Only few months after opening its first stores in Russia in June 2009, Carrefour announced that it would be leaving the country. This withdrawal was a shocker and is a setback for international retail development in Russia.
Carrefour’s group sales resulted in a 2.9% drop for the 3rd quarter of 2009. The strongest sales decline comes from the companies operations in Europe. The only regions that resulted in positive growth were Asia, with sales growth by 5.1% and Latin America with a 5.3% growth.
Carrefour says that the lack of organic growth prospects and acquisition opportunities in the short and medium term is behind its decision to withdrawal from Russia. Whit out these opportunities it is hard to achieve its goal to attain market leadership. Other factors might play a role in this decision. Some of the severe obstacles and barriers that foreign companies face while entering the Russian market includes complicated statutory framework, widespread bureaucracy, red tape and corruption. Because of these obstacles, and the lack of credit, it was very challenging for Carrefour to acquire a domestic player. Its efforts to acquire a majority stake in Seventh Continent didn’t work out.
For Carrefour, acquiring Seventh Continent, which was facing some financial problems, was not an attractive investment, since Carrefour was under a lot of pressure from some of its largest shareholders to sell operations in emerging markets. So withdrawing from the Russian market in an early stage was probably the right move to take.
Carrefour’s goal is to become one of the top three players in terms of market share in all the countries in which it operates. But that goal was hard to be achieved in Russia because of the difficulties in acquiring a local player and because of other market difficulties. In 2005 Carrefour draw back from four countries where it couldn’t achieve that goal. That was a strategic move that helped it on focusing its operations in growing markets like Eastern Europe and Latin America. This withdrawal from Russia is a setback of Carrefour’s goal to gain presence in all of the BRIC countries, but they stile maintain presence in Brazil and China. The growing operations in these two countries, and in different countries in Asia and Latin America might lead to easing investor pressure to deposit these valuable assets, which would be a very short-term decision. Carrefour is also investigating opportunities for operating in India. Carrefour’s experience in Russia will probably affect other international retailers considering interring the Russian market.
Multinational food retailers dip their toes in emerging markets
In June 2009 Carrefour, the world’s second largest retailer after Wal-Mart, and that operates in more counters than any other retailer in the world; opened its first store in Moscow. However only three months later, the company announced it’s withdraw from the Russian market. In a prepared statement, the company cited “the absence of...