EU grocers go global

Europe Business Review, Oct-Dec, 1999

Napoleon derided the English as "a nation of shopkeepers", words he borrowed from the economist Adam Smith.

There might have been some truth in the phrase when first used two centuries ago - but it now fits the French better.

France's two largest retail chains are combining to create Europe's largest shopping group. It will be second only in the world to Wal-Mart of America.

Carrefour and Promodes are getting together, figuring size may make them safer against Wal-Mart's emerging move into Europe.

And there is now not one British retailer among the world's top ten, although Tesco (12th) and Sainsbury (15th) are in the global top 20 measured by 1998 sales.

Before their merger, now being arranged, Carrefour (sales US$28.7 billion) was ninth largest in world retailing and Promodes was 16th with sales of US$20.5 billion.

Their combination will still be about US$90 billion short of Wal-Mart's sales of US$139.2 billion in 1998.

In third place is Metro of Germany (US$49 billion). A hold of Holland reported 1998 sales of US$27.7 billion.

The prospect of Wal-Mart moving into France persuaded Carrefour and Promodes to combine resources to create a company with 9,000 stores in 26 countries across three continents.

Shoppers know Carrefour by hyper-markets of that name, but also through Ed and Stoc, chains of low-price food supermarkets, and Picard, which sells frozen foods.

Promodes, the market leader in Spain, operates the Continent chain of hypermarkets in France. It also has the Shopi, Dia, Score, Pryca, Promocash, Puntocash, Champion and 8-a-Huit chains of supermarkets, discount stores and corner shops.

The two retail groups have a combined stock market value of about US$49 billion, estimated pretax sales this year of US$54 billion, profit of US$1 billion, and nearly 250,000 workers.

Big French retailers were frightened by Wal-Mart's move into Germany last year, when it bought two chains, and its recent acquisition of the British supermarket chain Asda.

France appeared to be the next target for Wal-Mart, with Carrefour vulnerable to a takeover bid.

French retailers have, like Wal-Mart, also sought growth overseas, partly because of a law in France barring the opening of more giant hypermarkets, a measure designed to help city-centre and corner-store businesses survive.

Carrefour and Promodes both began as family companies and expanded abroad actively in recent years. Carrefour operates in about 20 other countries in Asia and Latin America.

Carrefour grew into the largest retailer in Brazil and Argentina, South America's two largest economies. In Brazil, Carrefour's influence comes from acquisitions of smaller chains giving it 13 percent of the market.

In Argentina, Carrefour's share of the market should be even larger than in Brazil, about 30 percent, after its link with Promodes. Promodes has a 49 percent stake in Argentina's third-largest supermarket chain.

Napoleon, an empire builder, would probably approve.