Carrefour Lures West Africa Shoppers From Markets Into Malls
(Bloomberg) -- Battered minibus taxis snake the perimeter of Ivory Coast’s latest shopping hotspot, a brand new mall in a sprawling Abidjan suburb that shows how grocers like France’s Carrefour SA are turning their attention to lower-income African customers.
The parking lot reserved for car owners lies empty, contrasting with the throng of shoppers inside the crowded $30 million Cosmos Mall, which opened in October. They include Nafua Karamoko, a 30-year-old teacher and mother of two who has recently converted to the convenience of supermarkets from informal marketplaces.
“It’s clean, well-stocked and the prices don’t differ much from the local market where I normally do my shopping,” Karamoko said while filling her cart with Carrefour’s cooking oil, rice and frozen chicken.
Up for grabs for the likes of the French chain is a market with a formal retail penetration of 35 percent, meaning only just over a third of shopping is done in stores as opposed to marketplaces. That makes Ivory Coast the second-biggest promising retail center in Africa behind Kenya, according to a study by data analytics company Nielsen. Carrefour has three supermarkets in the country and plans to add as many as 10 more across Ivory Coast, Senegal and Cameroon this year.
“If we want to develop on the African market we can’t limit ourselves to one type of client or neighborhood,” said Jean-Christophe Brindeau, chief executive officer of CFAO Retail, Carrefour’s partner in West African countries that also include Senegal. In Yopougon, where Cosmos mall is located, “we’re targeting consumers with less buying power that still want to do their shopping in a clean and safe environment.”
The Ivorian economy, estimated at about $40 billion, is the biggest in Francophone West Africa and is expected to expand by 7.5 percent this year, according to the International Monetary Fund. President Alassane Ouattara has overseen a breakneck recovery since a decade of political instability ended in 2011, attracting investors keen to tap rising consumer confidence and major infrastructure projects such as an Abidjan commuter train network and a toll bridge.
International companies expanding and doing business in Ivory Coast are still largely dominated by those from France, including train maker Alstom SA, construction firm Bouygues SA, ports giant Bollore SA as well as Carrefour. South African retailers lead the foreign presence in West Africa’s English-speaking countries such as Ghana and Nigeria, where the likes of supermarket chain Shoprite Holdings Ltd. and Walmart Inc.’s Massmart Holdings Ltd. have stores.
Carrefour is under pressure from online retailing in its home market, and is reducing store space there to adapt to the changing trading environment. In African countries including Ivory Coast, less than 1 percent of retail sales went through online channels in 2018, according to Euromonitor.
A possible barrier to Carrefour’s expansion plans lies in local giant Prosuma, which dominates shopping malls in the world’s biggest cocoa grower, and is controlled by wealthy Lebanese families who’ve been in Ivory Coast for decades. Prosuma is the owner of Cap Sud, one of the biggest malls in Francophone West Africa, and has supermarkets, hypermarkets and a network of small convenience stores in its more-than 126-store portfolio.
That means food prices on the shelves of Carrefour’s hypermarkets need to be as low as possible, enough to engage in a price war with the local market leaders. The French chain has already started operating the Supeco chain in Senegal’s capital, Dakar, and is considering the same cash-and-carry style format in Ivory Coast and elsewhere to target shoppers on modest budgets.
“Instead of a 20-euro ($22.60) basket they might go for a 10-euro basket, which means we have to adapt our stock and prices for this specific consumer group,” Brindeau said.
Another barrier to growth is rising rental costs. With demand for new malls and supermarkets in Ivory Coast on the rise, the price of retail space has surged, according to Knight Frank. That partly accounts for why CFAO announced four years ago it would have over 100 stores in eight countries in coastal West Africa by 2025, and has opened just four stores in two nations since.
But the opportunity outweighs the challenges, with both Carrefour and Prosuma keen to go where the rising incomes are, rather than wait for those customers to come to more affluent parts of Abidjan where malls are already established.
“The Ivorian consumer is a real consumer, they like their local products, but they love foreign brands too and are increasingly being able to afford it,” said Carole Toutoukpo, director of Prosuma’s SCI Business Center, the division that manages the group’s mall portfolio. There’s plenty of room for competing chains, she added in an interview in Abidjan.
Carrefour shares have gained 15 percent this year in Paris, valuing the company at 13.5 billion euros.
©2019 Bloomberg L.P.