MxMIndia

Tag: Carrefour

  • Global retailers like Wal-Mart, Tesco, Carrefour and others not buying India's FDI in retail story

    It’s wait-and-watch for Wal-Mart, Tesco, Carrefour…

    By Rasul Bailay & Chaitali Chakravarty

     

    Four months have passed since the government braved intense opposition to allow foreign supermarkets to enter India, but it has not received a single investment proposal so far as global retailers play wait-and-watch and seek more clarity about the conditions imposed on their entry.

     

    The delay is beginning to irk the government, which almost put its survival at risk over this controversial issue. A top executive with a global retailer said that in a recent meeting with a senior commerce and industry ministry official, he was asked when his firm would submit its proposal for opening multi-brand retail stores in the country. “We have done our bit, when will you do yours?” the official bluntly told him.

     

    “The authorities seem to be under some kind of pressure, after going through so much to open this sector. But we need some clarifications before we start here,” said the retail executive, who did not wish to be named.

     

    In September last year, the government allowed foreign supermarkets to own up to 51% in local ventures, but imposed stiff local sourcing conditions as well as investment restrictions.

     

    Kishore Biyani

    Kishore Biyani, who owns India’s largest homegrown retail house, The Future Group, said these riders are preventing electronics, fashion garments, and other retailers from firming up their India plans. “How can they source 30% of their goods from small-scale industries? Or even invest $50 million in the backend over three years? Fashion or electronics does not require that kind of investment in the backend,” he said. Biyani is looking for foreign partners for his retail businesses.

     

    The government has imposed two significant riders on foreign retailers. First, they will have to compulsorily source one-third of the products they sell from small and medium enterprises whose investments do not exceed $1 million in total. Second, they will have to invest at least $100 million, half of which has to go into backend infrastructure over three years.

     

    Foreign retailers, including Wal-Mart, Tesco and Carrefour, are seeking clarification on these riders. Sir Richard Broadbent, chairman of Tesco, met Commerce and Industry Minister Anand Sharma in Davos last week and sought clarity on the conditions imposed on the retail FDI policy. Walmart International CEO Doug Mcmillon also told the minister that his company was “excited about India”, but was currently studying the conditions. “We are looking at clarity on those conditions. All those conditions have certain implications on the overall business viability,” Sameer Barde, a spokesperson for UK supermarket chain Tesco in India, said.

     

    “Each one of them has to be clearly understood and then only we will be able to take a call on when to proceed with our plans.” A Walmart spokesperson in India said the company continued to study the requirements placed on FDI in multi-brand retail to better understand how its business would operate in a complex environment. Some retail experts, however, feel that foreign companies are deliberately going slow in India.

     

    “There is no real intention (on the part of large retailers) to enter the country at the moment. Had it been so, they would have lobbied hard with the government to ease rules like IKEA did,” said Harminder Sahni, MD of retail consultancy firm Wazir Advisors. IKEA, the world’s largest home furnishing retailer, was also confronted with strict local sourcing conditions under the single-brand retail policy. But it was successful in convincing the government to dilute these norms.  Abhishek Malhotra, partner at consultancy firm Booz & Co, said global retailers would wait for six to nine months to see how things pan out.

     

    “They are watching the political landscape and trying to figure things out,” he said. The vigorous resistance of BJP, India’s principal opposition party, to the entry of foreign supermarkets has come as a surprise to many observers and analysts. The party forced a vote in Parliament on the issue, and if the minority government of Manmohan Singh had been unable to muster the numbers, it could have decisively crippled the UPA coalition.

     

    Even now, the opposition of BJP and other political parties continues to be significant as the Centre has left it to state governments to decide whether they would allow foreign retailers to open stores in their respective states. Almost two dozen of India’s 35 states and union territories, including key states like Tamil Nadu, Karnataka, Gujarat and Uttar Pradesh, have decided not to allow foreign retailers.

     

    As per the FDI policy spelled out in September, global retailers such as Walmart and Carrefour are only allowed to open their stores in 53 Indian cities with population of a million or more. Due to the opposition from most states, retailers can only open stores in 18 of these 53 cities. In addition to India’s FDI policy and political complexities, global retailers are grappling with their own set of problems.

     

    Even though Walmart Stores has an understanding with Bharti Enterprises (the two companies are 50:50 partners in a wholesale retailing venture), the US retailer is currently preoccupied with its sweeping worldwide anti-bribery investigations that have brought negotiations and expansion in India to near-standstill. Britain’s Tesco Plc, which has a supply chain and retail technological partnership with the Tata Group, is busy fixing its struggling business in the home market before committing anything to India, said a person familiar with the UK retailer’s plans.

     

    Carrefour SA, which currently operates a fully owned cashand-carry venture in India, is bullish about the country’s $500-billion annual retailing market, but has been unsuccessful in finding a local partner for the last seven years.

     

    Source:The Economic Times

    Copyright © 2013, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • Even international chains such as German retailer Metro Cash & Carry believe that the reform move may impact local businesses

    Multi-brand FDI to hit kirana shops: Metro boss

    By Dipti Jain

     

    It is not just small traders and kirana stores who are worried over loss of business if foreign direct investment (FDI) in multi-brand retail is allowed. Even international chains such as German retailer Metro Cash & Carry believe that the reform move may impact local businesses.

     

    While the influx of international retail giants will bring in investments in back-end and supply chain management, the Indian arm of Metro Cash & Carry said this will decrease the importance of small traders in the country as consumers would shift to large format stores from the local kirana shops.

     

    “Consumers will shift to large format stores, so the relevance of small traders will decrease. Because of substantial increase in disposable income due to a growing economy, the focus has today shifted from small to large format stores,” said Rajeev Bakshi, managing director, Metro Cash & Carry, India.

     

    The statement by the German company comes as a surprise especially after international chains have been waiting for the opening of FDI in the sector as they reason it would benefit smaller players by way of technological enhancements as well as creation of new jobs, besides giving them an opportunity to tap into the growing retail market in India.

     

    The government and other retailers have argued that the entry will help local outfits get more efficient and innovative and also check wastage as nearly 40 per cent of the farm produce is lost due to poor storage and distribution facilities in the country. Several global giants such as Wal-Mart and Carrefour are waiting for the government to finally permit FDI in the multi-brand segment, an area that Metro does not intend to enter immediately.

     

    In recent weeks, the government has pitched for opening up multi-brand retail and even cited the backing it has received from several states.

     

    The government allowed 100 per cent FDI in single brand retail last year. However, the permission for 51 per cent FDI in multi-brand retail had to be put on hold after widespread protests by Congressmen as well as UPA allies, including Trinamool Congress.

     

    While the impact on small traders would affect Metro’s business in the country, the company is betting on a growing business from hotels, restaurants and caterers (Horeca) for continued growth. “This will indirectly impact our business, but then the other business takes off. People are eating out much more than before. So our Horeca business will go up. The net effect on us is balanced,” Mr Bakshi said.

     

    However, Mr Bakshi added that it is not just foreign retail majors, even large cash-rich domestic players have the capacity to exploit the market. Despite discussions that modern stores and wholesale chains would make the local channels irrelevant, Mr Bakshi said with the demand pattern shifting, these models are becoming irrelevant themselves. Metro Cash & Carry entered India in 2003 and currently has 11 wholesale distribution centres.

     

    The company has already invested close to Rs1,000 crore and plans to open six to eight stores annually, each entailing an investment of around Rs 60 crore. The company recently opened its store in Delhi and Jaipur and is planning two more stores in Chandigarh and Indore.

     

    Source: The Economic Times

    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • The Government’s decision to allow FDI in retail has opened up possibilities for international retail giants who till now have been waiting in the sidelines.

    IKEA, Carrefour welcome FDI

    By Tuhina Anand

     

    The Government’s decision to allow FDI in retail has opened up possibilities for international retail giants who till now have been waiting in the sidelines. While Indian politicians are busy either batting for FDI or opposing it vehemently, the international biggies are playing safe and watching their step before making any decision.

     

    IKEA, the international home products company that has been clear that it will only enter India when 100% FDI will be allowed now seems to have crossed that hurdle. With Indian government allowing 100% FDI in single brand retail, it clears way for the Swedish furniture giant to make its presence in India.

     

    An IKEA spokesperson informed MxM India, “The IKEA Group welcomes the Indian Government’s decision to allow 100 percent Foreign Direct Investment for single brand retailers. We will now over the next few days look into the details of the decision and we expect to present more information shortly about our intention to establish retail operations. India is since long a strong and growing purchase market for IKEA.”

     

    IKEA has been looking towards India increasingly over the years to outsource its products including textiles and carpets and the country finds the retailers focus in its social initiatives. Looks like it’s not far when IKEA would announce its plan for India and be present in a market which is seen by many International retailers as crucial because of the changing dynamics and economy of the country. In fact, giants like Walmart is already present but in Cash & Carry business with a partnership with Bharti Enterprises. Tesco has strategic partnership with Tata Trent for back end and supplying for Tata’s Star Bazaar. French retailer Carrefour too has opened last year its cash and carry store in Seelampur area in Delhi.

     

    Carrefour’s statement on FDI in India stated, “Carrefour welcomes the Indian Government’s decision to allow up to 51% foreign direct investment in multi-brand retail. This legal evolution should contribute to modernise Indian food supply chain and to fight against food inflation for the benefit of Indian customers. It will also provide farmers and local SMEs with new outcomes and will more generally contribute to India’s economic development. Carrefour will remain attentive to the finalisation of this new regulation and continues the development of its cash and carry operations. Please note that we cannot give you any further elements.”

     

    The move is a welcome relief for the international biggies but it now remains to be seen how and when these giants make their entry into the front end of the business in India.