World’s leading supermarkets to get bigger, developing markets offer golden opportunities

Posted by Daniel Palmer on 10th December 2008

The world’s largest retailers are set to get much bigger over the coming five years as developing markets like Brazil and China spur growth.

IGD’s latest report, Global Retailing: Preparing for Change, also predicts that the world’s third largest retailer, Tesco, will grow at a faster pace than French retailer Carrefour to see it claim second spot by 2012, with forecasts suggesting a compound annual growth rate (CAGR) of 11% and 7% for Tesco and Carrefour respectively between 2007 and 2012.

Green supermarkets

With conditions deteriorating this year, retailers have been put under great pressure but supermarket operators and grocers have been seen to cope much better than many other retail sectors. And that is likely to continue.

“The next few years are likely to be challenging for the leading global retailers, yet all are well placed to achieve further growth, particularly internationally,” Joanne Denney-Finch, IGD’s Chief Executive, explained. “Scale alone will not determine who will win in today’s global trading environment. Global retailers must also show increased simplicity, greater efficiency, flexibility and strong brand positioning to succeed.”

Emerging markets are likely to attract even greater interest in the future as retailers enter a new phase of globalisation, characterised by a more cautious approach and a greater focus on asset performance. Low prices, a strong value message and operational efficiency will also be important for success.

Report author Jonathan Gunz, Senior Business Analyst at IGD, noted that grocery retail growth will be in double figures in many of the major developing economies. “Emerging markets will not be immune to the global economic slowdown, yet the pace of growth will continue to outstrip that of the developed world,” he said. “We estimate that in grocery, retail markets in China and India will each grow at a compound annual rate of 13.2% between 2008 and 2012, exceeding any other country in the top ten. Other emerging markets to watch include Indonesia, Ukraine and Vietnam.”

The extent of growth available to major retailers is symbolised by the forecast turnover increase of the world’s largest retailer – Wal-Mart – with turnover to rise from US$374.5b to US$476.2b. The forecast for Tesco would see turnover rise from US$94.7b in ’07 to $157.1b in 2012, edging France-based Carrefour out of second place – their turnover is anticipated to grow by US$44.4b to US$157b.

The growth rates predicted by IGD are predicated upon the belief that continued international expansion by the majors will see them gain a foothold in strong, developing markets, negating a slowing of growth in the major US and Western European markets.