Carrefour in Turkey: not so supermarket
Mar 25, 2013 4:46pm by David O’Byrne
A long-running spat between Turkey’s Sabanci and retail partner Carrefour has taken another downward turn: Haluk Dincer, head of Sabanci Retail and Insurance, says the group has lost patience with its French counterpart and that if it can’t get what it wants, it is ready to take legal action.
Serious stuff – though it hardly comes as a surprise.
It is now a full eight months since Dincer, along with Sabanci’s three other representatives at CarrefourSA, the Sabanci-Carrefour joint venture, walked off the board complaining of a deterioration of relations with the French retailing giant.
With the French parent suffering from its own management problems, CarrefourSA – in which Carrefour holds 58.2 per cent and Sabanci, 38.8 per cent – is widely reckoned to have suffered from a lack of attention.
“The company is operating on a very low margin of only around 2 per cent ebitda [earnings before interest, tax, depreciation and amortisation] compared with 5 to 6 per cent ebitda enjoyed by its rivals,” says Melda Agirdas, retail analyst at Istanbul’s Ekspres Invest, noting that eight months after the resignations there is no indication of where the company is going.
In July last year, three options were apparent: Carrefour could sell to Sabanci and get out of Turkey; Sabanci could sell to Carrefour and end its interest in food retailing; or both could sell to a third party.
Agirdas says the signs are that Sabanci has tired of food retailing and would prefer to plough the revenue from a sale of CarrefourSA into Enerjisa, its rapidly-expanding power generation and distribution joint venture with E.ON.
But while Sabanci appears ready to quit a sector it entered in partnership with Carrefour 20 years ago, Carrefour’s plans are still unclear.
Under new boss Georges Plassat, Carrefour has sold or closed down operations in Colombia, Indonesia, Malaysia and Singapore, tripling revenues to €1.2bn over the past 12 months and freeing up funds to boost capital expenditure this year to €2.3bn.
However, the company has yet to offer any indication of what it plans to do with its poorly performing Turkish operation, prompting Dincer’s threat of legal action.
But Turkey’s food retail market continues to grow, with the share held by organised retail expected to rise from 50 per cent to 60 per cent over the next three years. So now may not be the best time to sell.
Migros, Turkey’s biggest food retail chain, is already up for sale with majority owners UK based BC Partners reported to have opened negotiations late last year with US giant Walmart, having earlier sold 17.4 per cent of Migros on the Istanbul stock exchange and offloaded Sok, Migros’s discount supermarket chain, to Turkish food group Ulker.
With Migros up for sale it may be harder for CarrefourSA to find a buyer. The sale of Migros also effectively rules out any chance of a long-mooted merger between the two chains. And anyway, Agirdas points out, Migros’s strategy has been to expand its smaller format stores; it would be unlikely to see much benefit in CarrefourSA’s hypermarket operations.
One possible suitor for CarrefourSA could be BIM, Turkey’s leading discount food retailer. Galip Aykac, finance director, told beyondbrics last month that the company could be open to acquisitions, albeit only in a different format to its own hard discount model.
The Financial Engineer 