French retailer Auchan scouts India all over again

About three years after it exited the Indian market, French retailing major Auchan Group is keen to return if the government allows “food plus” in foreign direct investment (FDI) in retail, official sources said.

About three years after it exited the Indian market, French retailing major Auchan Group is keen to return if the government allows “food plus” in foreign direct investment (FDI) in retail, official sources said.

Executives of the company recently met senior officials of the ministry of food processing industries (MoFPI) and expressed interest in coming to India, in case the FDI norms are relaxed, the sources said.

Auchan and another French retailer, Carrefour, exited India in 2014.

The government opened in February last year the food trading sector to foreign investment, with up to 100 per cent FDI, drawing little interest from international retail players who said just having “food only” stores was not a viable option.

“Officials from Auchan are among several companies that have had discussions with various ministries, recently. The company made an exit from India but is now evaluating a re-entry. However, they want to be sure of the policies before investing in the country,” said a senior government official. 

Of the Rs 30 lakh crore retail pie in India, food constitutes Rs 4 lakh crore.

Auchan ended its partnership with Max Hypermarket India, part of the Dubai-based Landmark Group, in 2014. The split was on account of the difficulty in complying with India’s foreign investment rules and strategic differences between the partners. The company did not respond to an e-mail sent by Business Standard.

Max and Auchan entered a licensing agreement in August 2012 under which Max Hypermarket would operate the Auchan Hypermarket chain in India. Before exiting India, the French retailer had 13 hypermarkets spread over 639,000 square feet in Bengaluru, Coimbatore, Gurugram, Mangaluru, Hyderabad, Delhi and Pune.

Auchan has a hypermarket chain network of about 600 in 12 countries in central and northern Europe, Russia, and China. The company has a euro 44.4-billion turnover.

Industry insiders said while Auchan might be having preliminary talks, none of the international players would take any concrete steps before the government clarifies its rules on FDI in retail and ‘food plus’ component. Also, the government is talking about allowing just ‘Made in India’ products at the stores, and retailers have concerns about that as well.

“The percentage of ‘food plus’ needs to be decided first. It would not make sense for any of us to start retail chains if it is less than 25 per cent. We cannot just sell food products while the big Indian retailer next door is selling everything, from a pack of biscuits to flat-screen televisions. To begin with, at least some fast-moving consumer goods and kitchen products should be allowed at our stores,” said a senior official of an international retail chain.

Sources said the government plans to ease fDI rules in multi-brand retail sector and allow food retailers to sell 25 per cent of non-food items. 

Experts, however, believe that instead of tweaking the present policy, a brand new FDI in retail policy should be introduced. “A brand new policy is the only way to go ahead. Till then, many of the large retail chains of the world might check out of India,” said Arvind Singhal, chairman and managing director of Technopak.

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