Geant deal puts MAF at top of food chain

Group con­sol­i­dates its lead­ing po­si­tion in re­tail with ac­qui­si­tion of su­per­mar­kets

The National - News - Business - - Front Page - Michael Fahy mfahy@thena­tional.ae

The deal agreed by Majid Al Fut­taim to buy Re­tail Ara­bia’s Geant stores and add them to its Car­refour port­fo­lio re­in­forces its mar­ket-lead­ing po­si­tion in the UAE, said the group’s chief ex­ec­u­tive Alain Be­j­jani.

“Our strat­egy is to ba­si­cally al­ways main­tain our lead­ing po­si­tion in the mar­kets we are in,” Mr Be­j­jani said. Majid Al Fut­taim an­nounced that it was buy­ing 26 Geant stores from Re­tail Ara­bia’s par­ent com­pany, BMA In­ter­na­tional, as well as four Gulf­mart su­per­mar­kets in Bahrain. Th­ese will all be re­branded to Car­refour, bring­ing the total num­ber of Car­refour out­lets to 80 in the UAE, 11 in Bahrain and eight in Kuwait.

Mr Be­j­jani de­clined to say how much it had paid for the stores, nor when he ex­pected Majid Al Fut­taim’s in­vest­ment to pay for it­self, but said the deal would bring ben­e­fits to staff, cus­tomers and sup­pli­ers.

For in­stance, he said there was very lit­tle over­lap between the UAE stores. Geant’s two main hy­per­mar­kets are an­chor stores in ma­jor malls where Car­refour is not present – Nakheel’s Ibn Bat­tuta Mall in Dubai and at Yas Mall in Abu Dhabi.

“Lo­gis­ti­cally, most of their sup­pli­ers are our sup­pli­ers,” said Mr Be­j­jani. “The sen­ti­ment in the mar­ket – peo­ple are happy about it and I think it is some­thing that is giv­ing sus­tain­abil­ity to ev­ery­one’s busi­ness.”

He also said that it would not be dam­ag­ing in terms of com­pe­ti­tion, ar­gu­ing that ben­e­fits in terms of scale and buy­ing power would be passed to cus­tomers.

“There are a num­ber of play­ers in the mar­ket. It will con­tinue to be a very com­pet­i­tive mar­ket. From that stand­point I wouldn’t worry.

“I think we have a track record where we con­sis­tently and sus­tain­ably make sure the ben­e­fits go to the cus­tomer in terms of the cost, be­ing more com­pet­i­tive on the pric­ing side.”

Craig Plumb, the head of re­search for JLL Mena, said that the re­tail mar­ket in the Mena re­gion is get­ting in­creas­ingly com­pet­i­tive.

“There’s no doubt that the mar­ket is tight­en­ing up a lot,” Mr Plumb said. “But Car­refour is the shin­ing star for Majid Al Fut­taim. In re­tail terms, it is their cash cow.”

The rea­son for this, he said, is be­cause the gro­cery busi­ness – par­tic­u­larly convenience store re­tail – re­mains stronger than lux­ury re­tail.

“Ob­vi­ously, peo­ple still need to eat, but they don’t need to buy more watches or shoes.”

This deal strength­ens Majid Al Fut­taim’s po­si­tion in convenience re­tail, he said, and al­lows it to eke out sup­ply chain ben­e­fits.

“Be­cause re­tail has be­come so com­pet­i­tive, ev­ery dol­lar you can save in ship­ping costs in the sup­ply chain makes a big dif­fer­ence.”

John Brash, the founder and chief ex­ec­u­tive of the con­sul­tancy Brash Brands, ar­gued that price com­pe­ti­tion between su­per­mar­kets is still not as big an is­sue in the Mid­dle East as in other parts of the world.

“Lo­ca­tion mat­ters much more, and that’s where MAF is al­ready ahead of the game, and – with this move – set to be even more of a win­ner,” he said.

He said that Majid Al Fut­taim’s de­vel­op­ment model for Car­refour – of hav­ing large hy­per­mar­kets, with tiers of smaller su­per­mar­kets and then convenience stores – is one that it has man­aged to grow quickly.

“Geant tried to keep up, but this deal, to­gether with MAF’s re­cent ac­qui­si­tion of a UAE Hy­per-Panda site from Savola, ef­fec­tively makes Car­refour the win­ner – es­pe­cially at the hy­per­mar­ket level,” Mr Brash said. “With tough mar­ket con­di­tions in the re­gion – slow­ing eco­nomic growth, a strong dol­lar and a rise in on­line shop­ping – it was al­most in­evitable a sur­vival of the strong­est scenario would play out.”

Car­refour is the shin­ing star for Majid Al Fut­taim. In re­tail terms, it is their cash cow Craig Plumb the head of re­search for JLL Mena

Chris Whi­teoak for The Na­tional

Twenty-six Geant stores be­ing ac­quired from Re­tail Ara­bia are to be re­branded as Car­refour out­lets.

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