BackMax Hypermarket partners again with Spar to run its stores in India
The new agreement will result in 13 Auchan stores converting to the Spar brand and a further 20 stores opening nationwide over the next 5 years
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Mumbai: Max Hypermarket India Pvt. Ltd, part of Dubai-based retailer Landmark Group, has re-entered into an agreement with Dutch food retailer Spar International BV for running Spar Hypermarkets in India.
This is the second time that the two firms are partnering with each other. They had earlier tied up in 2007, but parted ways in May 2012 due to differences in ambitions for developing in the Indian market.
“Max doesn’t invest in the retail business and only provides know-how. This partnership will work well in the Indian context," said Arvind Singhal, managing director (MD) of Technopak Advisors Pvt. Ltd, a retail consultancy firm.
On Tuesday, Max Hypermarket announced parting ways with French retailer Groupe Auchan SA on account of the difficulty in complying with India’s foreign investment rules and strategic differences between the partners. The new agreement will result in 13 Auchan stores converting to the Spar brand in the coming months and a further 20 stores opening nationwide over the next five years, according to a joint statement by Max Hypermarket and Spar International.
Modern trade retailers like Reliance Retail Ltd, the retail unit of conglomerate Reliance Industries Ltd which runs Reliance Mart, and HyperCity hypermarket run by Shoppers Stop Ltd have over the past couple of years consolidated their footprint as they looked at profitability.
Modern retail accounts for 11% of the overall retail in India. The proportion hasn’t risen in the past couple of years.
“The overall channel growth is at 7%, primarily coming from same-store sales," said Ranjeet Laungani, executive director at Nielsen India, a market researcher. “The modern retail channel is looking at consolidating versus store expansion."
Same-store sales growth measures comparable growth of shops that have been open for over a year and does not take into account growth coming from opening new stores.
The retail industry in India has seen its growth rate drop to a decade’s low in the last fiscal year as consumers cut back on discretionary spending. The industry is estimated to be worth around ₹ 31 trillion in 2013-14. Modern or organized retail is worth about ₹ 2.4 trillion. Max Hypermarket and Spar International see retail sales exceeding €300 million (around ₹ 2,460 crore today) by 2019.
“Our new partnership with Max Hypermarket reaffirms the suitability of the Spar business model to the retail market in India. Our previous presence in the market provides a strong foundation to grow the brand in the years ahead and we look forward to working closely with Max Hypermarkets to bring quality fresh foods, low price and a convenient shopping environment to consumers in India," said Gordon Campbell, MD of Spar International.
“We are pleased to renew and extend our business partnership with Spar International. We look forward to working with Spar to rapidly expand the chain and increase our footprint nationwide," said Viney Singh, MD of Max Hypermarket.
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