Carrefour to sell in India by 2009, opts for franchisee route

Carrefour to sell in India by 2009, opts for franchisee route

New Delhi: Carrefour SA, the world’s No. 2 retailer, said it will roll out fully-owned stores to sell to wholesalers in India by mid-2009 even as the company is in talks with three Indian companies to open the French firm’s franchisee stores that will sell directly to Indian consumers.

Carrefour has floated two separate units in India—Carrefour WC & C India Pvt. Ltd will roll out fully-owned wholesale stores and Carrefour India Master Franchise Co. Pvt. Ltd will enlist an Indian company to open the French firm’s branded stores in the country.

The Indian franchisee will open Carrefour brand hypermakets in India and Carrefour’s 100%-owned cash and carry stores will feed it, said Herve Clec’h, managing director of Carrefour in India.

“We are talking to three very willing Indian partners who will bring dimension to the business in a country the size of India," said Gerard Freiszmuth, general manager for Carrefour in India. He declined to name the Indian companies they are in talks with, but “it could be a conglomerate, a developer, a financial institution or even a retailer."

Carrefour will provide “technical support" such as providing expertise in logistics and supply chain support to the Indian franchisee. The officials declined to say how much Carrefour plans to invest in India. Currently, India allows foreign retailers such as Wal-Mart and Carrefour to own 100% cash and carry subsidiaries that sell to businesses. It doesn’t allow full ownership of multi-brand stores selling to individuals.

The Indian company will open Carrefour hypermarkets and will pay a royalty fee to use the French company’s name in India. Freiszmuth said the firm will have a clause in the franchisee agreement that Carrefour will become a majority-partner in the front-end retailing if India allows foreign multiple retailers to sell directly to Indian consumers. Carrefour will retain the Indian franchisee as a partner even if India allows 100% foreign ownership in front-end retailing. “The willing partner will share share long-term values as we do," Freiszmuth said.

Freiszmuth said Carrefour will finalize the Indian franchisee by the first quarter of next year and expect to roll out cash and carry hypermarkets of about 5,000 sq. m that will sell mainly food items.

The announcement comes months after the world’s largest retailer Wal-Mart Stores Inc. inked a 50:50 joint venture agreement with India’s largest mobile service provider, Bharti Enterprises, to open cash and carry hypermarkets in India early next year.

The Carrefour officials admitted cash and carry is not the core business of the firm and the company plans to use the expertise of a Brazilian retailer Atacadao that the French retailer acquired earlier this year. Freiszmuth conceded that Carrefour’s Indian plans are “not far from" Wal-Mart’s entry strategy in India. After being put on thin ice by successive Indian governments, Wal-Mart finally picked Bharti to open cash and carry stores.

Groups opposing the entry of foreign and Indian companies into India’s lucrative retail market accuse Wal-Mart of tip-toeing into the country.

Carrefour said it may have had held talks with various Indian companies including Bharti Enterprises, real estate major DLF Ltd and Bombay Dyeing and Manufacturing Ltd but “many of the discussions fell rather quickly," Freiszmuth said.