Wed, Oct 05, 2005 - Page 10 News List

Hypermarkets face new challenge, possible reshuffle

ROCKY ROAD Carrefour Taiwan is poised to take over Tesco's local operations by the end of the year, which could have a ripple effect and cause problems for rivals

By Jackie Lin  /  STAFF REPORTER

Taiwan's highly competitive hypermarket sector is facing a major reshuffle as soon as Carrefour Taiwan formally takes over rival Tesco's local operations at the end of the year, which market watchers said might place further pressure on small players here and offer less choices for shoppers.

A market analyst, who preferred not to be named, said this deal would not create major changes on the nation's hypermarket turf in the short term, as Carrefour's market dominance will not change drastically after taking over Tesco's six stores.

But Tesco's complete pull-out locally hints at the No. 3 player, Far Eastern Geant (愛買吉安), also potentially finding it hard to compete in the near future, the analyst said, considering Far Eastern Geant's lack of economies of scale -- the predicament that forced Makro Taiwan Ltd (萬客隆) and Kaomart (高峰百貨量販) to close down in 2003.

Far Eastern Geant has been working hard to break even since the 50-50 venture was formed in 2000 between the nation's Far Eastern Group (遠東集團) and Casino Guichard Perrachon & Cie SA, the second-biggest supermarket company in France after Carrefour.

Downplaying the merger's impact, Wendy Yang (楊文婷), marketing director of Far Eastern Geant, said the company will strengthen its cooperation with partners in the home market. She refused to elaborate.

According to the asset-swap deal agreed between the two retail giants' headquarters last week, Carrefour Taiwan will fork out 132 million euros (US$159 million) to acquire Tesco Stores (Taiwan) Co's six outlets and two development sites, while the UK's Tesco Plc will obtain Carrefour SA's 15 outlets in the Czech Republic and Slovakia for at least 189 million euros.

The deal will cause Carrefour's market share in Taiwan to jump from the current 33 percent with 36 outlets nationwide to a promising 40 percent with 42 outlets, far outstripping RT-Mart's (大潤發) 23 stores and Far Eastern Geant's 13 stores.

Faced with their largest rival's swift growth in terms of market presence, the nation's second-largest hypermarket chain RT-Mart appears unfazed, saying that increased market share is not equal to rising profits.

"Their combined sales might go up but synergy will not really surface because most of Tesco's stores geographically overlap with Carrefour's outlets. Do you really need to operate two hypermarkets in the same area?" said Kaufmann Wei (魏正元), president of RT-Mart, a Taiwanese-French hypermarket venture.

Moreover, he said, how to smoothly integrate two different companies' corporate cultures and safeguard employees' benefits to stabilize operations might pose big challenges for Carrefour, although it would enjoy a bigger bargaining chip in purchase negotiations.

Expressing confidence in RT-Mart's profitability, Wei stressed that the company has no need to adjust its strategies and will only carry out cooperation or similar merger plans when more obvious benefits can be created.

However, for local consumers, the merger means that shopping choices available become fewer and market monopolization might increase, jeopardizing consumers' rights and interests.

In this repect, Chen Jung-lung (陳榮隆), commissioner of the Fair Trade Commission, said the government organization will judge the impacts brought about by the integration of Carrefour and Tesco before granting its approval.

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