Interview – Carrefour Egypt Eyes EGP4.5 billion Sales within 2014

Carrefour plans pumping EGP2 billion fresh investments for 5 years.

Carrefour has 23 total branches, 8 hypermarkets and 15 supermarkets.

Carrefour’s City Light in Alexandria inaugurated in August-End with EGP45million cost.

Al-Futtaim Ruled out selling listing in EGX now, it is not aiming entering any new deals after the failure of seizing ‘Metro’.

Amwal Al Ghad Interviewed Majed Al Futtaim’s Group-Carrefour’s in ‘Egypt-Saudi Arabia-Yemen-Libya’ Regional Director Dr. Herve Majidier

What about Carrefour’s strategy? And its total value of investment Cost?

Carrefour’s strategy is very clear some companies reduced the employees, some others closed but Carrefour continues its strategy today we have 8 hypermarkets and 13 supermarkets with total numbers 23, we are going to open more in many areas across Egypt, we are opening in Mansoura,  Menufiya, Tanta not only in Cairo or Alexandria, we are going to open everywhere, we finalised the launch of Carrefour’s branch in Alexandria City Light in the last of August with EGP 45 million total cost.

Every competitor contributes with different cost. We do not obligate the rival to pay certain number, everyone has a freedom and everyone is different from another one but we can spend EGP 2 billion for the next five years and after that more than, Al Futtaim is aiming to open three huge shopping stores (malls);  including one in Sixth of October City by rent system by the end of 2015 and the early of 2016, Al Futtaim spent many billions, we are trusting Egypt and we are going to do our best, the three malls are now in the primary stage and we are still working in order to finish and inaugurate them soon.

Could you tell us about major economic challenges haunting the Egyptian market and Carrefour’s strategies to face those challenges?

There are many challenges as everybody knows Egypt is supporting a lot of subsidiaries categories for example in a few weeks ago the price of petrol increased, all prices increased, subsidiaries cannot continue forever in all categories,challenges starting from energy till electricity and of course infrastructure is a big challenge for our country in addition to education, health, the government is making a lot of efforts to face those challenges and I assert that I am very optimistic that Egypt will cross all obstacles as most of ministries (in the Egyptian cabinet) have good experience they know what must be done , what are the possibilities, we should apply balance as if you are rich ,you have to pay tax and if you are poor, you should work hard.

Will you expect Egyptian economy is going to hit positive rates this year?

No way for two reasons, because of the foreign direct investments (FDI) decreased a lot because of demonstrations, strikes in Tahrir square all of these affected badly on the rates of investments and the productivity of the country, another biggest source is the tourism sector as it also affected in the recent period so the two developing factors were badly affected.

How do you see the internal trade in Egypt during 2014?

Internal trade is doing well, but for many reasons we did not do enough internal trade we face some obstacles including not full delivery, not enough production and that should be managed.

Will Egypt Hit Investments in FY14/15?

My own expectation is that the rate will be plus 2 % and that is good.

What about Carrefour’s Growth rate?

Year after year is about 8% and sometimes 9% not more or less, Carrefour today aims achieving easily from 25 to 30 hypermarkets and from 150 to 200 supermarkets and we are seeking Luxor and Aswan but after opening in Ismailia and Tanta and before Ismailia we are aiming opening in Port Said whose Population reached 4.5 million and each project has different value.

What is the market share of Carrefour in Egypt? And are there any possibilities of increasing it within this year?

The global market closes to 24% or 25% of modern retail like Spinneys , hypermarkets, and even close to 30% , retail is very wide because of the highly population every year close at 2% and even 2.5%, Carrefour eyes boosting its market share to 3% at maximum within 2014.

In your opinion, what are the most urging laws needed to revive the retail sector? And what about the key investment incentives mostly required?

The first there are laws that should be corrected and improved like the customs law and if we are talking about Egypt’s bigger volume of retail, we need to have possibility for faster process everywhere and the custom for all imports is one of the most important laws so we also should increase the areas which have no subject and if it increases it will bring a lot of positives to the country, General Authority for Investment and Free Zones (GAFI) should educate more people and more possibilities to deliver the needed incentives, but the subject of license is the major dilemma, GAFI plays an important role it should adopt itself more so as to welcome more economic incentives in Egypt and not in Carrefour and this by the support of Egyptian Investment Ministry.

What strategy will be adopted by Carrefour within 2014?

Carrefour has no new strategy it will continue its same strategy of the last year and the main strategy is only being the cheapest in markets, serving customers with good services and the key strategy is to pursue all the developments  as we are doing exports in Egypt to Saudi Arabia, UAE and Qatar so we seek also to increase exports in Egypt to attain higher number , we are exporting a lot of things from Egypt to other Carrefour’s branches, My role in the country is to support  economy and support any cheapest and good things in Egypt, Carrefour’s exports including home ware and electric tools.

Will Carrefour sell shares in Egyptian Stock Exchange (EGX)?

No, because in bourse we cannot control 100 percent of the business , bourse is risky we cannot control shareholders; in addition we do not need extra money, so selling shares is not easy as for example the capital of EGP5million will be EGP14million later. It is risky.

Are you considering acquiring any New Deals in the upcoming period?

Now we have no intentions but we are currently aiming to open more stores and from 60 to 70 supermarkets at least in the next 5 years.

What are the plans to achieve remarkable growth rates in the light of the current circumstances?

Everywhere but food division is the key plan for achieving remarkable growth rate as Egyptian people need to eat everyday  and they can never give up foods including bread, oil, rice, meat and so on.

Are you planning new expansions in 2014?

We are looking for good areas, geographic location plays an important role in choosing places in eastern and western areas of Egypt, looking to inaugurate in new areas like Madinaty, El-Rehab and Porto Cairo.

Can you name Carrefour’s certain key rivals?

I respect everybody including Ragab’s sons, Mahmal, Metro and Fattah Allah.  I respect all of them and they are accepted by society but each one is different from the other, hypermarket is more close to Carrefour, Spinneys is also more close to us, others are more difference like Fattah Allah in Alexandria is very good I respect it , but today we have a lot of different and good services , we have big rate between 60 to 65 thousand items stores, thanks God no one has that now.

A year ago Carrefour entered a deal with Metro and Kheir Zaman supermarkets to take over them, but it failed, Could you tell us the reasons?

I had a chance within a year ago to shake hands with the Chairman Mr. Youssef  Mansour and I can never forget his welcome of course we were looking to seize Metro in order to grow by five or six times more than our development plan we were really motivated because Metro is good, but in the last stage of the talks, Mr.Youssef decided to cancel the deal and said we are sorry, somehow I respect his decision despite my sadness that was done without any reasons , but Mr Youssef himself told newspapers that ‘I do not want to give Metro’s management to other people hands, but I hope the door will never close forever and to keep business relations.

After Ragab’s Sons Company acquired Mahmal, how is Carrefour’s competition with retail market rivals is going?

I wish good luck to Ragab’s Sons with Mahaml chains. Mahmal’s branches were sold to Ragab Sons chains, to add around 40 branches to his portfolio through this move, but we did not target Mahmal at all as it is not the same volume, it is not the same value and it is not the same size of business and not the same design, otherwise may be today this was not a successful location for us, we did not target Mahmal only company was not matching with our standard compared to Metro, Metro’s deal request with Carrefour is different from Ragab’s sons and Mahmal deal. Mahmal and Ragab do not have the same standard of Carrefour we cannot do own standard in this kind of store we need something closer to our business. One reason we applied to buy Metro is because their level of performance is close to ours, but any way I respect both of them.

Carrefour’s competition with retail market rivals has not changed, I respect Ragab’s sons they are very professional and for sure they will do something good in Mahmal and the customer is the only one who decides not Carrefour nor Mahmal.

Do you think that the Government’s decision to freeze and seize supermarkets owned by Muslim Brotherhood such as Zad and Seoudi will affect the trade in Egypt?

Not at all because the stores are not close, management and customers will not change they are doing good mainly Seoudi they are professional  and my opinion about economy, society and country first I have to see the positive side because if I am not positive, I have to go out because they are a lot people are really acting.

What are the reasons behind Group’s decision to fix its products prices until the beginning of 2015?

The prices of petrol increase now, life is expensive and this of course will affect the products prices, for me I am currently losing money because some products should increase now, I am not deciding to increase the products prices now in order to help my customer, the average price of the products that fixed is 2% in all products and this is a part of Carrefour’s participation for country.

Can we see Carrefour launching its trademark under the franchise system as a step to support the youth?

May be but after few years not now as the number of stores are not enough for this strategy and before doing something we have to be sure that we are able to do it.

What about Carrefour’s size of sales in Egypt in which it aims to register?

Carrefour eyes boosting its sales to EGP 4.5 billion as annual sales’ size.

Will we see Carrefour Participating in National Projects like Suez Canal Development project?

Not at all, we do not have many expertise and we have contributed to social responsibility in Egypt, there are many other things that we can serve such as orphanage or hospitals , now there is no intention to enter any national projects as the cooperation needs committee, discussion and a lot of things it is not easy.

How Many Carrefour’s current branches are?

We have 23 branches including 15 supermarkets and 8 hypermarkets and the supermarket’s numbers will be 17 soon by inaugurating branch in Al-Ahram road and other in Hurghada, however hypermarkets number will be 9 by opening Alexandria City Light branch by the end of 2014 and with EGP2billion investments have pumped for 5 years coming. The investment cost of hypermarket is 8 and 10 times bigger than the cost of supermarkets.

What do you think of Egyptian economy after seeing some recent political stability?

The first think is the people are losing a little confidence and they are not spending money like before because they need to know what will be tomorrow or the day after but of course all of these bad things or historical events will give chance to the economy to start to flourish after the elections and after what happened, everybody knows where is the roadmap, where Egypt is going and what are the challenges. So confidence is improving a lot and this can be seen by increasing the number of positive areas, I am more confident that Egypt’s economy is going to show signs of success in a short period of time, I think banking system has to be more flexible.

How do you assess the Macroeconomics in Egypt: Current Opportunities and Challenges?

Dr. Herve Majidier asserted that there is no economy without market and there is no market without customer mainly we are talking about macroeconomics that is the globalization of all kinds of different categories and it is related to many different factors but as I told you no positive economy without market and no market without customer. Egypt has a large population and this population close to 88 million today with 2.2% or 2.3% grow year after year, for us Egypt is the best market because of its highly population as I know that 52% of population are too young and they can do a lot for developing their country. In addition, Egypt has the best geographical position and demographical characteristics, it has the best Arabic geographical location in Africa country so it has best location and best population, there are a lot of challenges but I believe that everyone should contribute to the success of the country and everyone should consider himself part of the government.