According to a report on Bloomberg.com, Carrefour SA, the world's second-largest retailer, is looking to expand in the market by opting for a franchise model in India. The market in India is a hot one, and retailers are aware of the potential in expanding to this market. Carrefour Chief Executive Officer Lars Olofsson said on May 4 that the Paris-based company is holding talks with an unidentified potential partner on expanding into India.
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Carrefour Working on Franchising Setup for India
By Saikat Chatterjee and Andrew Roberts
May 11 (Bloomberg) -- Carrefour SA said it may opt for a franchise model in India, allowing the world’s second-largest retailer to expand in the market while meeting laws barring foreign companies from owning multibrand retail stores.
Carrefour also plans to open its first wholesale outlet in New Delhi in the next few months, Jean Noel Bironneau, managing director of the company’s operations in India, told reporters in the nation’s capital today.
The French hypermarket operator and larger U.S. competitor Wal-Mart Stores Inc. are trying to gain a foothold in India, where sales of retail chains may rise by as much as 35 percent a year to $80 billion by 2015, according to an August 2008 study by consultant McKinsey & Co. India’s laws, aimed at protecting owners of smaller shops, have limited overseas companies to operating single-brand outlets or wholesale stores.
“Based on those choices, it’s not an unreasonable thing for Carrefour to do,” Christopher Hogbin, an analyst at Sanford C. Bernstein Ltd. in London, said in a telephone interview. “It puts a toe in the water in what could potentially be a big market.” Hogbin has a “market-perform” recommendation on Carrefour stock.
Carrefour fell as much as 88 cents, or 2.5 percent, to 34.85 euros and was down 2 percent as of 1:48 p.m. in Paris trading. The stock has gained 4.4 percent this year, valuing the company at 24.7 billion euros ($31.3 billion).
Emerging-Markets Strategy
Chief Executive Officer Lars Olofsson said on May 4 that the Paris-based company is holding talks with an unidentified potential partner on expanding into India.
The strategy for other emerging markets includes 22 hypermarkets, which sell groceries, home furnishings and items usually found in department stores, and 140 discount outlets in China, Olofsson said at the time. Plans for Brazil include two hypermarkets, 40 discount stores and 12 Atacadao-brand cash and carry outlets, he said.
The company aims to open 150 hypermarkets in India and is in partnership talks with local retailer Future Group, French daily Le Figaro reported on May 4, citing unidentified people. Bironneau declined today to comment on the report, saying it was “speculative.” Carrefour is “working on the franchisee concept” for retail operations in India, he said, without giving details.
SOURCE: Bloomberg.com
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