Carrefour has maintained its position as the leading grocer in Europe, with sales rising 4 per cent in 2002 to €58.7 billion, according to the latest data from retail market analysts M+M Planet Retail.
Although it is a truly global player, France continues to be Carrefour’s main source of revenue growth in Europe, M+M Planet Retail said. As a result of limited new store openings during the year (two hypermarkets, six supermarkets, 33 Ed discount stores and 127 convenience stores), Carrefour has been working on improving sales from existing stores.
This year, again faced with little prospect of further expanding its hypermarket network, Carrefour is looking to expand existing outlets, investing between €300-400 million on extensions.
But the tough planning restrictions on large stores have also led to Carrefour developing its Ed discount chain, whose stores are traditionally much smaller. The chain now consists of 489 stores in France, and these small outlets have enabled Carrefour to move into smaller niche markets such as town centres.
Elsewhere in Europe, Carrefour has aggressively grown its business in Spain with the opening of 163 stores, Italy (45 stores) and Greece (47 units). In Spain and Greece, once again it is discount stores that are driving growth, while in Italy, Carrefour’s expansion has focused on its GS supermarket division.
Overall, across its European operations, discount stores have been the dominant format developed by Carrefour over the last year. During the year, 262 new discount stores and 156 convenience stores opened, compared with 43 supermarkets and 14 hypermarkets. This reflects the growing resistance to large-scale store development across Europe, in particular in the more mature western countries, and a reaction to the depressed consumer market.
Metro – a truly European business
Behind Carrefour in the retail rankings for 2002 is Germany’s Metro group, which last year reported sales of €49.8 billion. But unlike Carrefour, Metro is not dependent predominantly on its home market to generate sales, since 44 per cent of its business is generated outside of Germany.
In fact, Metro is one of the most ‘Europeanised’ retailers, claims M+M Planet Retail, with activities in 21 European countries. It has significant operations in France, Italy and Poland, with a broad portfolio of businesses including cash & carries, consumer electronic stores, hypermarkets and DIY stores.
“Metro’s strengths are its ability to operate a diverse range of retailing businesses across a large number of countries giving it a great deal of flexibility to adapt to different economies at varying stages of retail development,” claims the report.
This is illustrated by its entry in recent years into developing European markets such as Russia, Bulgaria, Croatia, Romania and Slovakia, where it is spearheading retail development with the opening of cash & carries. It has also unveiled plans to enter the Ukrainian market, a bold move according to M+M Planet Retail with just the Rewe-owned Billa chain as its only international competitor there.
If convenience and discount stores have driven Carrefour’s European growth over the last year, Metro’s expansion has been fuelled by the cash & carry format, with 47 new outlets opening across Europe, 26 of which were in Germany. This increase largely reflects the acquisition of 25 cash & caries from Spar AG in April 2002.
Discounters enjoy rising levels of success
With economic stagnation blighting many of Europe’s key economies, it is no surprise to find discount operators enjoying rising levels of success. The Schwarz group, whose main fascia is the Lidl discount chain, has seen its sales grow the fastest over the year, with an estimated 24 per cent expansion in net sales to nearly €23 billion, putting it in 11th place in the overall ranking.
This growth has been driven by an increase of 200 stores, 50 per cent of which were opened in Germany, a market where food expenditure shrunk by 1 per cent last year. Further growth is set to take place this year, according to the report, with Schwarz poised to enter five European countries (Bulgaria, Estonia, Hungary, Latvia and Sweden) largely via Lidl, although proposed expansion into Norway and Denmark has been put on hold for the time being.
Fellow hard discounter Aldi has also seen its growth outperform the market average with sales up 10 per cent on 2001, pushing it up the ranking from eighth to sixth place. Over the course of the year Aldi opened 166 stores, and once again half of these were in Germany. Last year saw Aldi enter the competitive Spanish market, acquiring nine stores from Tengelmann in April 2002. It ended the year with 21 outlets, and is believed to be scouting for sites around Barcelona and Valencia.
Tesco and Wal-Mart expanding their reach
Other companies that are muscling their way up the ranking include the UK’s Tesco, which saw its European sales grow by 8 per cent last year, and US-based Wal-Mart, which experienced an 11 per cent growth.
Although Tesco has a market leading position in the UK, its home country continues to drive revenue growth, with net sales up by €2 billion. Strong volumes from existing stores as well as new store openings underpinned growth, and the report suggests that this trend is likely to continue with a full year of trading from the newly acquired T&S chain due to be consolidated this year.
Across the rest of Europe, Tesco is continuing to build a strong presence with 24 new stores set to open this year, largely hypermarkets, along with a full year of trading from the Hit hypermarket chain acquired last year in Poland.
Wal-Mart’s acquisition of Asda in the UK continues to bear fruit, with net sales growth of €1.4 billion from the British unit last year. Wal-Mart’s German operations produced a more muted growth of just €245 million, the report said. The UK is likely to continue to dominate Wal-Mart’s European operations, with a further 10 new stores scheduled to open this year, along with an expansion of space in existing outlets. Furthermore, Wal-Mart is tipped to be the likely winner in the battle for Safeway, leading the way to an additional €14 billion in sales.
Indeed the sale of Safeway is likely to have implications across the UK market, with a break up of the group to some extent likely if it is acquired by any of the leading retailers. Within the ranking this could have an impact on Tesco, Wal-Mart, Sainsbury’s and Morrisons. In addition to Safeway, Somerfield and Big Food Group are also potential takeover targets that could change the shape of UK and European grocery retailing, M+M Planet Retail said.
Ahold’s fall from grace
Perhaps the biggest change in the ranking this year has been the decline of the Ahold group, which has dropped from ninth to 15th place. However, M+M Planet Retail stressed that this fall largely reflects a change in its accounting methods rather than any downturn in its European business, since the company’s European retail sales all grew (with the exception of its Portuguese joint venture with Jerónimo Martins), rising by €1.5 billion on the back of an increase of 147 new stores, largely in Sweden and the Netherlands.
In Sweden, 45 new outlets were opened – reflecting the introduction of Netto discount stores and the expansion of its ICA-Express forecourt operation. In the Netherlands, meanwhile, 37 new stores were opened with an expansion across most parts of its diverse store network that ranges from small forecourts to superstores and also takes in drugstores.
Similarly to Metro, Ahold is a highly diverse retailer both geographically (66 per cent of net sales in Europe are achieved outside of its home country and its network spans 12 countries), and operationally with 15 formats across Europe. Despite the current wave of negativity engulfing Ahold, these factors should stand it in good stead in the longer term. However, the size of its network could shrink if it is forced to sell Jerónimo Martins in Portugal or its eastern European operations in an effort to reduce debt, the report said.
Casino gains weight but not enough to maintain position
Casino’s acquisition of Dutch company Laurus last year partly enabled it to increase net sales by 6 per cent , but this was not enough to prevent the French group slipping down the ranking from 12th to 14th position. Its main country of growth has been the Netherlands, with the Laurus purchase bringing an additional €4 billion in retail banner sales. However as Casino only owns 38.6 per cent of Laurus, the impact on net sales was diminished.
With Carrefour, Metro and Tesco topping the list, the other companies in the top ten are Rewe of Germany (which is vying for third spot with Tesco), the French ITM group (which trades mainly under the Intermarché fascia), Aldi, Edeka (both of Germany), Auchan, Leclerc (both French) and Sainsbury.
Small stores drive growth
Over the last year, small stores have seen the largest growth in outlets, with the number of convenience/forecourt stores operated by the top 30 grocers rising by 26 per cent to over 10,000 outlets, the report claims. Notable acquisitions include Tesco’s purchase of 1,200 stores from T&S in the UK and the Co-operative Group’s acquisition of 630 Alldays stores, also in the UK.
However, supermarkets continue to dominate retailers’ overall portfolio with the top 30 grocers operating nearly 36,000 outlets, having increased their numbers by 1,300 over the last year. In addition, retailers are continuing to aggressively grow their discount store base with numbers expanding to 25,000, reflecting the opening of nearly 1,000 stores.
The planning restrictions on new store growth have also led to an increase in M&A activity during the year, with some 71 deals carried out covering 15,000 outlets and representing €44 billion in net sales. The most significant among them were Casino’s acquisition of its stake in Laurus (taking it into Spain, Belgium and the Netherlands, although Spain and Belgium have both subsequently been sold), Tesco’s purchase of the Dohle-owned Hit hypermarket chain in Poland, Ifil/Auchan buying the outstanding shares in La Rinascente and Metro buying 25 cash & carry outlets from ITM’s Spar in Germany.
This year has already seen further significant levels of activity, with the acquisition of Swiss group Bon appétit by Rewe of Germany, the impending sale of the Safeway chain in the UK and the possible sale of Ahold’s east European assets in the wake of its accounting scandal.
Further details of M+M Planet Retail’s report on the Top 30 European Grocers in 2002 can be found at the company’s website.