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Supermarket Wars: Global Strategies for Food Retailers

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Supermarket Wars: Global Strategies for Food Retailers SUPERMARKET WARS Global strategies for food retailers Andrew Seth and Geoffrey Randall SUPERMARKET WARS This page intentionally left blank Supermarket WARS Global strategies for food retailers Andrew Seth and Geoffrey Randall © Andrew Seth and Geoffrey Randall 2005 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their right to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2005 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN-13: 978–1–4039–1910–6 ISBN-10: 1–4039–1910–0 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Seth, Andrew. Supermarket wars : global strategies for food retailers / by Andrew Seth and Geoffrey Randall. p. cm. Includes bibliographical references and index. ISBN 1–4039–1910–0 1. Food industry and trade. 2. Grocery trade. 3. International business enterprises. 4. Competition, International. I. Randall, Geoffrey. II. Title. HD9000.5.S4175 2005 381'.456413—dc22 2005049805 10987654321 14 13 12 11 10 09 08 07 06 05 Printed and bound in Great Britain by Creative Print & Design (Wales), Ebbw Vale v Contents List of Tables and Illustrations vii Preface ix Acknowledgements xi Abbreviations xv Introduction 1 1 The World as a Market 6 2 Wal-Mart: The Colossus 15 3 Carrefour: The Pioneer 38 4 Tesco: Chasing Hard 52 5 The Contenders 76 6 Issues in Going Global 87 7 Information and Technology as Competitive Advantage 102 8 Global Advantage: Theory and Practice 114 9 Social Issues: Who Loves Global Retailers? 119 10 Strategic Options for Local Retailers 137 11 Strategic Options for International Retailers 144 12 The Future: Where, How, Who? 161 References and Further Reading 175 Index 180 This page intentionally left blank vii List of Tables and Illustrations Tables 7.1 Internet penetration rates 111 8.1 International sales of the largest retail companies 115 8.2 Push and pull motives for international development 116 Illustrations (see plate section) 1 Wal-Mart supercenter 2 Sam’s Club 3 Asda, Harlow, UK 4 Letñany, Prague 5 Wal-Mart Neighborhood store, China 6 Carrefour, Wuming, China 7 Carrefour, Guanghua, China 8 Dia, Beijing opening 9 Tesco HomePlus, Yeong Tong 10 Champion, Beaune, France This page intentionally left blank ix Preface In our previous book (Seth and Randall 2001), we started from the propos- ition that supermarkets are an extremely important part of the lives of all those living in industrialised societies. The statement most quoted from the book by reviewers and commentators was that in these countries, the average adult will spend about 2 per cent of their life in a supermarket: we cannot escape their influence, for good or bad. We also pointed out that the future of the industry would be inter- national, but that only a few European firms had made any real progress in developing an international strategy (we mentioned specifically Carrefour, Ahold, Metro and Aldi). This book therefore concentrates on the develop- ment of international food retailing, which has been proceeding apace in the past few years. While Western Europe, North America and Japan have been stable, many other countries have seen dramatic changes – political, economic and social. One of these is the entry of international food retail- ers, and the development of a modern retailing system. Unusually in an emerging world industry, American or Japanese companies do not dominate the field. Wal-Mart, the giant among retailers (and indeed among companies of any sort), is, of course, a major player, but the rest are European – French, German and British. For us, it is a fascinat- ing story, with very different strategies and, as yet, no clear winners – though some spectacular failures. We hope that you find it equally interesting. This page intentionally left blank xi Acknowledgements Particularly warm thanks are due to members of the two world-class contender companies now present in UK – Tesco plc and Asda (Wal-Mart). At Tesco, Sir Terry Leahy was his usual courteous and lucid self, full of ideas with a well-developed global perspective. Several members of his team were readily available and informative – David Reid gave me early guidance after taking over as Chairman. Philip Clarke, who took over the direction of the overseas markets, David Potts and Tim Mason were all helpful about their own key areas. Lucy Nevill-Rolfe read the script of Chapter 4 in draft and was interesting on the subject of culture and people – crucial areas for inter- national companies. Her assistant Deborah Girling was the soul of helpful- ness when we were up against publishing deadlines. At Asda, Tony de Nunzio gave me a highly relevant interview, and Chris- tine Watts and Olivia Gilmore assisted with perspectives and with photographs. At Sainsbury, Sir Peter Davis gave me interviews in his second period of office. I also talked to Stewart Mitchell who led the trading team. Jeremy Schwartz, Brand Director, became a close contact during a year of working together. Several city analysts shared their views. David McCarthy at Citibank Smith Barney reviewed the relative performances of Tesco and Asda. Andrew Fowler has a truly excellent worldwide perspective and a wealth of exper- ience, and I was able to check impressions of future challenges in the world stakes with him. The strategies of the brand owners are a key area for debate and have seen much change in recent years. Gerry Warner, head of retail accounts at Lever Faberge brought me up to date with the Unilever strategies. The quality of reading material available was increasingly interesting as worldwide competition became a reality. The references at the end of the book list many of these but three specific publications stand out in my mind – Sam Walton’s autobiography, an international study by Deutsche Bank Eat Cheese or Surrender: Global Food Retail (Rabattu and Botteri, 2003) and a series of good pieces on Wal-Mart often authored by Neil Buckley at the Financial Times. The Institute of Grocery Distribution (IGD) team at Letchworth was well placed to provide articles and quantified information on the key industry players. Its annual publication, Global Retailing, is an excellent summary of the industry. Rachel Aggarwal was informative and directed us to good sources in the IGD library. xii ACKNOWLEDGEMENTS Wyatt Cameron and Peter Levi, based in Shanghai at Dulwich International College produced a series of exciting photographs of the Chinese retail scene (see plate section). Peter Law and Susann Jerry at the Media Foundry gave first class indus- try perspectives and helped with the introduction to the book. Two of my best professional friends – Mark Sherrington of SAB Miller, an erstwhile colleague at the Added Value company, and Chris Ingram, on two of whose boards I have been privileged to serve as a non-executive director – were constantly offering ideas and guidance and I count myself lucky to have worked so closely with them in two-top class marketing environments. I would like to make two final acknowledgements. First to my co-author, who, since our first meeting at Oxford in 1957, I have grown to know very well. He is a genuine pleasure to work with, an eminent teacher and a cool and objective scholar who knows how to evaluate my often inadequately thought-out viewpoints. Our regular meetings in the welcoming inns of Kent, Sussex and now Hampshire, have often produced new ideas, but have invariably lasted for more hours than we had originally planned. When work, if that is what writing is, and friendship come together then the recipient is truly blessed. This brings me to the last dedication, to my wife Edith, my best friend, which she has also been to our four boys and is now to our four grandchil- dren. She shows endless patience and gentle encouragement to a sometimes unsociable, and frequently unavailable, partner. I am hugely lucky to have had the support she has given with this book – the latest element in our lives – as she has given to all the things we have done in many parts of the world for half a century together. ANDREW SETH I echo Andrew’s thanks to the many people who have made this book possi- ble. Jose-Luis Duran, the CFO, and now CEO, of Carrefour, was generous with his time. He was articulate (in what is his third language) in giving a wide-ranging strategic view of both his company and the industry world- wide. He also provided introductions and access to his colleagues, who were similarly forthcoming and helpful – Bruno Cabasso, chief information officer, was frank as well as positive about Carrefour’s information systems, Francois Bouche described its approach to global sourcing and Elisabeth Andro kindly supplied photographs.
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