Dutch Retailer Spar International to end ties with Max Supermarkets

ET Bureau, The Economic Times

Bangalore, 10 May, 2012

Dutch retailer Spar International and Dubai-based Landmark Group’s Max Hypermarkets have decided to part ways in India by the end of this year after the two developed differences over expansion strategy.

While Spar was keen on partnering multiple national and regional retailers to expand in the country, Max Hypermarkets wanted a strategic investor for the business, Dr Gordon Campbell, managing director of the 31-billion euro (approx 2 lakh crore) Spar International, said.

The companies will now pursue separate growth plans in the country, they said in a joint statement.

Max Hypermarkets operates 13 Spar Hypermarkets across Karnataka, Maharashtra, Andhra Pradesh, New Delhi and the national capital region under a licence agreement signed in 2007.

The two have decided not to renew the licence after it expires in December.

Viney Singh, MD of Max Hypermarkets India, said the company will rebrand its hypermarkets-or, large-format food & grocery stores that also stock general merchandise, electronics and apparel-once it decides on its future course. "We believe that it is good to have in the long term, strategic investor partners to run the hypermarket business in India," he said.

Spar, which has 12,000 stores across 35 countries, does not financially invest in any market, but signs license agreements with independent retailers in different markets to use the Spar brand name.

It also provides technical know-how and expertise for the front-end and supply chain for its partners. In fact, it had first entered the Indian market with Mumbai-based Radhakrishna Foodland in 2004.

Spar is now looking for multiple partners in India. "Given our experience now, we believe we have the opportunity for other partners to develop it (stores) at a quicker speed. We would be interested in tying up with 4-5 partners for different regions," Campbell said, on a call from Amsterdam.

He said Spar has established contact with a few partners across regions, but refused to clarify whether they were corporates or standalone chains.

Campbell said Spar is willing to open supermarkets in India. The size of its supermarkets are around 1,000-2,000 square metres, while hypermarkets are above 4,000 sqm.

Spar aims to finalise new relationships quickly so that its brand does not have to wind down. Campbell said this would be possible if new partners have operational stores that can be converted into Spar.

Analysts say there is limited risk to brand Spar if it is absent from the Indian market for a few months because its footprint is limited.

"Food and grocery is bought within a limited radius. As long as the brand’s reappearance is handled well, there is no real damage expected," Devangshu Dutta, chief executive of retail and consumer goods consultancy Third Eyesight, said.

He also said that it would not be difficult for Max Hypermarket to find a foreign partner, given Landmark Group’s presence in India and international retailer interest in the market. Landmark Group operates department store Lifestyle International in India.

"They could also come up with their own brand and partner a financial investor as they would have the operational expertise now," Dutta says.

The $12-billion organized food and grocery retail market that is projected to grow at a compounded rate of 30% over next five years, according to estimates by Technopak Advisors.