Carrefour approach from Amazon could face political pushback (MergerMarket)
* Government could facilitate digitalisation of French grocers
* Carrefour CEO led online push at FNAC
* Employment guarantees key aspect of any takeover discussion
Any bid by Amazon [NASDAQ:AMZN] for Carrefour [EPA:CA] could face political hurdles, independent sector advisors and a person familiar with the French government told this news service.
Officials from France’s economy ministry met with Carrefour CEO Alexandre Bompard in the last few days, the person familiar said.
There may be no bricks-and-mortar supermarkets in 50 years, and whether Amazon has a monopoly on grocery retail at that point depends on what regulators do today, the person familiar said.
Instead of allowing a foreign tech firm to become a dominant player in French food retail, the government could help Carrefour and other established grocers to develop digital sales channels, the person said.
Bompard was CEO of FNAC [EPA:FNAC] from 2011 until this year, where he led that company’s charge into online retail, a source briefed noted.
When Bompard joined the technology retailer in 2010, the group was struggling against competition from online retailers such as Amazon, according to previous French press reports. After its listing in 2013, Bompard contributed to the restoration of the group's profitability through the development of online services, the source briefed said.
Bompard succeeded Georges Plassat as CEO of Carrefour on 18 July 2017. At the time, Carrefour's board of directors touted “his career, his experience and his success in his previous positions” and said that he would “develop and transform Carrefour in any and all respects.”
It would be a pity to see Carrefour taken over just after Bompard took over as CEO, the person familiar with the French government said.
Amazon, Carrefour and the economy ministry declined to comment.
The French government is vigilant about protecting jobs, the person and an independent sector advisor added. Carrefour is France’s largest employer, with more employees than the city of Grenoble has citizens, the advisor noted.
Carrefour has over 360,000 employees and more than 12,000 stores across 30 countries, according to the company’s website. In France, it has over 115,000 employees and 5,636 stores.
The government would at least likely require that Amazon provides guarantees on job protection in the event of any takeover, the source briefed agreed.
In addition, there would be issues in food sourcing in France for Amazon, which would need to ensure a good relationship with food producers, farmers and distributors to negotiate on prices, this source added.
For its part, Amazon needs M&A to enter the European grocery market because it cannot do it from scratch, the advisor said. With Amazon having just acquired US-based Whole Foods as its first big move into food retail, it is now time for a similar move in Europe, a second sector advisor said.
Carrefour’s appeal is that its reach would give Amazon a foothold in multiple national markets, the second advisor said. Similarly, Germany-based Metro [ETR:B4B] also has a pan-European presence and its takeover would carry less risk of government intervention, he said.
Other big European grocers would not give Amazon a presence in so many national markets in one fell swoop, he said. British and Spanish companies in this sector are more concentrated in their home markets, he said. Ahold Delhaize [AMS:AD], which has also been tipped as a potential target for Amazon, is concentrated in the Benelux region, he and a third sector advisor noted.
The third advisor suggested that Amazon should avoid the likes of Carrefour altogether. Once it consolidates Whole Foods, there will be better ways to roll out its distribution model in Europe than acquiring traditional grocery stores, he said.
Amazon is focused on improving distribution and logistics, the source briefed agreed. Younger, smaller firms focused entirely on online retail – such as Ocado [LON:OCDO] – would establish Amazon in new national markets while fitting within Amazon’s distribution model, the third advisor said. Meal-kit deliverers such as HelloFresh [ETR:HFG] are also logical targets, he said.