Elaine Watson
Tesco is planning an aggressive store opening programme in Japan after closing a £139m deal to buy C Two-Network, a Tokyo-based convenience chain.
Publicly quoted C2 operates 78 stores ranging from 1,000 to 10,000 sq ft under the Tsurukame, Tsurukame Land, Foodlet and Kamechuru fascias.
Tesco is planning to open 10 to 20 new sites a year, but the chain will not serve as a springboard for a hypermarket expansion programme, said Tesco deputy chairman David Reid. "There are no immediate plans for large stores. Tokyo particularly is very densely populated and smaller formats work best.
"This is a great company with young management and lively colourful, price-led stores, £286m sales and £21m profit. More importantly, we are not dealing with a startup, or a turnaround case, or taking on a pile of debt.
"This is a low risk foothold in the market, but we can also add value in terms of systems, distribution and procurement."
Tesco had been researching the market for almost three years, said Reid.
The challenge for Western retailers, as recent market entrants Wal-Mart, Carrefour, Costco and Metro have discovered, he said, was dealing through wholesalers, rather than directly with suppliers, and adjusting to consumers' shopping habits.
There are about 1,000 potential locations in and around Tokyo where Tesco could add new sites, he added. "We are dealing on a leasehold basis. New stores cost around £500,000 to fit out, so there is no great capital intensity."
Although retailers were operating in a deflationary environment, Japan's c-store market, currently dominated by a handful of major players such as Lawson, 7-Eleven and FamilyMart, was growing fast, and a slump in land prices made organic growth relatively cheap, said M+M Planet Retail analyst Robert Gregory. "Things have been pretty awful. There's no real like-for-like sales growth."
Carrefour, which has four hypermarkets in Japan, had planned to open 13 by 2003, a plan recently shelved as shoppers spurned its large store formats, he said.
IGD business manager Louise Spillard said: "The acceptance of the traditional western hypermarket remains questionable in Japan even in the long-term.
"The culture is to purchase products for immediate consumption driven by a lack of storage space and the requirement for freshness."
Tesco's agreed 3,400 yen a share offer values C-Two Network at £139m, net of cash balances of £34m.
{{NEWS }}
Tesco is planning an aggressive store opening programme in Japan after closing a £139m deal to buy C Two-Network, a Tokyo-based convenience chain.
Publicly quoted C2 operates 78 stores ranging from 1,000 to 10,000 sq ft under the Tsurukame, Tsurukame Land, Foodlet and Kamechuru fascias.
Tesco is planning to open 10 to 20 new sites a year, but the chain will not serve as a springboard for a hypermarket expansion programme, said Tesco deputy chairman David Reid. "There are no immediate plans for large stores. Tokyo particularly is very densely populated and smaller formats work best.
"This is a great company with young management and lively colourful, price-led stores, £286m sales and £21m profit. More importantly, we are not dealing with a startup, or a turnaround case, or taking on a pile of debt.
"This is a low risk foothold in the market, but we can also add value in terms of systems, distribution and procurement."
Tesco had been researching the market for almost three years, said Reid.
The challenge for Western retailers, as recent market entrants Wal-Mart, Carrefour, Costco and Metro have discovered, he said, was dealing through wholesalers, rather than directly with suppliers, and adjusting to consumers' shopping habits.
There are about 1,000 potential locations in and around Tokyo where Tesco could add new sites, he added. "We are dealing on a leasehold basis. New stores cost around £500,000 to fit out, so there is no great capital intensity."
Although retailers were operating in a deflationary environment, Japan's c-store market, currently dominated by a handful of major players such as Lawson, 7-Eleven and FamilyMart, was growing fast, and a slump in land prices made organic growth relatively cheap, said M+M Planet Retail analyst Robert Gregory. "Things have been pretty awful. There's no real like-for-like sales growth."
Carrefour, which has four hypermarkets in Japan, had planned to open 13 by 2003, a plan recently shelved as shoppers spurned its large store formats, he said.
IGD business manager Louise Spillard said: "The acceptance of the traditional western hypermarket remains questionable in Japan even in the long-term.
"The culture is to purchase products for immediate consumption driven by a lack of storage space and the requirement for freshness."
Tesco's agreed 3,400 yen a share offer values C-Two Network at £139m, net of cash balances of £34m.
{{NEWS }}
No comments yet