Asia’s emerging markets – India and China in particular – have long been held up as offering great potential for the world’s largest food retailers.
Rising incomes among the growing, urban middle-classes in cities from Beijing to Bangalore are said to offer very lucrative opportunities to retailers like Wal-Mart, Carrefour and Tesco.
Indeed, the promise of these emerging markets has almost become an immutable law of food retailing. The belief in that potential was heard again in April at the World Retail Congress in Barcelona, where the great and good of food retail gathered to take the pulse of the sector. And it was development of organised retail in China and India that warmed the heart of many of the attendees, who had been left cold by the pessimistic assessment of retailing in the West and of the wider global economy.
China and India’s home-grown retailers were among the more vocal cheerleaders. Indian conglomerate Bharti Enterprises, which has just moved into retailing and has set up a wholesale venture with Wal-Mart, spoke of a “gold rush” in the sector. Elsewhere, others were at pains to point out that, although the concept of China as the world’s factory is well-established, the business world is now seeing China become the world’s largest consumer market.
Nevertheless, as the clouds gathered over Barcelona, some attendees could see some turbulent economic conditions on the horizon, even in China and India. Carrefour CEO Jose Luis Duran pointed to China’s food inflation rate, which is approaching 25 per cent. Gordon Campbell, MD of Spar International, highlighted the high levels of investment needed to just break into India.
In fact, Mr Campbell’s insistence that the retail sector should not be blinded by the prospects for growth in the emerging markets and be more aware of the “problems and issues” was a timely piece of advice. India, he said, was fraught with challenges, not just in terms of investment but also in the lack of efficiency in agriculture and the lack of a suitable infrastructure to move fresh goods.
Such warnings left those in Barcelona feeling a little uneasy. Asia has been held up as the safe haven from any buffeting from economic headwinds in the West. Those hoping for clear blue skies above Bangalore and Beijing may be disappointed.
