Tag Archives: Tesco

Indian States are Putting More Roadblocks in front of Walmart Expansion

New Orleans   Two reports yesterday from Dharmendra Kumar, director of the India FDI Watch Campaign affiliated with ACORN International, point out how far the superstore giants like Walmart, Carrefour, Tesco, and Metro really are from being able to freely enter markets throughout India.  This is largely a story that the global business press is missing as they tout the rise and fall of the stock market without trying to understand that there continues to be a huge struggle over these issues of foreign direct investment in multi-brand retail.

            First and foremost, when Prime Minister Singh announced that he was pushing forward the modification, he could only do so generally at the parliamentary level.  Specifically each of the twenty-eight India states, not to mention the seven territories, has the right to independently decide whether to allow this FDI expansion in their jurisdictions.  As of this date, only 11 of the 28 states have indicated a willingness to tolerate such expansion with 17 thus far militantly opposed.

            As Dharmendra reported yesterday, there continue to be more roadblocks. 

            Walmart had teamed up with India-based Bharti in recent years to operate a “cash-and-carry” business that sold only to other businesses and not the general public, something like Sam’s Clubs the United States.  The Government had indicated that a “group” business like Walmart-Bharti had certain restrictions, but in recent years the ambiguity of the “group” business definition had allowed them free rein.  No more. 

            To quote from Dharmendra’s report:

On 3rd June 2013, Govt. of India defined Group firms as two or more enterprises that directly or indirectly are in a position to exercise 26% or more voting rights in the other enterprise or appoint more than 50% members on board of directors in the other enterprise. Amidst widespread opposition to the Walmart’s backdoor entry of FDI in Multibrand retail (through Bharti-Walmart, the 50:50 joint venture between Walmart and Bharti for operating Cash-and-carry outlets in India), in April 2010 Govt. of India framed a policy that asked cash-and-carry businesses (Bharti-Walmart) to limit their sale to group firms at 25 per cent of their turnover. In absence of clear definition of what group firms meant Bharti-Walmart’s cash & carry business (20 Best Price Stores) continued to sale almost 85% of their products to Bharti Retail’s 200 Easy Day stores.

Now, Bharti-Walmart will either have to limit its sale to Easy Day to 25 per cent of its turnover or restructure its corporate structure.

 

There can’t be happiness in Bentonville over this new clarification.

 

Yesterday the Indian Department of Industrial Policy and Promotion (DIPP) was also meeting and was expected to also propose additional heartburn for the superstore outfits.   India FDI Watch expected the following actions:

It is likely that the DIPP

 

– Would ask global superstores to invest 50% of only the first tranche of investments (minimum $100 million) in back-end infrastructure.

– Would declare that the 51% foreign direct investment limit in multi brand retail is composite one, including FDI and foreign institutional investment (FII).

– Would allow superstores to create back-end infrastructure in states that do not allow any FDI in multi-brand retail

             Forcing the big boys to put their investments up front rather than only in the logistics and supply at the backend of a retail operation almost puts a bull’s-eye specifically on the usually smiley-face of Walmart.

            There’s a lot more fight to come in India over FDI’s expansion into retail.

Indian States and Walmart Expansion Audio Blog

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Tesco, Once the Walmart Killer, Limps out of USA

 

Little Rock  It was only a bit more than 6 years ago when grocery unions feared that Tesco, the giant United Kingdom grocery conglomerate, might have found the secret sauce in both beating unions and Walmart although with labor’s West Coast containment strategies as they entered Los Angeles with what seemed a nearly unbeatable small store, fresher food, hot meals model.  Walmart for decades had had its way with store expansion throughout the country in rural, suburban and exurban areas, but as it encroached on East and West Coast cities, its giant footprint, superstore model conflicted with a host of other urban land use values and interests, so victory was never assured, but at least on a case by case basis was finally possible.. 

            This had certainly been the case with our Walmart organizing in Florida where between 2005 and 2008 we were able to block openings of 32 consecutive superstore proposals along the corridor between Tampa/St. Pete and Orlando.  We had taken our inspiration and often partnered with unions and community efforts in California where many of the same techniques had been pioneered and where land use laws were the best in the country with many jurisdictions outright banning store footprints of over a 100,000 square feet thereby putting a stake in the heart it seemed of the Walmart superstore model, requiring numerous regulatory obstacles to be mastered before construction.

            Tesco’s announcement then that it would take Los Angeles by storm with its small stores sounded like nothing but trouble.  A smaller footprint meant that they could immediately open in some locations then empty that had once held similar stores.  Many of the California tools wouldn’t work.  The UFCW launched an organizing project designed as much to harass Tesco as organize workers.  There were some picket signs.   There were conversations with customers about quality and offerings.  Hopes that the fact that Tesco was solidly union in Britain and that such leverage might give hope to unions in the USA were swiftly found to be futile.

            Now 6 years later, Tesco has announced that it is throwing in the towel.  The cost of obtaining their “get out of the USA” visa was said by their executives to be between $1.3 and $1.8 billion dollars.  What killed them according to reports is that they underestimated the American consumers.  The same reports infer indirectly that we Americans just like big stores, cold food, and stale products. 

            Having been there at the beginning I wonder if the Tesco story might have been different if it had not come in spoiling for a fight, but instead had been looking for love from American workers and unions.  No matter how big and bold, it’s never easy to move to a new country if your message is mainly that you are ready to take on all comers, rather than realizing they have to feel the love and spend their money with you.

Tesco Audio Blog

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