Carrefour's success in Thailand
and planned expansion
By Jon Fernquest |
Saturday's Bangkok Post business ran a story denying rumours that Carrefour is looking to sell its operations in Thailand.
Instead, the retail chain is actually planning a massive expansion of operations: "The new expansion plan would double its branch network to 54 [stores] in just three years."
This announcement indicates not only confidence in the future of the Thai economy but also confidence that the business environment for foreign companies in Thailand will remain friendly.
Proposed changes to retail laws hostile to large retailers and in the Foreign Business Act also seem to be discounted by Carrefour.
Here is the article in full:
Carrefour denies rumours of sale
28 new branches planned through 2010PITSINEE JITPLEECHEEP
Saturday April 26, 2008
Executives of the French hypermart operator Carrefour denied a report that it was considering selling off its business in Thailand to its rival Big C.
The Thai language daily Thai Rath yesterday reported speculation that Carrefour could sell its operations to Big C, whose major shareholders include the Casino Group, a major French retailer.
Philippe Broianigo, managing director of CenCar Co, the local operator of Carrefour, noted that Carrefour's French headquarters last week approved a four-billion-baht investment plan that would result in up to 28 new branches opened through 2010.
The company plans to spend one billion baht this year to open six to eight new outlets. Another 1.7 billion baht in investment was planned for 2009 and 1.3 billion in 2010 to add 20 stores.
Each new store would also generate 200 to 300 new positions, depending on store space. The investment plan would be financed from cash flow and support from its overseas parent.
Carrefour, which entered Thailand 11 years ago, currently operates 27 outlets nationwide. The new expansion plan would double its branch network to 54 in just three years.
The company this year has already opened two new outlets, one in Nong Chok and another on Sukhaphiban 1 road, its smallest store to date with retail space of about 2,000 square metres.
Another 2,000-sq m "mini" hypermarket is planned to be opened on Soi Udomsuk on Sukhumvit Road by the end of the month.
"We will open all three retail formats to match with the environment in each location. All of them will make money and have sustainable growth," Mr Broianigo said.
Carrefour's formats include conventional hypermarts of over 6,000 sq m each, compact stores of around 4,000 sq m and mini-stores of 2,000 sq m.
Mr Broianigo said Carrefour was committed to its business in Thailand, and had turned a profit since 2006. The Thai operations were ranked in the top 10 for Carrefour worldwide.
"So, we have no plans at all to sell our firm to our rival. Our operations had a net profit of 130 million baht in 2006 and jumped more than three-fold to 430 million baht last year. So, we will go back to grow again," he said.
Carrefour expects revenue growth of 12% this year from its 2007 sales of 23.7 billion baht. Net profits are projected to reach one billion baht within the next two years.
Mr Broianigo said operations had improved thanks to internal restructuring and the development of new store formats to meet customer demand.
He said the company has recently repositioned itself as the "premium hypermarket" with a marketing focus on medium- and high-income customers. The company would spend 450 million baht on marketing to establish the new image.
Carrefour also also plans to spend 30 million baht this year to relaunch its house brand product line, which would be expanded by around 2,000 products. House brand sales now account for around 5% of total sales.
(Source: Bangkok Post, business section, page B1, 26-04-08, temp-link)
Vocabulary:
deny X - say that X is not true
a rumour - an uncertain story or piece of information that many people are talking about
denies rumours - say that rumours are untrue
denied a report - say that a report is not true
looking to - planning to do in the future, looking for an opportunity to do in the future
looking to sell - planning to sell
X indicates Y - X shows that Y is true
the business environment - thegeneral situation for people doing business, whether it is positive or negative
Foreign Business Act - the laws regarding foreign companies and business people doing business in Thailand
discount - consider a fact, idea, or opinion to be not important and not worth considering
hypermart - a very large store (superstore) which combines a supermarket and a department store, carrying an enormous range of products (See Wikipedia)
speculation - guess about something you are unsure about (See glossary)
outlets - stores where you can buy a certain kind of product (See glossary)
generate 200 to 300 new positions - create 200 to 300 new jobs
retail - selling goods directly to the public, stores with customers buying goods in small quantities
retail space, store space - the floor space of a store (determines quantity and variety of goods that store can stock)
retail formats - different kinds of stores (different sizes and layouts)
cash flow - money coming into the company (payments for goods or services sold) minus money going out (costs of doing business)
a branch of the store - one store location [Thai: Saka]
branch network - all store locations operated by company and the transportation and warehouse facilities (logistic) used to supply the stores
the environment in each location - the neighborhood surrounding the store (the people who shop in the neighborhood of the store and their needs)
conventional - ordinary, normal
conventional hypermarts - ordinary hypermarts (very large)
compact - small and takes up very little space (for example, compact cars can find parking space more easily)
compact stores - small stores that take up little space
turned a profit - earn a profit, make money, revenues greater than expenses
rival - competitor, similar companies trying to attract same customers
projected - predicted, forecast, expected
Net profits are projected to reach one billion baht -
restructuring - the act of partially dismantling or otherwise reorganizing a company for the purpose of making it more efficient and therefore more profitable (See Wikipedia)
internal restructuring - changing the organisation inside a company to make it more profitable
positioning of a product - controlling what the customers think about a product or brand, what they they believe the benefits of the product to be compared to other similar products (See Wikipedia)
reposition - changing the way that customers think about your product
company has recently repositioned itself as Y - the company has recently taken action to change the way people think about their products and brands
premium - costs more for higher quality
marketing focus - the customers they are trying to attract to their product
a corporate image - what people think about when they think about the company, associations (for example, the image I have of Carrefour is a well stocked meat section 24-7)
establish the new image - change the way that people think about the company, create new associations about the company in customers' minds
house brand product line - products sold with the company's own name as brad name
