Global Analysis
Global: Top 20 Grocery Retailers
Information in this article is based on the recent report by Planet Retail, “Top 20 Rankings, 2011: When the strong grow stronger.” For more information contact: Renaye Edwards at Email: renaye.edwards@planetretail.net, or visit www.planetretail.net.
After the turbulence in commodity and food prices in the preceding 12 months, 2010 was a year in which previous trends started to assert themselves – the weak got weaker while the strong got stronger. As Planet Retail’s global and regional rankings show, this trend in the grocery business is expected to continue – especially in the face of an uncertain economic outlook. It is primarily the streamlined, price aggressive retailers, including Walmart, Tesco and Schwarz Group, which are forecast to continue their rapid advance. At the same time, numerous domestic-only players (as well as Carrefour, which is finding itself in troubled waters) have to content themselves with a modest growth outlook.
Expansion continues in varying degrees, and in varying ways, across the globe. While in places like Latin America, where retailers are moving from the saturated conurbations into uncharted territory in second-tier cities and the countryside, the players in the developed markets are now pushing into the major cities. Walmart, meanwhile, who built its business running big boxes in small towns, is now launching smaller formats in large towns. Then there are the Continental European grocers who are re-discovering the city centres by testing the waters with newly developed convenience-orientated concepts.
As for the emerging markets, it has become increasingly clear that the much-cited BRIC countries (Brazil, Russia, India and China) have actually shrunk to become the BIC markets. Whereas Brazil, India and China continue to fascinate the international behemoths, both Walmart and Carrefour have given up on their projects in Russia for the time being. In general, large parts of Central & Eastern Europe have become less attractive since it emerged that there is a long, arduous way ahead to recover from the economic crisis, resulting in some big players’ limited investment budgets flowing into other regions of the world instead.
After all the grocers in the Asia & Oceania Top 20 have established a presence in China (with the only exceptions being the Australian and New Zealand players), some observers have already declared Africa the “next China”. This may be a bold overstatement at this point in time, despite the hopeful, but fragile reform movements in the north of the continent. Notwithstanding, Walmart’s market entry into South Africa, which was first announced in autumn last year and realized this summer, will surely trigger a rush of hectic activity and accelerated modernization in the retail industry.
Speaking of modernization, a strategy that unites the large international players is an even stronger focus on driving private label penetration with enhanced and revamped lines. This is particularly striking in the drugstore sector, as revealed by Planet Retail’s Global Top 20 list of health and beauty specialist retailers. While the leading US drugstores continue to squeeze into the food market, the traditional grocers are further tiering their lines and are pushing into non-food.
Carrefour at the Crossroads
The divestment of significant parts of its store network resulting from the spin-off of discounter Dia will heavily impact growth forecasts for the world’s second largest grocer Carrefour. Despite new store openings in its other formats, it will still have some 4,500 fewer outlets in 2015 than in 2010.
Carrefour’s future is looking more uncertain than ever given the increasing speculation surrounding the French retailer. Its fortune will largely depend on the success or failure of its new hypermarket concept, which is being rolled out across Europe.
Generally speaking, modest growth rates are expected for grocers with operations limited to their home markets. Kroger and Safeway in the US and Edeka in Germany for instance are all forecast to record single-digit growth rates for their store networks over the next five years.
However, being bound to a single country even if it is saturated is not necessarily a bad thing as it allows a retailer tofocus its resources on that one market rather than risk losing money in daring foreign ventures.
Western Europe
Planet Retail’s 2010 Western European ranking of the leading grocers highlights a dynamic sector in which retailers are showing ever-increasing creativity and flexibility to weather the storms in saturated retail markets. Looking ahead, market leader Carrefour’s spin-off of Dia means it could lose its leading position to Schwarz Group by next year.
The Top 20 Grocery Ranking remains a home game, dominated by retailers from the three leading markets, Germany, the UK and France, which account for 15 out of 20 top players. In total, the Top 20 increased their sales by 3.7% on the previous year (in euros and therefore partly affected by foreign exchange rates), exceeding the EUR500 billion (USD700 billion) mark.
In 2010, the Western European economy was affected by a steadily accelerated upward movement in prices, after a rebound in 2009 from the hike in the previous year. This allowed some retailers to recuperate from sales stagnation in the previous year, and the forecasts for 2011 and beyond make it even more likely that gains in sales will be very much driven by inflation rather than an easing of the financial situation of consumers in the major markets.
