Castorama purchases interest in Turkish home center chain

Home Channel News, March 20, 2000

The world's third-largest home improvement dealer has grabbed a 50 percent stake in five-unit Koctas

ISTANBUL, TURKEY -- Castorama, the world's third-largest home improvement dealer, is extending its market reach into an 11th country. Its parent company, the United Kingdom-based conglomerate Kingfisher, has acquired a 50 percent stake in Koctas Yapi Marketleri Ticaret, Turkey's leading home improvement retailer.

Through a joint venture with Koc Group -- Turkey's largest corporation, which will own the other half of Koctas -- Kingfisher, through Castorama, wants to open 30 home centers in Turkey over the next five years.

Koctas -- which is based in Uskudar and was started as a wholesaling company in 1955 -- has been one of the few home improvement dealers in Turkey that have added home centers in recent years. Gunduz Basaran, Koctas' general manager, said the company generated the equivalent of US$53 million in sales last year from five home centers that average 5,000 square meters (53,763 square feet) and six wholesale units that average 200 square meters each. Kingfisher is acquiring an interest in the retail segment of this business, which has assets of US$7.2 million. Terms of the agreement, which was announced Feb. 29 during a press briefing here, were not disclosed.

"Koctas has now achieved obvious competitive advantage" through this alliance, Basaran said. A source knowledgeable about this deal said that Castorama would provide "retailing skill sets" to Koctas, whose current management is expected to stay on to run the business.

With 68 million people and 14 million households, Turkey is a huge market whose western sector has a reasonably high standard of living. A devastating earthquake that rocked the country last year exposed severe deficiencies in Turkey's building codes and construction practices. However, the country's populace has been resistant to the idea of do-it-yourself home improvement.

Bauhaus, the German-based retailer that opened the first warehouse home center in Turkey in 1996, still has only one store there. Gotzen last year sold its four stores to 3G, its in-store racking supplier, which has converted them into home improvement stores called Stock that are still searching for their retail identity, according to one industry source who has seen those stores recently. France-based ANPF's Mr. Bricolage chain operates three large stores in Turkey, although one outlet is located in a three-story building. Praktiker, which once planned to open 25 stores in Turkey, has backed off from those ambitious plans. The fate of its two home centers there -- which are controlled by Praktiker' s parent Metro -- is up in the air right now.

Nevertheless, Kingfisher expects Turkey's retail home improvement sales to double over the next decade from their current annual level of between US$4 billion and US$5 billion, a number far lower than the $10 billion estimate local industry touted a few years ago.

"The DIY market in Turkey is hugely fragmented," said Sir Geoffrey Mulcahy, Kingfisher's CEO, in a prepared statement. "The combination of Castorama's Pan-European position with Koc's local expertise [one of Koc's businesses is Turkey's largest supermarket chain] creates a new force to meet the demands of a large and fast-growing market."

One informed source said that he expected Castorama to open larger stores in Turkey than Koctas currently operates. Indeed, Martin Toogood, the CEO of the B&Q division of Castorama, told NHCN that B&Q and Castorama -- which merged in 1997 -- are working on what he called a "European warehouse home center" model that could be used for expansion purposes across the continent.