Carrefour may partner with Reliance in retail

NEW DELHI: French retail giant Carrefour has been trying to enter the Indian market for a while with little success so far. Numerous attempts to enter into partnerships with Indian companies have gone nowhere. But for two weeks now, industry has been abuzz with talks of a possible deal between two giants — the French retailer and Mukesh Ambani’s Reliance Retail.

The trigger was a recent meeting between Carrefour’s top team and a few executives from Mukesh Ambani’s office. Sources also indicated that a top Reliance team led by Mr Ambani’s close associate Manoj Modi is likely to go to France for further talks. “If it happens, it will be a global alliance. But these things take very long time to materialise,” said sources.
The exact contours of a possible Carrefour-Reliance tie-up is still unclear. But sources said that Reliance could well emerge as a potential partner for Carrefour’s cash-and-carry business in India. The deal might be akin to the Bharti-Wal-Mart arrangement, sources added, but this could not be confirmed.

For the past two years or so, Carrefour has opened up dialogue with a range of partners, including DLF, Parsvnath and the Wadia group. After a considerable soul searching on the tenure of its Indian strategy, Carrefour is said to have figured out that its Indian partner must possess three key strengths: a cache of prime real estate, undeniable clout with the government and a long-term interest in retail. Reliance scores on all counts. It has already tied up 30-35 million sqft area across the country.

And its ability to influence policy in the corridors of power remains unmatched. It is also committed to the retail business unlike real estate companies which are merely looking for lease or sell commercial space.

But there’s clearly one issue where, if a deal with Carrefour finally materialises, will come as a surprise. Reliance does not have a track record of partnerships. So far, India’s biggest private sector company has little experience in managing complex joint ventures.
Reliance Retail, when contacted, came up with a terse statement: “We won’t comment on speculation.” Sources said that the initial proposal for a possible alliance between the two giants was mooted by Carrefour and it was for a front-end retail venture in the country. However, it is understood that Reliance has not shown much interest in this and the two companies have decided to jointly explore a mutually acceptable model. “One thing is certain, Reliance Retail will not operate Carrefour-branded outlets,” sources added.

They also said that Reliance would mainly be interested in getting into a partnership with Carrefour on two fronts: strengthening its back-end in India and setting up retail operations in other emerging countries. For Carrefour, Reliance’s real estate bank and considerable clout would help immensely in building a retail operation.

Though Reliance Retail has been aggressive in its rollout of the front-end retail business, it is suffering significant losses due to problems in its back-end and supply chain. Also, the company is yet to open a wholesale ‘cash and carry’ store. If the company is able to strike an alliance with Carrefour in these areas, it can solve its supply-chain problems.

Perhaps, aware that the behemoth cannot single-handedly pull off its ambitions in retail, chairman Mukesh Ambani has already signalled a change in philosophy. In his speech at RIL’s 32nd annual general meeting last October, Mr Ambani had said that joint ventures and partnerships would be key growth drivers for the group in years to come.

He said Reliance Retail is building global partnerships with global leaders in all aspects of retail, including fast-moving consumer goods, health and wellness, apparels, electronic goods, lifestyle products and services, home and furniture, luxury goods and financial and advisory services. For the company, which had initially decided to operate completely on its own, this is a major departure from the past.

Interestingly, last month, a French newspaper had reported that Carrefour was looking at selling its discount supermarket businesses Dia and ED, which was subsequently denied by the Carrefour management.

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