The pace of global food retailing for the Top 25 players picked up in 2006, with companies continuing to rationalize market strengths.
Wal-Mart Stores, the leader of the pack, pulled out of Germany and South Korea last year, unable to satisfy localized tastes and cultures, while shoring up interests in Latin America and Japan. France's Carrefour, the world's second-largest retailer, also succumbed to local competition in South Korea. Meanwhile, the U.K.'s Tesco, which is preparing to enter the U.S. this year with its Fresh & Easy convenience concept, exited Taiwan in an asset swap due to lack of sufficient scale.
“The underlying fact is that many global retailers are focusing on markets where they will have long-term impact,” said Bryan Roberts, London-based retail analyst for Planet Retail, an online provider of retail intelligence and research.
The Top 25 retailers generally enjoyed buoyant sales, generating $1.4 trillion, about an 8% increase from 2005. Except for Germany and Japan, most economies were fairly solid, encouraging consumer spending.
Just five of the Top 25 — Edeka, ITM, Tengelmann, Casino and Coles Group — had flat or declining sales. Coles Group in Australia is entertaining takeover bids from private equity and others.
The top sales gainer on this year's global list is Japan's 7-Eleven (Seven & I) with a 33% increase in sales, due partly to rapid global expansion.
The top 10 companies on the list all showed positive sales, with Tesco the growth leader among them with a 12.6% sales increase.
Supervalu's acquisition of Albertsons last year brought the wholesaler into the glo-bal field this year. Canada's Loblaw also is new on the list. SN took Walgreens off because the company is a drug retailer rather than a grocery retailer.
While merger and acquisition activity remained mostly in the U.S. — Supervalu/Albertsons and, earlier this year, Tengelmann's A&P/Pathmark agreement — there was no shortage of speculation about private equity takeovers with companies like Morrisons, Sainsbury's and Carrefour, said Roberts. “Given these [companies] are very asset-rich retail businesses with lots of potential returns for private equity, then this interest will continue,” he said.
Many of the multinational players continued to pilot new concepts, Roberts said. Most notably, Wal-Mart opened a new discount outlet, MercaMás, in Mexico. Tesco continued its expansion of convenience store concepts in Eastern Europe and the Far East, and all are waiting for Tesco's U.S. debut with Fresh & Easy later this year. Others — Carrefour and Auchan — rolled out discount concepts.
“As retailers' domestic markets become more crowded and competitive, then the imperative is to explore markets overseas,” said Roberts.
Look for Tesco, Carrefour and Wal-Mart to enter new markets in regions of Asia Pacific and Latin America. Meanwhile, all major multi-nationals are looking for ways to enter India, a country with a huge but diverse population that offers big opportunities fostered by economic growth and improved living standards.
Germany's Metro and South Africa's Shoprite are already trading in India. Wal-Mart has formed a joint-venture supply arrangement with Bharti, a telecom company with diverse holdings.
Both Tesco and Carrefour are said to be seeking partners in India, which restricts direct foreign investment, making entry into the market challenging.
SN Global List Methodology
SN's Top 25 Worldwide Food Retailers list (see Page 22) was produced in cooperation with Planet Retail, a provider of online retail intelligence and research. The list is ranked by net sales of companies tracked by Planet Retail. Net sales are for the 2006 calendar year (or nearest fiscal period) and are consolidated without VAT or other turnover-related taxes. All exchange rates are calculated full-year averages. While Planet Retail also tracks retailers such as Sears, Target, Walgreens and CVS on its Top 30 Grocery Retailers Worldwide list, those retailers currently do not meet SN's criteria of generating at least a third of their sales from food. They were therefore eliminated from the SN list. As a provider of online global retail intelligence, Planet Retail offers up-to-the-minute industry news, analysis and digital media to decision-makers within the retail, manufacturing, finance, IT, entertainment and consulting sectors. With offices in the U.K., Germany, India, China and Japan, Planet Retail's coverage of the retail industry includes more than 1,800 grocery retailers and 4,000 banner operations in over 130 countries. For more information, visit www.planetretail.net.