Rapid Wal-Mart Growth in Europe?

Retail giant Wal-Mart is turning its attention to the increasing opportunity presented by the '63% of world GDP beyond the US', and will derive $30bn worth of sales from its European operations by 2007, according to new research by food and grocery specialists IGD.

The 2007 projection represents an increase of 45% on the 2003 total of $20.7bn - itself representing rapid growth since entering the market in the early 1990s. Wal-Mart's global non-domestic sales are now greater than the non-domestic sales of Carrefour or Tesco.

In 2002 only 6.1% of Wal-Mart's sales came from Europe, whereas the other major international retail players in Europe have more than half their sales there. Acquisition is likely to be the most practical means of growing in Europe, as IGD estimates that Wal-Mart would only be able to open up to 45 new stores by 2007 due to the strict European planning environment. Wal-Mart has indicated that it may be in a position to make an acquisition in the 'near term', which according to IGD means the next one to two years.

IGD predict that Wal-Mart will look at opportunities to acquire family-owned operators in France (for example Auchan) or Spain (perhaps Mercadona), although its opportunity in France may be hampered by the alliance already forged between Auchan and Casino through IRTS.

Acquiring Auchan would 'undoubtedly be Wal-Mart's preferred target' according to the report. The family-owned player holds a 9.0% market share in the French market, 4.8% in Spain and has a strong position also in Italy. The market leader in these countries is Carrefour, and IGD considers Auchan the key to contesting its dominance.

Another possibility in Spain is Mercadona, which holds the No.2 position with an 8.0% market share - its store size and format are not necessarily a natural fit with Wal-Mart's, but the company is highly successful and the discount format one of the few growing areas of the Spanish grocery market. In Germany, the most likely partner would be a smaller regional hypermarket operator such as Globus, or family-owned operator Tengelmann, as larger players are either co-operatives, public companies or do not fit naturally with Wal-Mart. Specific targeting of Central or Eastern European markets is considered unlikely.

According to Louise Spillard, Business Manager at IGD, 'International growth is now an increasingly important strategic focus in Wal-Mart's operations, indeed it is currently training senior associates in the International Division in order to capitalise on the vast number of international options'.

More information is available at www.igd.com or by emailing publications@igd.com

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.

• IGD
• All news