Germany's Metro AG plans to invest Rs 400 crore to expand in India market

Germany-based retailer Metro AG is all set to invest Rs 400 crore to increase the number of its wholesale stores in India as part of a strategy to make the country a key focus market.
Germany's Metro AG plans to invest Rs 400 crore to expand in India market
Germany-based retailer Metro AG is all set to invest Rs 400 crore to increase the number of its wholesale stores in India as part of a strategy to make the country a key focus market. 
In a submission to the Registrar of Companies last week following a board resolution, Metro said it will raise the amount from its parent company through equity infusion, without specifying any time frame. An email query did not elicit any response from the company.
Metro, the first global retailer to enter India, has not been able to capitalise on its first-mover advantage. Although it has been in the country since 2003, it has been outpaced by both the US-based Walmart and the home-grown Reliance Retail in terms of store count.
 Reliance Retail has nearly 43 stores while Walmart runs 20 wholesale stores. Metro, still the largest wholesaler by revenue, has 16 outlets but it plans to increase the count to 50 by 2020. Last year, Metro announced that it wanted India to become one of its "focus expansion countries" alongside Russia, China and Turkey.
"In India, Metro Cash & Carry has little international competition due to the existing restrictions on foreign retailing activities.... In spite of the easing of the ban on direct investments in India made by international retail companies, we project that competition from modern grocery retailing formats will remain relatively weak there in the near future," the company said in the Metro AG 2014 annual report.
While traditional retailers, an important customer group for self-service wholesale trade, continue to act as the most critical channel, experts feel Metro has remained largely urban-centric. "Metro seems to be doing well at some of the urban centres by getting sales traction mostly from hotels, restaurants and catering channel.
However, they have not been able to make the kirana stores its main buyer. Local kirana shops can give any business-to-business player the maximum sales," said an industry executive, who did not wish to be identified. Modern trade, which accounts for 7% of the market size, saw a sharp deceleration in growth rate to 5.4% in 2014 from 32% in 2012, according to market researcher Nielsen. In comparison, kiranas, which control 74% of the market, grew 7.1% despite a large base. And that's where Metro's rivals are investing Walmart is betting big on e-commerce as part of its business expansion plan while Reliance has been opening a wholesale store almost every month on average.
"As we build store pipeline for growth in India, we've seen great improvement in ease of doing business across several states where we've been growing our business," said Rajneesh Kumar, VP, corporate affairs at Walmart India, which is planning to open another 30 outlets by 2020. Besides, experts say, cash-and-carry, like retail, is a long-haul business with longer break-even period.
Though foreign operators, including Metro and Walmart, report growing sales at their stores, firms are still not making money even after years of operations. Carrefour exited the market a year ago after reporting a loss of Rs 83 crore for 2012. Metro Cash & Carry India incurred a loss of Rs 142 crore on a turnover of Rs 3,439.9 crore for 2013-14.
Publish Date
Not Sponsored
Live: People Reading Now
 
 
 
 
TRENDING ARTICLE
RECOMMENDED FOR YOU