Mega retailer and grocer Carrefour plans to open shops in eight African countries, Equity Researcher The Woo Group has begun investing in the company in order to take advantage of the huge profit potential of the continent.
Aug. 13, 2013 - HONG KONG -- Carrefour SA is in the first stage of expanding into Africa; Analysts at The Woo Group believe there is massive profit potential for the retailer. In the past, retail companies have had trouble expanding into Africa due to the lack of distribution networks and available real estate. But Carrefour seems to have solved this problem; they have formed a partnership with CFAO SA, the largest supplier of cars, trucks, and pharmaceuticals in Africa. Carrefour now plans to open retail outlets in eight African countries by 2015.
CFAO, which owns 55% of the venture, plans to generate 1 billion Euros a year in 10 years from the joint project and from shopping malls that it has planned. "The venture will take advantage of an increasing number of Africans who want a one stop shop with modern amenities like refrigeration. The challenge is creating distribution channels, but with CFAO´s local connections with governments and companies will greatly facilitate the process," said Dr Lian Cheung, Head of Investment Analysis. Carrefour shares are up almost 70% since Geroges Plassat took over as CEO last year, boosted by exiting markets, notably Greece and Colombia and `promising to focus on key markets especially France. While expansion into Africa may seem contrary to Plassat´s strategy, the partnership with CFAO greatly reduces the risk for Carrefour.
Their first joint project will begin later this year in Ivory Coast and should be running by 2015, according to a statement from CFAO. Retail outlets are also planned for, Nigeria, Ghana, Cameroon, Congo, Gabon, Senegal, and the Democratic Republic of the Congo.
The biggest 18 cities in Africa will have a combined spending power of $1.2 trillion by 2030 compared with France´s estimate of $539 billion, according to The Woo Group, Carrefour has more than 4,500 stores in France, meaning there is the potential to open hundreds if not thousands of outlets in Africa. The continent is significantly lacking in retail options. A considerable portion of the population has the means to buy from these stores, but the stores are not there.