Retail grocery too mature' for investors.

Posted On Tuesday, 29 July 2003 02:00 Published by
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THE local grocery retail sector is not seen as an attractive investment opportunity by global retail groups, a food retail market study conducted by research company A T Kearney has revealed.
Industrial Reporter

 THE local grocery retail sector is not seen as an attractive investment opportunity by global retail groups, a food retail market study conducted by research company A T Kearney has revealed.

 The report, which rates the retail food markets of developing countries in terms of the investment opportunities on an index for multinational retailers, said the SA market was unattractive because the African retail market was mature and suffered from low economic growth.

 An analyst said the relatively small size of the domestic retail market compared to those in Asia made those foreign markets more attractive to global retail chains.

 The analyst said that in many Asian countries there was no supermarket culture. This meant there was still room to develop a market, while in SA such a culture had been around for some time.

 The low operating margins of domestic retailers also made breaking into the SA market more difficult for global players.

 For global retail chains, moving into emerging countries was an attractive option because their home markets were saturated and there was often restrictive legislation to contend with back home.

 According to the report, the top 30 retailers had "extended their empires" into 85 countries this year.

 However, global expansion did not "guarantee easy harvests", as two out of three retailers failed to meet initial financial targets.

 Despite the difficulty, AT Kearney said global expansion was an "essential element" for a global retailer's growth strategy.

 The report said Russia had replaced China as the most attractive developing grocery market.

 The report pointed out that grocery retail markets matured quickly. This could be seen in Poland being punted as a retailers' "El Dorado" five years ago. Today, with more than 17 retailers based there, it was regarded as crowded.

 Local chains in emerging markets have not taken the influx of foreign competitors lying down. These domestic retailers have started forming their own conglomerates .

       
    Jul 29 2003 07:37:03:000AM Larry Claasen Business Day 1st Edition

Publisher: Business Day
Source: Business Day

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