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Carrefour's Wal-Mart act

Amit Mukherjee     November 27, 2007

More than two years after IT started scoping out the Indian market, French retail giant Carrefour has finally found a way to get started without hitting the foreign direct investment (FDI) hurdle. The credit for that must go to Wal-Mart, the world’s biggest retailer, which last year hit upon a novel ‘combo’ entry strategy in a market that allows foreign majority ownership only in single-brand retail chains.

Herve Clec’h
Herve Clec’h
Therefore, like Wal-Mart, Carrefour plans to set up a fullyowned wholesale cash-n-carry business (where there are no restrictions on full foreign ownership) and find a franchisee for the retail business. To that end, Carrefour, the world’s biggest retailer after Wal-Mart, has set up two different entities in India: Carrefour WC&C India Pvt Ltd, and Carrefour India Master Franchise India Pvt Ltd. “The Indian franchisee will open Carrefour brand hypermarkets in the country and Carrefour’s 100 per cent-owned cash-and-carry stores will feed them,” says Herve Clec’h, MD, Carrefour India, who will be heading both the entities.

The group, which had $130 billion in revenues at last count, has already set up an office in Gurgaon with a staff of 50, of whom 30 focus on sourcing for the parent company and the rest on local retail. Over the next few months, Clec’h (pronounced Klesh) expects the headcount to touch 100. “We’re at the moment talking to three very large and powerful willing Indian partners who will bring dimension to the business in a country the size of India,” says Gerard Freiszmuth, Carrefour India’s General Manager, and the one doing all the scouting.

The three companies, Freiszmuth says, have been shortlisted from a list of more than 50 business groups that Carrefour had talked to for partnership. “We have been looking at groups with national ambitions and who can effectively contribute to our plans—in fact, a partnership in which Carrefour will not have to look at things from the scratch,” says Freiszmuth. The first store is expected to roll out by the second half of 2008.

That seems a tad optimistic, given that none of the players with “national ambitions” may want to be a Carrefour franchisee, which in effect will mean being a sleeping partner. In fact, that was a reason why HDFC, Anil Ambani, Adi Godrej and even DLF—some of the big players Carrefour talked to without much luck—said no to the French retailer’s overtures.

So it will be interesting to see who finally ties the knot with Carrefour in India. As for the market itself, Freiszmuth says the group has operated in far tougher environments. “India definitely has a better atmosphere than what we faced in China, where today there are over 100 Carrefour stores,” he says. Bal-Mart, watch out.

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