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Abu Dhabi, UAETuesday 17 July 2018

MAF acquires Retail Arabia – franchise owner of Geant in the Middle East

No staff will lose their jobs in the deal that will see 30 stores converted into Carrefour outlets.
Under the deal, which also includes four Gulfmart supermarkets in Bahrain, all of the hypermarkets, supermarkets and convenience stories will be rebranded as Carrefour. Mona Al Marzooqi / The National
Under the deal, which also includes four Gulfmart supermarkets in Bahrain, all of the hypermarkets, supermarkets and convenience stories will be rebranded as Carrefour. Mona Al Marzooqi / The National

The deal agreed by Majid Al Futtaim to buy Retail Arabia’s Geant stores and add them to its Carrefour portfolio “gives us reinforcement of our market-leading position in the UAE”, said the group’s chief executive Alain Bejjani.

“Our strategy is to basically always maintain our leading position in the markets we are in,” Mr Bejjani said.

Majid Al Futtaim announced that it was buying 26 Geant stores from Retail Arabia’s parent company, BMA International, as well as four Gulfmart supermarkets in Bahrain. These will all be rebranded to Carrefour, bringing the total number of Carrefour outlets to 80 in the UAE, 11 in Bahrain and eight in Kuwait.

Mr Bejjani declined to say how much it had paid for the stores, nor when he expected Majid Al Futtaim’s investment to pay for itself, but said the deal would bring benefits to staff, customers and suppliers.

For instance, he said there was very little overlap between the UAE stores. Geant’s two main hypermarkets are anchor stores in major malls where Carrefour is not present – Nakheel’s Ibn Battuta Mall in Dubai and at Yas Mall in Abu Dhabi.

“Logistically, most of their suppliers are our suppliers,” said Mr Bejjani. “The sentiment in the market – people are happy about it and I think it is something that is giving sustainability to everyone’s business.”

He also said that it would not be damaging in terms of competition, arguing that benefits in terms of scale and buying power would be passed to customers.

“There are a number of players in the market. It will continue to be a very competitive market. From that standpoint I wouldn’t worry.

“I think we have a track record where we consistently and sustainably make sure the benefits go to the customer in terms of the cost, being more competitive on the pricing side.”

Craig Plumb, the head of research for JLL Mena, said that the retail market in the Mena region is getting increasingly competitive.

“There’s no doubt that the market is tightening up a lot,” Mr Plumb said. “But Carrefour is the shining star for Majid Al Futtaim. In retail terms, it is their cash cow.”

The reason for this, he said, is because the grocery business – particularly convenience store retail – remains stronger than luxury retail.

“Obviously, people still need to eat, but they don’t need to buy more watches or shoes.”

This deal strengthens Majid Al Futtaim’s position in convenience retail, he said, and allows it to eke out supply chain benefits.

“Because retail has become so competitive, every dollar you can save in shipping costs in the supply chain makes a big difference.”

John Brash, the founder and chief executive of the consultancy Brash Brands, argued that price competition between supermarkets is still not as big an issue in the Middle East as in other parts of the world.

“Location matters much more, and that’s where MAF is already ahead of the game, and – with this move – set to be even more of a winner,” he said.

He said that Majid Al Futtaim’s development model for Carrefour – of having large hypermarkets, with tiers of smaller supermarkets and then convenience stores – is one that it has managed to grow quickly.

“Geant tried to keep up, but this deal, together with MAF’s recent acquisition of a UAE HyperPanda site from Savola, effectively makes Carrefour the winner – especially at the hypermarket level,” Mr Brash said.

“With tough market conditions in the region – slowing economic growth, a strong dollar and a rise in online shopping – it was almost inevitable a survival of the strongest scenario would play out.”

mfahy@thenational.ae

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