Thursday, January 6, 2011

Big C begins overhaul Carrefour name goes but products will stay

Source from:

Big C Supercenter Plc has begun the transformation of the Carrefour outlets it purchased last year from the French retail chain, starting with a 350-million-baht re-imaging exercise.

The company has no plan to close any of the 42 Carrefour stores because many are located in strategic central Bangkok locations that would augment the network of Big C, whose major stores are located in suburban areas and the provinces, said Rumpa Kumhomreun, chief financial officer and vice-president for accounting and finance.

As well, she said, Carrefour customers generally had higher purchasing power than those who traditionally shopped at Big C. Consequently, the signs on the former rival's stores will change to Big C but the merchandise inside will remain the same as before.

The company expects all the new signs to be in place in six to 12 months but says the complete transformation will take three years.

It also sees no problem with potential overlapping service areas.

"Overlap doesn't mean cannibalise," said Praphan Eamrungroj, executive vice-president for properties. "Both Carrefour and Big C have their own customers in each location. What we want to do after changing the brand to Big C is to ... win Carrefour consumers' hearts and keep them shopping there."

Mr Praphan said the company would even build bridges connecting Carrefour and Big C stores that are located near each other.

Apart from the 350 million baht for signage, other funds would be spent re-branding Big C in the coming months.

Ms Rumpa said the takeover would enable Big C to cover all customer groups and grow in the future.

Moreover, the company will benefit from the combination of product purchases, advertising and sharing expenses, resulting in higher bargaining power and better prices.

"It took us about eight years to open 42 new outlets. Also, it's very difficult to open our own new outlets in downtown areas, where Carrefour has sites at present, because of limitations of city planning," she said.

As of Nov 30, Big C had 71 hypermarket stores, 13 Mini Big C outlets and 27 Pure stores and two Big C Junior locations.

After the conversion, Ms Rumpa said, sales of Big C would climb to 110 billion baht by the end of 2011, up from 70 billion last year.

Preeyanun Tripetchchuporn, an analyst at Phillip Securities, said Big C had made good preparations for the conversion. Carrefour and Big C have their own customer bases even their stores are just located opposite of the road.

"I don't think Big C will lose some mid-range to high-end Carrefour customers once the stores are converted. Big C will try hard to maintain the premium positioning of Carrefour and some premium products would probably be sourced from Groupe Casino in France to serve Carrefour customers," she said.

Yves Braibant, the CEO of Big C, said he aimed to make it the country's biggest hypermarket operator, surpassing Tesco Lotus, but he did not give a timeframe.

Big C yesterday sought shareholder approval for 38.5 billion baht in bank loans. The lenders have not been chosen but the company expects to pay an interest rate of 4.5% or less. About 35.4 billion baht would be used to purchase the Carrefour assets and the rest as revolving funds at Carrefour.

Big C's debt-to-equity ratio in 2011 will rise but will not exceed 2.5 times, as it will have more cash flow from sales at Carrefour stores. It expects to repay its loans within five years.

Although Big C has acquired more branches, it will open two new hypermarkets this year, one of them in Tak province.

Mr Praphan said the local hypermarket sector had not saturated yet. The company believes it takes a catchment area of 120,000 people to support one hypermarket. However, it has to be more cautious to ensure it obtains an optimum return on investment.

BIGC shares closed yesterday on the SET at 90 baht, up 50 satang, in trade worth 58.36 million baht.

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