A recent acquisition in Taiwan’s retail market has raised questions about monopoly effects and caused concern among shoppers used to supermarkets’ wide range of imported foods.
In July 2022, French retailer Carrefour announced it had agreed to sell its 60% stake in Carrefour Taiwan to co-shareholder Uni-President, in a transaction valued at US$2.15 billion. Taiwan’s Fair Trade Commission (FTC) is currently reviewing the sale, but approval is expected.
The timing of the announcement raised eyebrows among Taiwan’s retail industry watchers. Only a year before, Carrefour Taiwan had completed the acquisition of the Wellcome chain of supermarkets – which included the upscale Jasons Market Place stores – from its Hong Kong parent. Why was the company now selling its stake to Uni-President?
Carrefour said at the time that it wanted to refocus on markets in Europe and Latin America, where growth is expected to be more significant. Experts interviewed largely shared this view. David Hsu, an associate director with Taiwan Ratings, a Taiwan market intelligence company, notes that Taiwan is a mature market, and its population has started to shrink, which makes it a less exciting market for the French conglomerate than some emerging markets with more room for growth.
“The Carrefour group has a presence in many emerging markets,” says Beatrice Chen, an associate at Taiwan Ratings. “Sales there are better than the Taiwan market. The growth rate for expansion will be much more.” In 2021 for example, Carrefour Brazil completed an acquisition of Grupo BIG, Brazil’s third-biggest food retailer, from Advent International and Walmart, boosting its presence in Latin America’s largest market. Its 2022 fourth-quarter sales rose 36.3% to US$5.3 billion.
Once the Taiwan deal is complete, Uni-President will continue using the Carrefour brand at its 340 locations island-wide, joining a network of brand licensees operating Carrefour stores in over 40 countries. Uni-President declined to comment on the sale to TOPICS, noting that the case was still being reviewed by the FTC.
Perhaps unknown to many casual shoppers at Carrefour was that Uni-President was already the supermarket’s second-largest shareholder. The food and beverage conglomerate is omnipresent across the island’s retail landscape – not only does it own Taiwan’s ubiquitous 7-Eleven convenience store chain, it also operates Starbucks, Cold Stone Ice Cream, and Mister Donut franchises, the Cosmed chain of wellness stores, and entire shopping malls in Taipei and Kaohsiung. It even has its own professional league baseball team – the Uni-President 7-Eleven Lions. Last year the group’s combined revenue topped NT$500 billion.
With the acquisition of Carrefour Taiwan’s 68 hypermarkets and 272 neighborhood supermarket locations, Uni-President will now have more sales channels to sell its food and beverage products. While convenience stores offer products at higher prices than supermarkets, Chen believes that overall sales volume will grow. Carrefour’s hypermarkets, for example, could sell Uni-President’s existing products in multipacks.
Harry Huang, a partner in financial advisory services of Deloitte, a London-based international professional services network, notes that the acquisition will increase the scale of Uni-President’s business, allowing it to lower its operating costs, including those relating to procurement and logistics.
“Business scale is very important,” Huang says. “Once the scale is bigger, the profitability is higher. Carrefour Taiwan is very good in operations. It has good revenues and profitability.” Once the deal is complete, Uni-President will have acquired an attractive retail channel that will complement its some 6,500 7-Eleven stores across Taiwan.
Taiwan isn’t the first Asian market where Carrefour has sold its stake. In 2019, Chinese retailer Suning.com bought an 80% stake in Carrefour’s China unit for US$698 million in cash. Carrefour Taiwan accounts for 3% of the French conglomerate’s sales globally and is the only remaining major Carrefour operation left in Asia.
Another potential motivation for the deal is Taiwan’s changing retail market. Taiwanese supermarket chain PX Mart, which operates more than 1,050 stores, is currently the largest supermarket chain by number of locations and the second in retail revenue behind 7-Eleven. PX Mart overtook Carrefour by number of locations in 2012.
A new retail landscape
Deloitte’s Huang says Uni-President was known as Taiwan’s “retail king” over the past 20 years, but the situation began to change recently, with PX Mart benefiting from an increase in people ordering grocery delivery and cooking at home due to the pandemic rather than venturing out to grab microwave meals from 7-Eleven. President Chain Store Co.’s revenue stood nearly still at -0.08% year-on-year growth in 2021.
By the end of 2021, PX Mart occupied 64.1% of the supermarket sector with sales of NT$159 billion (US$5.2 billion). In 2022, the Fair Trade Commission said it had conditionally approved PX Mart’s acquisition of hypermarket operator RT-Mart International, which has sales of NT$26.6 billion (US$87 million).
“PX Mart has been very aggressive in its expansion,” says Huang, adding that without Uni-President’s acquisition of Carrefour, PX Mart would be Taiwan’s leader in the retail sector. “Anyone who acquired Carrefour would be the market leader for a while. After this transaction, Uni-President will be the undisputed leader in the retail market for the next 10 years.”
In Taiwan, store competition is “intense,” Hsu says. “For every retail channel in Taiwan, the growth rate is very low. It’s in the low single digits for hypermarkets. For 7-Elevens, the growth rate is still higher, but still low compared with emerging markets.” Therefore, companies need to look to different channels, both offline and online, to capture market share. Opening several channels also allows retailers to collect information about consumer preferences. This will be another advantage for Uni-President, which already has a long history of cross-promotions run at Starbucks and Mister Donut, offered to consumers making purchases at 7-Eleven.
“We believe the group would like to have more diversified channels to offer the full spectrum of retail services for different customers’ preferences,” Chen says. Currently 53% of Uni-President’s earnings come from retail.
Huang notes that “e-commerce and omnichannel strategies will be more and more important” for retailers. “In the future, competition might come from online and other countries. If companies are only focused on the domestic market, and business scales are small, it is not a good thing in the long term.”
However, interviewees scoffed at the idea that Uni-President, despite its prominent position in the retail market, could become a monopoly with the purchase of Carrefour. They say that when adding together sales from department stores, convenience stores, hypermarkets, and supermarkets, Uni-President’s market share stands at only 16.8%.
“They are the leader and have an impact on the market, but they are not a monopoly,” Huang says. Compared with other Asian consumer brands or channels, Uni-President is not considered a big player. The recent consolidation in the retail market gives Taiwan, a market of 24 million people, more resources to compete in the region.
Perhaps of more concern than market monopoly to some customers is whether Carrefour Taiwan under Uni-President’s ownership will continue to stock the imported specialty items it is known for – including a wide selection of French cheeses and European jams – or merely become another avenue for the company’s range of Taiwanese offerings.
The people TOPICS spoke to remained divided on this question, but most said if Uni-President changed Carrefour Taiwan’s product lines, they would likely only be minor adjustments.
“We definitely believe the character of the French-owned store probably won’t disappear, but it will definitely move in the other direction,” says Taiwan Rating’s Chen.
Christophe Charrondiere, a chef at an Italian restaurant in New Taipei City with 20 years of experience in the UK and French catering industries, says Carrefour Taiwan may be tempted to get rid of some European products. “It depends on their business strategy. It might be their strategy to differentiate themselves and keep the French aspect with specialty foods.”
In any case, interviewees said most food products and ingredients that are popular with the international community will still likely be widely available in Taiwan, as society has changed and internationalized fundamentally over the last few decades. Nicholas Chen, a partner in Pamir Law Group, says when he arrived in Taiwan in 1989, availability of imported food products “were limited to Tianmu outlets and transits to Hong Kong to acquire spices, flavor packs, and ingredients. [This] was a serious challenge for international foodies.”
“Taiwanese are widely traveled, and demand has diversified,” Chen says. He also notes that traditional markets now have wide varieties of fresh ingredients used in European-style cooking, such as dill, rosemary, thyme, figs, and apricots. Charrondiere, who has lived in Taiwan for eight years, also thinks Western ingredients have become increasingly available.
Cedric Guyot, founder of Shilin-based café and bakery brand Lutetia, has been supplying Carrefour’s Taipei locations with fresh bread for several years. Guyot says he works hard to produce authentic French food, and 80% of his cafe’s customers are Taiwanese. Regardless of the possible changes to Carrefour Taiwan’s product line, he doesn’t believe it will matter too much.
“One way or another, the foreign products will keep coming,” he says.