on 1 September, five months after leaving Dutch electronics giant Philips where he had been CFO,  Executive Vice President and Member of the Board of Management since 2005. Carrefour's headquarters issued a press statement welcoming his “financial expertise, international experience of over 30 years and his leadership skills” as “strong assets to continue the transformation of Carrefour”. 

'Punished' for Brazilian fiasco

Pierre Bouchut will continue his work as CFO alongside Sivignon for two months, after which he will take over the office of Executive Director for Growth Markets from Thierry Garnier, whose “new roles which will be announced in the coming weeks”. Analysts think Bouchut is paying the price for the failed takeover of Grupo Pão de Açúcar, that chose to continue its cooperation with Carrefour's arch rivals (and Bouchut's former employers) Casino. His appointment to the Growth Markets department, alongside his connections with holding company Blue Capital - in which major shareholders Bernard Arnault (LVMH) and Colony Capital (private investment fund) cooperate – gives fuel to the rumours of a split of the supermarket group. 

French game of musical chairs

This is only the latest episode of Carrefour's musical chairs soap, after the departures of James McCann, director of Carrefour France, in May and Vicente Trius, director of Carrefour Europe minus France, in February. The managerial mess also shows in the company results: Carrefour expects its operational profits to drop 23% in the first half of this year. Its shares fare even worse and dropped from 52 euro to 18.7 euro in four years time.

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Fashion

Carrefour publishes dramatic results - except for Belgium

Carrefour has announced very disappointing results about the first half of 2011 – even after issuing a profit warning earlier. Impatient shareholders continue to build up the pressure on the French supermarket chain.

Home bitter home?

Carrefour's main problem is its home market, where it still earns 44% of its turnover. Mainly due to problems there, their semi-annual profits drop from 989 million euro last year to 760 million now (-23%). Turnover did rise however, to 44.6 billion (+2.7%), but the results of the second quarter were worse. “May and June were difficult months”, said financial director Pierre Bouchut. “We will have to bear the consequences of their bad figures all year long”.

 

The supermarket giant admits they will have to focus on sharp prices in order to regain a part of their home market. “Our permanent prices are to high”, admits Bouchut. 

 

Turnover rise in Belgium

Belgium is one of the very scarce positive points for Carrefour, as turnover grew 6.7% to 2.04 billion euro for the first six months of this year. An important note here is, that last year was a bad year with huge cost cuts, store closings and the subsequent social disaster. Notwithstanding the turnover rise, Carrefour's market share dropped to 22.7% - getting further and further behind the two market leaders Delhaize and Colruyt. 

 

Judging by the figures, the reorganisation was a success – adding 10.1% to Carrefour's Belgian hypermarkets' turnover. This success was particularly strong in the new Carrefour Planet hypermarkets. Chairman Lars Olofsson is indeed counting on the Planet to save his job, as discounter Dia's flotation did not produce enough money to please demanding shareholders like LVMH and Colony Capital. They are still upset and embittered with the cancellation of the Brazilian plans (merger with Pão de Açúcar) and the delayed sale of Carrefour's real estate branch. 

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Dia changes focus from discounters to supermarkets

Only just separated from former mother holding Carrefour, hard discounter Dia has already made an important and remarkable decision for the Chinese market: it will switch its attention from discounters to supermarkets. Yesterday PlanetRetail reported about this move, that would have been impossible while Dia was still under Carrefour's wings – even though Carrefour has no supermarkets in China. 

 

'Agequake'

Dia, whose projected format for China is one of 500 m² supermarkets focussing on fresh and frozen food products, seems to be very much in touch with the changing demographics in China. Much like in Western Europe, society in China is ageing – but the Chinese change happens considerably faster because of the one-child policy. 

 

Martin Walker, senior director of AT Kearney’s Global Business Policy Council, launched the idea of an 'agequake' on the Consumer Goods Forum Global Summit last month: the population pyramid in many countries is disappearing as birth rates decrease and people live longer. In 2047, Walker predicted, the Earth could for the very first time see the number of over-60s exceeding that of the young. “People over sixty generally prefer smaller local stores over discount stores or hypermarkets, as they need smaller quantities and often do not use a car to go shopping”, he said.

 

Carrefour has created its own competitor

While China is clearly the best place for Dia to start this change in focus, both because of the speed of ageing and the lack of Carrefour's supermarkets, it is very well possible that Dia supermarkets will appear elsewhere too. Specialists point to countries like France, Spain, Portugal, Turkey, Brazil or Argentina, where Carrefour has invested significantly in supermarkets and hypermarkets. As such, Carrefour might have created a very strong challenger in markets that are of critical importance to the French hypermarket giant.

 

 

(You can find Martin Walker's report, The maturing consumer, here).

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Fashion

First European M&M's store opens in London

M&M's, one of the world's favourite non-Belgian chocolate brands, has opened its first European flagship store in the Leicester square area in the centre of London. If the new store, in the old Swiss Centre Building, is as successful as the three that already exist in the US, it might well become one of the major tourist attractions in London.
 

All colours and smells... and merchandise

The new store is 3250m² big and holds all the treats you would it expect to: The wall of Chocolate (M&M's in 22 different colours of which you can pick your own combination), the smell of chocolate, the typically American overload of merchandising (like M&M's clothing or jewellery)... and a tiny bit of “couleur locale”: the entrance is a Routemaster: the typical London double-decker bus.

While new in Europe, the M&M's stores have been a tremendous success in the US. Every year, over 10 million people visit the M&M's worlds in New York, Orlando or Las Vegas. The aim for London is 4 to 5 million visitors a year. To achieve this goal, the 170 employees will open the store from 10AM to midnight (or noon to 6 in the evening on Sundays).

M&M's is a worldwide brand that sells in over 100 different countries and is worth 2.75 billion dollar (1.9 billion euro), making it the largest candy brand in the world. It is owned by the New Jersey based Mars Retail Group, who will probably spread the concept to other European capital if the London store proves successful.

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Less packaging = lower costs + more goodwill

An overwhelming majority of the British would like to reduce their waste production to zero, says research service IGD. 70% is in favour of recycling all packaging, composting all organic waste and... actually eating all the food they bought.

 

Save up to 530 euro for a household, up to 2 billion for Wal-Mart (per year)


WRAP (Waste & Resources Action Programme), a programme through which authorities and companies work to use materials as efficiently as possible, calculated that every British home can save up to £480 (€530) – mainly in food that is now bought just to be thrown away later.

All of this would not mean that ecology would cost retailers dearly – on the contrary: they can make a lot of money with it. Wal-Mart for example was able to save over two billion euro as a result of using less packaging. Even for a company as huge as Wal-Mart, whose profit rose over 15 billion dollar last year, this is an enormous amount of money.

Wal-Mart logoOther American retailers have been following Wal-Mart's successful example: SuperValue has decided to decrease waste production by 90% in 40 of its supermarkets. This is of course a different scale than Wal-Mart's 4400, but it still helps. Moves like these also add to the good, green image of retailers – which in turn generates goodwill with potential future customers.

 

A strong incentive - and a stronger warning


Even though “green” is good, for retailers profitability is paramount – and also for consumers this is important: many Britons want to receive a compensation for the effort these measures will take, like a tax cut or a direct cash bonus. But even without this compensation, 62% of the British is “in theory” in favour of recycling – even more if the packages are picked up from each doorstep.

Moreover, 60% says they will use reusable bags in the future to go shopping, but even more important: 36% vow to boycott products with too much packaging. Suppliers will have to listen to this warning, and not only to reduce their own costs...

 

 

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