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Momentum
Time to add, not to divide , in the global retailing
Marcos Gouvêa de Souza - CEO, GS&MD - Gouvêa de Souza
Carrefour, the world’s second-largest food retailer, next to Walmart, is studying in France a new strategy regarding the spin-
off of its Dia hard discount chain, with initial public offer in the Madrid stock exchange. In an environment the natural order is to
grow to become more relevant, the Carrefour’s alternative seems to be in the opposite way of the trend, as it has been motivated
much more by a short-term financial approach than by a long-term strategic one.
In the more mature and developed countries, however, still engulfed in the consequences of the recent global financial crisis,
competitiveness has grown exponentially, stimulating business integration, as in the distribution (retailing) as in the industry.
There are plenty examples.
On the industry side, one can mention the integration and consolidation the beer segment has been living, led by InBev. In
the food segment, led by Unilever and Kraft. In the beauty and personal care, by Procter & Gamble and also Unilever. And that
has been happening in almost all segments, including cars, with brands consolidating in global conglomerates, as BMW, Ford,
Fiat and others.
In the retail sector, this process advanced a lot by the organic expansion of the large chains, expanding brands, store formats,
channels and businesses to create large global conglomerates, as Walmart, Carrefour, Metro, Tesco and Auchan, specially from
Europe, more relying on the global expansion to expand their businesses, as their home markets have less potential for growth.
Dia chain owns today around 6,400 stores and is the world’s third-largest discount food retailer, with sales around 10 billion
euros and an Ebitda of 504 million euros.
An important characteristic of the Dia operation is that around one third of its stores are franchised, strategy inherited by Carrefour
from the merger with French Promodès in 1999, that made the company the world’s second-largest retailer, then with close to
9,000 stores, being 3,200 discount shops and 680 hypermarkets, besides other specialized operations.
The spin-off proposed by Carrefour, just like the IPO intended in the real estate segment some months ago and also received
with mixed thoughts, comes from a concern with the group’s global figures, that impacted the stock values in 2010 and had been
slightly recovering since January, rising 1.12% in the period. The spin-off aims to address the interests of some stockholders,
looking for better return on their investments.
The spin-off, with different and non-converging motivations for the two resulting groups, would make direct competition grow,
will reduce negotiation power against suppliers, will make Carrefour give away a discount operation that has grown all over the
world, will make the company lose opportunities to improve integration of the logistics and IT systems, and will surely increase
direct costs for the two remaining companies.
In the global scenario, much more integration than disintegration has been seen. Among groups, stores, brands, store channels,
businesses or even, ironically, between global conglomerates and independent players, through franchising. Driven by the
competitive scenario, and also by local retail rules. As in the case of Walmart in India, associated with local group Bharti.
This perspective brings to light a deeper question, regarding the business management focused on a short-term return, a
dominant paradigm in the financial markets and for institutional investors; versus another paradigm, result-oriented and with
strategies focused on the long-term. An eternal and sometimes difficult question that has already made many relevant brands
and businesses lose a lot of value.
Brazilian Retail News (BRN) is a weekly newsletter published by GS&MD - Gouvêa de Souza with the most important news
on the Brazilian retailing. The content can be freely used, once the source is quoted. If you want any information on BRN or our
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