Retail 100: Wal-Mart still way ahead
Elsevier Food International, Vol.9, Number 3, September 2006 Bryan Roberts
Among these are retailers active in the health & beauty/pharmacy sectors, which saw their top lines grow thanks to mergers and acquisitions, rapid store opening programmes and extremely favourable demographic trends. Also benefiting from these trends are Canadian market leader Shoppers Drug Mart, its rival Jean-Coutu group (still struggling to integrate its acquired Eckerd chain in the USA), global leader Walgreens and its US rival CVS, another beneficiary of the Eckerd carve-up. While perhaps not apparently relevant to a food publication, it is worth remembering that the FMCG categories sold by drugstores are extensive – ranging from toiletries to beer – and that Walgreens is currently the world’s 30th largest seller of grocery items. By 2011, its ranking is expected to increase to 17th. Definitely a channel worth bearing in mind.
Discount still going strong
Discounting, still one of the predominant themes in any discussion of the global grocery retail landscape, shows little sign of running out of steam. Global leaders Aldi and Lidl (Schwarz Group) have both been busy entering new markets and have also been trying to raise their game in quality terms to broaden their appeal, embarking on initiatives including TV advertising and the introduction of healthy-eating, fair trade and organic lines in many markets. So compelling has the discount phenomenon become, retailers such as Leclerc (France), Auchan (France), Wal-Mart (UK and Mexico) and Tesco (Czech Republic) have opened their own versions of the discount formula.
Other single-channel operators that continue to deliver impressive growth include US-based global warehouse club operator Costco. Given that all other top 20 players trade through networks of between 1,400 and 21,000 stores, the fact that Costco books its place with just 460 outlets indicates just how eye-wateringly immense its throughput and sales densities are. In the mainstream food retail business, there are also single-format operators that demonstrate that doing one thing well is a strategy that has a lot going for it. The likes of Publix and Mercadona continue to excel in their domestic markets of the USA and Spain with just one mainstream format, although Publix is now tweaking its offer through Hispanic, organic, convenience and restaurant concepts too.
Multi-channel
Despite the ongoing success generated by single channel players – BJ’s, Couche-Tard and Dollar General are all worthy of a mention here too – the biggest businesses generally continue to pursue the multi-channel model, with the vast majority of the top 20 operators active in at least two different channel segments. Wal-Mart, whose lead at the top continues to be extended at a staggering rate, trades through an extremely disparate array of concepts, thanks largely due to its acquisitive expansion overseas. Carrefour, meanwhile, has begun to stray from its classic three-format strategy of hypers, supers and discount, prompted in part by the lacklustre performance of its supermarket divisions in a number of markets. It now proclaims a five-format strategy – compact hypermarkets and large-format discount stores have been added to the mix – and initial results indicate that the shift in strategy has been a worthwhile transformation.
Perhaps the best exponent of the multi-channel approach has been UK market leader Tesco, nowhere more so than in its domestic market. This strategy – from hypermarkets to c-stores, taking in non-food, financial services and e-commerce along the way – has enabled Tesco to become one of the UK’s biggest single destinations for consumer spending. While Tesco might regret its CEOs boast that £1 in every £8 is spent with Tesco in the UK (regulators are now re-examining competitive issues in the UK grocery market), there can be no doubt that Tesco has provided a master class in multi-channel retailing. Its UK model is now being slowly spread to other markets, particularly through c-store operations, so it was no great surprise to see convenience-style retailing selected by Tesco as its mode of entry for its impending assault on the US grocery market.
This year’s losers
While Tesco continues to be a winner on the global stage, others have not fared so well. Among the losers this year are ITM, which saw its scale reduced thanks to its somewhat overdue exit from the cut-throat German market, with Edeka picking up the spoils. Others who did not enjoy a great year in terms of growth were US regional grocer Winn-Dixie, although its radical downsizing may help it as it attempts to emerge from bankruptcy protection, Dutch-based Ahold which finally appears to have completed its divestment programme and Scandinavian group Axel Johnson, ending the year somewhat smaller through its sale of the SPAR Operations in Finland.
Two of last year’s Top 100 have ceased to exist, with troubled UK food retail and wholesale operation Big Food Group being swallowed up by Baugur, the acquisitive Iceland-based retail conglomerate that also has domestic grocery operations and a wide variety of non-food retail operations in the UK and beyond. Another victim of consolidation was Australia-based group Foodland Associated, carved in two and taken over by Metcash in Australia and Woolworths in New Zealand. Woolworths and key rival Coles Myer have both continued to enjoy robust growth rates in Australia, although this has largely been a result of their expansion into areas such as specialist drinks stores and hotels. New faces in the 2005 ranking include BI-LO/Bruno’s in the USA, the two regional chains divested by Ahold in late 2004, and the aforementioned Baugur, now something of a sprawling holding company with a vast network of assorted retail chains across Europe.
Hot markets
In terms of top-line growth, however, there are few retailers that can hold a candle to AS Watson, the Hong Kong-based retail group backed by gigantic conglomerate Hutchison Whampoa. With nineteenth century roots as a Hong Kong dispensary, the group has made a series of acquisitions since the 1970s to become a food and drug retail powerhouse in Asia and also a key player in the European health & beauty market. The retailer has suggested that North America is in its sights in the longer term, so a top 30 place is not out of the question over the coming years.
In geographic terms, Russia and India have joined China as the hot markets for cross-border expansion over the last year or two, yet domestic players from Russia and India are still notable by their absence in the top 100. While rapidly-growing and consolidating Chinese operators such as Lianhua are growing quickly and have entered the major leagues - likely to be joined by compatriots China Resources Enterprises and Beijing Hualian before too long - the top 100 has yet to be troubled by any Russian retailers. This is set to change thanks to the recent merger of Perekriostok and Pyaterochka to form a clear market leader - assuming of course the merged group does not attract the predatory attentions of any of the big global players.
It seems likely to be some time before any Indian retailers gain sufficient mass to enter the lower reaches of the ranking. Despite groups such as Reliance and Pantaloon demonstrating great ambition and setting forth immense store opening programmes, the fragmentation and low spending power in India means that it will be a few years yet before an Indian retailer takers pride of place in the top 100.
For all of the retailers, however, it will be a case of watching Wal-Mart streak ahead into the distance in terms of total global sales. This rapid growth rate has traditionally been powered by ongoing organic growth in its home market, but Wal-Mart has recently proven more aggressive in its acquisitive activities, taking control of operations in Japan and Central America. With US growth poised to continue at a robust tempo and further international expansion almost inevitable, despite its recent reversals in Germany and South Korea, it is extremely difficult to comprehend how Wal-Mart’s global domination could be threatened.
Bryan Roberts is global retail research manager at PlanetRetail, which provides news and analysis on retailers and retail markets worldwide on a day-to-day basis. This retail 100 ranking is drawn from the PlanetRetail database, which consists of the world’s leading grocery, general merchandise and drugstore retailers.
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