New Delhi: After years of negotiations with more than a dozen potential Indian partners, Europe’s biggest retailer Carrefour SA has forged an alliance with Kishore Biyani’s Future Group, which runs India’s largest store chain, according to two persons familiar with the development.
Future Group will open Carrefour-branded franchise stores in the country under a deal signed three months ago, said the two persons, who spoke on condition of anonymity because an announcement is yet to be made.
Future Group plans to open between 150 and 300 Carrefour-branded hypermarkets in the next five years, said one of the two persons.
“This is quite ambitious given the challenges in finding right space required for such hypermarkets,” said the person.
Future Group, which runs Pantaloon and the Big Bazaar chains, will pay the French retailer a royalty for using the brand, said the person, who declined to specify the royalty amount.
Indian rules allow foreign multi-brand retailers to operate in the country only through franchise agreements with local firms.
Carrefour has been scouting for a partner for several years, without success. It has previously held talks with Bharti Enterprises Ltd, which teamed up with Wal-Mart Stores Inc., Wadia Group, and real estate firms DLF Ltd and MGF Ltd, among others.
In 2007, Carrefour started two separate units in India, Carrefour WC and C India Pvt. Ltd to roll out fully owned wholesale stores, and Carrefour India Master Franchise Co. Pvt. Ltd, which was to partner an Indian company to open the French firm’s branded stores in the country.
Carrefour did not respond to a detailed questionnaire emailed to Jean Noel Bironneau, the company’s India head. Biyani, the chief executive of Future Group, said “nothing (has been finalized) yet”.
The two persons cited above said Future Group was currently identifying several Big Bazaar hypermarkets that could be converted into Carrefour stores. It plans to use space it has rented in upcoming malls for Big Bazaar outlets to open Carrefour stores instead.
The first Carrefour store could open in Mulund, in Mumbai, in space that was acquired by Future Group in March from South Africa’s Shoprite Holdings Ltd. Another possible site for a Carrefour store could be the upcoming Ambience Mall, in New Delhi’s Vasant Kunj neighbourhood.
Future Group had booked 80,000 sq. ft of space in the mall in July with plans to open a Big Bazaar store. Future Group currently runs 125 Big Bazaar hypermarkets. The Carrefour stores will occupy between 50,000 and 80,000 sq. ft.
Another person close to the situation at Future Group said the company will continue to push both Big Bazaar and Carrefour brands because they cater to different sets of consumers. While Big Bazaar will operate as a mass-market format, Carrefour will cater to “upscale” consumers in the country, this person said.
The deal will allow Future Group to source products and seek technical, technological and other expertise from Carrefour. The French retailer is scheduled to open its first cash-and-carry store in New Delhi’s eastern suburb of Seelampur in June. The first person quoted above said the cash-and-carry outlet will be fully owned by Carrefour and Future Group will hold no stake in it.
India allows 100% overseas ownership in so-called cash-and-carry retail ventures that are allowed to sell products only to other retailers and business establishments.