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Carrefour plans assault on Shoprite territory

SA giant may have to man the aisles as French grocer plans move into the south. Shoprite's biggest rival on the continent may not be a local business, but a French company, the world's second-largest retailer, as Carrefour carefully plans its expansion into Eastern and Southern Africa.

Carrefour has some stores in Francophone Africa, but a report released this week by Bloomberg Intelligence shows that Shoprite's key geographical areas may be under threat as Carrefour plans its strategic entry into sub-Saharan Africa.

Carrefour has 331 stores in Africa, and an investor presentation by Majid Al Futtaim, a franchise partner, in March showed that one of the group's strategic priorities is to look at expanding in Southern Africa, including South Africa, for which it has a licence.

Shoprite has 417 stores in 14 countries in sub-Saharan Africa, excluding South Africa, as of December 2016.

Majid Al Futtaim is Carrefour's partner in the Middle East, Asia and some African countries. Carrefour has already expanded in Francophone Africa through a joint venture with CFAO, an established African trading company. Carrefour owns 45% of the venture.

A Carrefour spokesperson told Business Times this week that there are no immediate plans to come to South Africa, but "we are always looking what happens everywhere.

"CFAO has opened one hypermarket in Abidjan ... according to our agreement they have the right to develop the Carrefour banner in seven other countries, which doesn't mean that they have a specific project in all these countries short term. It means that we have an agreement and if we develop the banner in these countries it will be with them.

"In other countries, especially Eastern Africa, Middle East and some Asian countries, we have another agreement with Majid Al Futtaim ... and [there is] the possibility to develop the banner specifically in East African countries."

Shoprite has one store in the Democratic Republic of Congo. It exited East Africa because strong local retailers made it impossible to get a foothold.

Shoprite would not comment, saying it was in a closed period ahead of the release of its annual results in August.

Charles Allen, a senior retail analyst at London-based Bloomberg Intelligence, said while Carrefour might not be looking to invest in South Africa, Majid Al Futtaim had the option of opening stores in many African countries.

"So far, it has stores in Egypt and Kenya. I think it is much more likely that additional Carrefour stores will be in African countries with underdeveloped retail markets."

Expansion of supermarket chains through sub-Saharan Africa has been led primarily by South African companies, including Shoprite, PicknPay, Checkers and Massmart.

Last year, Carrefour opened its first store in Southern Africa in Nairobi, Kenya, which is said to be the fastest-growing retail market in Africa.

William Roos, head of the economic service at the French embassy, said most French companies in sub-Saharan Africa were in South Africa, ahead of West African countries like Ivory Coast. "Also, 29 out of 40 companies on the French stock market index are established in South Africa."

There had been several French investments in the retail sector in South Africa recently, he said. Leroy Merlin, the home-improvement retailer, is expected to open stores next year. Decathlon, a sporting goods retailer, is opening a store in Alberton, and bakery Paul, in a joint venture with Famous Brands, is looking to expand in Gauteng. "This can be attributed to South Africa being considered a mature market with a significant middle class. It is also the country with the highest purchasing power in Africa," he said.

South Africa had often been used as a gateway to Africa, he said. "Many French firms have a regional office in South Africa covering Southern Africa, often sub-Saharan Africa and sometimes the whole continent."

Allen said: "The attractions of the young population, rising GDP per capita and the general lack of modern retail across the continent mean that foreign retailers are likely to be attracted ... It may well be that quite a large part of the development may be through African businesses franchising more established retail brands and opening stores in Africa.''

 

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