PARIS (Reuters) - Carrefour (CARR.PA) is preparing to return to Algeria after a six-year absence, as part of a drive to tap booming consumer demand in Africa.
The world’s second-largest retailer after Wal-Mart (WMT.N) will open a hypermarket in Algiers by the end of June, a source close to the matter told Reuters.
The company operating the store is a joint-venture, 70 percent-owned by Carrefour Tunisia and 30 percent by a fund controlled by the Algerian state, the source said.
Carrefour declined to comment.
Carrefour entered Algeria in 2006, teaming up with local private holding company Arcofina. However, in 2009 the pair ditched the venture after opening only one of a planned 18 stores. Arcofina cited development roadblocks such as difficulties in securing land.
Rising incomes and an underdeveloped retail sector have made Africa an important new growth destination for retailers and consumer goods companies, with the likes of Danone (DANO.PA), Pernod (PERP.PA) and Diageo (DGE.L) boosting investments to counter weak growth in Europe.
The World Bank forecasts Algeria’s economy will grow 3.3 percent this year and 3.5 percent in 2016 -- more than double rates expected for the euro zone.
Small independent grocers dominate Algeria’s retail sector, where Carrefour would compete with Numidis, the retail unit of agro-food conglomerate Cevital, which had a 1 percent share of the 2014 local retail market by value, according to Euromonitor.
Newcomers to Africa face many challenges including legal hurdles, lack of available property and transport infrastructure and setting up a reliable supplier base.
Carrefour has thus chosen to expand on the continent through franchise deals with strong local connections to which it brings retailing skills while keeping investment to a minimum.
This is because Europe’s largest retailer has earmarked the bulk of its tight resources for expansion in its key markets of Europe, Brazil and China. [ID:L5N0W70N3]
“Carrefour is unlikely to sustain ambitious expansion plans for the African continent in the short-term as it already has a lot on its plate in its key markets,” said PlanetRetail analyst Gildas Aitamer.
Carrefour has had franchise deals since 2009 with Morocco’s Label‘Vie (LBV.CS) for 62 stores and in Tunisia with Ulysse Hyper Distribution (UHD) since 1997 with 71 stores.
In east Africa, it relies on long-time partner Dubai-based Majid al Futtaim (MAJ), its exclusive franchise holder for the Middle East, which operates Carrefour hypermarkets in Egypt and plans to open stores in Kenya this year.
In 2013, Carrefour teamed up with Africa-focused trading firm CFAO CFAO.PA to open stores in eight west African countries. CFAO plans to open the first shopping center in Abidjan in the second half of 2015.
Editing by Andrew Callus and Mark Potter