Leaders of the retail pack

Due to the diverse economic and cultural nature of the markets in Africa and the Middle East, modern retailing is perhaps unsurprisingly developing at a varied pace across the region.
By Staff writer
Tue 31 Oct 2006 04:00 PM

Due to the diverse economic and cultural nature of the markets in Africa and the Middle East, modern retailing is perhaps unsurprisingly developing at a varied pace across the region. While the rate of development across most of sub-Saharan Africa remains slow and almost exclusively the result of investment by South African companies, the retail scene in the Middle East is thriving. Some markets in the Middle East, especially countries lining the Persian Gulf, have reached early stages of maturity. Investment here comes from pioneering French internationals Carrefour and Casino, while a booming local and regional retail scene is not to be disregarded.

In 2005, the top five retailers in the Top 30 ranking are all South African retailers, mainly due to their position in Africa’s largest retail market. Their expansion across the borders into southern African countries and beyond has brought them a greater regional presence and a foothold in what could turn out to be fruitful markets in the future. Carrefour and Casino hold positions in the top 10 due to their ongoing growth in Middle Eastern and North African markets. The hypermarket is the banner of choice for both French giants as well as their local and regional competitors such as Panda and Emke Group. Further down the ranking, other Middle Eastern operators have adopted similar strategies and boosted their investments in the channel.

Below the top 10, almost all of the retailers are national or regional retailers hailing from the Middle East and Gulf Coast countries, where modern grocery outlets have become the norm. The UAE, and Dubai in particular, is the market to watch, and several retailers in the ranking have a presence or head office there. KSA retailers are also important to watch in terms of growth as cross-border investment begins.

The genie is out of the bottle and modern retail formats are now opening across the Middle East. Alongside the French internationals Carrefour and Casino in countries such as Saudi Arabia, Egypt, Algeria and the UAE, a number of vibrant and competitive domestic retailers have also emerged. Consumers in the markets are increasingly receptive to these modern formats, with a largely young and increasingly affluent population treating trips to the shopping mall as a social activity, while convenience foods and international cuisines are receiving increasing interest. Retailers, domestic and international, are scrambling to cater for these new appetites. The most important retailers emerging as regional leaders in the Middle East are Carrefour, Casino, Panda and Emke Group, with these retailers operating more than 100 stores in seven countries. Their ambitious expansion plans point towards rapid consolidation in the Middle East.

In particular, Carrefour has further consolidated its presence, with its first store in Algeria opening in January 2006 and proposed market entry into Jordan in November 2006. Entry into Bahrain, planned since 2004, will now take place in 2007, marking a late arrival in a market where competitor Casino had already set up shop in 2001. In its key existing markets, three new stores in Saudi Arabia and two large stores in the UAE were also opened during the past year. Furthermore, news has emerged that the company is actively researching possibilities in Iran. According to company sources, the possibility exists for a first store to open in Tehran in 2007 with up to 14 hypermarkets by the year 2012. The Iranian market, with nearly 70 million inhabitants, and unexplored by foreign retailers, is surely a hidden gem in this region.

French rival Casino does not intend to watch these developments idly from the sidelines, with exciting plans of its own. One format due to increase its presence across the Gulf is the Le Marché supermarket banner. The first Le Marché was opened in Dubai in June 2005, with an expected three more to follow in the UAE, and other openings planned for Bahrain. Diversifying its stores from hypermarkets to supermarkets is a new step in the region. Casino is also attempting to enter the Kuwaiti market, which is another potential growth market for the modern hypermarket formula.

The UAE, and the emirate of Dubai in particular, certainly exhibit the most vibrant retail scene in the Middle East. Boosted by an affluent population - and further nourished by a large expatriate community made up of tourists and professional workers flocking to the emirate’s booming tourist, banking and trading sectors - modern shopping malls anchoring state-of-the-art hypermarkets are now dotting the Dubai city map. Dubai had so far attracted most of the international attention but now neighbouring Abu Dhabi is gaining momentum and energy. Retailer Abu Dhabi Co-op is the clear local leader but investments by Emke and Carrefour are set to test this dominance.

One notable development was the first Hyper Panda store in Dubai Festival City in May 2006, marking the first entry into the market by a Saudi retailer. Saudi market leader Panda is spreading its wings, with the opening in Dubai representing the first step in its plans for regional expansion. Panda’s ascendancy to a regional player is evidence of the continued importance of the Saudi market and its growing retail scene of which Panda is the undisputable king of the hill. Having established a network of more than 50 supermarkets and five hypermarkets in the kingdom, the retailer is now upgrading its distribution facilities to prepare the establishment of a network of around 100 supermarkets and 25 hypermarkets in Saudi Arabia, up to six stores in the UAE and possibly more beyond.

Domestically, Panda’s plans give testimony to the long-term potential of the Saudi market, where a young population of more than 26 million has found a liking for modern shopping and an interest in international food products. The country’s retail scene is developing fast, with several players establishing national networks, such as Al Othaim and Giant Stores. Other regional leaders are preparing to open their first stores in the market, in particular Dubai-based Emke Group. Emke has also grown in other regional markets considerably in the past several years, with openings in Bahrain and Oman and its first store in Yemen in September 2006.

The rapid development in the region has increased the need for greater transparency and regulations governing the retail trade. In Dubai, for example, agency rights held by companies that import basic foodstuffs including rice, flour, condensed and powdered milk, sugar and tea have been abolished. This should lead to price reductions of up to 15%, which can only accelerate the growth of modern retailing further, as the new rules open the door for large retailers to import such products directly from manufacturers, while smaller retailers are still expected to still use importers as a supply channel.

Further evidence of the growing maturity in the region is the increasing rise of private label lines. In addition, the production of private labels for Carrefour, for example, has shifted from importing them from France or other established markets to producing them locally. Having established local manufacturers for products such as feta cheese for its No. 1 economy label line is a clear sign of Carrefour having achieved some critical mass to establish a long-term commitment in the emirates.

The South African retail market is the most developed in the whole of Africa & the Middle East. To underline this, South African retailers clearly dominate the top half of the Top 30 ranking. In fact, the seven South African retailers in the ranking account for 62% of the total Top 30’s combined turnover, a clear indicator of the size of the country’s market and the retailers in it.

While the Middle East will experience runaway growth and openings in the near future, sub-Saharan Africa will remain on a much slower growth trajectory set almost exclusively by the expansion plans of South African retailers. By 2010, the top 10 ranking will be populated by similar players that were present in the ranking in 2005, with South African retailers once again dominating.

However, it is worth noting that both Carrefour and Casino have moved up the ranking due to their expansion across North Africa and the Middle East.

"The genie is out of the bottle and modern retail formats are now opening across the Middle East. Alongside the French internationals Carrefour and Casino in countries such as Saudi Arabia, Egypt, Algeria and the UAE, a of vibrant and competitive domestic retailers have also emerged.".

"The UAE and the emirate of Dubai in particular, certainly exhibit the most vibrant retail scene in the Middle East. Boosted by an affluent population and further nourished by a large expatriate community."

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