Tesco takes steps into Chinese market
By Liu Jie (China Daily)
Updated: 2004-07-16 08:51

British chain retailing giant Tesco has snapped up a 50 per cent stake in hypermarket operator Hymall for US$260 million.

The move means China, the world's fastest growing market, has become the latest arena in which the world's top three chain retailing firms - Tesco, US-based Wal-Mart and French Carrefour - will battle it out for the biggest share.

Tesco has signed a 50:50 joint venture agreement with Ting Hsin, for its wholly owned Ting Cao subsidiary, which owns the Hymall stores in China, the British firm announced on its website.

Valuing the entire business at US$520 million, Tesco will acquire 50 per cent of Ting Cao's equity in Hymall for US$260 million cash. The transaction is expected to be completed within four months.

Hymall is on the verge of expanding its China operations, it currently runs 25 hypermarkets in the nation, but has plans to open up to 10 more stores in the coming year.

With sales forecast to exceed US$833 million this year, it is a profitable business, notching up sales of US$613 million and profits after tax of US$10.1 million in 2003.

Hymall hypermarkets can mainly be found in high-end shopping malls and have an average area of 8,300 square metres.

Located primarily in eastern, northern and northeastern China, including Shanghai, Hangzhou and Ningbo in the East and Tianjin, Shenyang and Dalian in the North, Hymall stores serve around 2 million customers a week.

An unnamed Hymall official told China Daily that the deal had been signed on Wednesday. But he declined to disclose the deal's details and the joint venture's further business expansion plans, as the transfer is still taking place.

Tesco has been researching the China market for a number of years.

"As one of the world's leading retailers, Tesco has been cautious. But eying up its counterparts' - Wal-Mart and Carrefour - prosperity in China, the most booming market in the world, Tesco is eager to get piece of the action," said Fan Yanru, deputy secretary-general of the retail enterprise's committee of the China Commerce Association for General Merchandise.

Wal-Mart and Carrefour had 44 and 28 chain stores in 21 and 14 cities in China respectively by the end of June.

Carrefour's sales volume in China totalled 13.437 billion yuan (US$1.62 billion) last year, ranking it sixth among China's top 100 chain retailers, while Wal-Market (China) was ranked 18th, with a sales volume of 5.853 billion yuan (US$705.18 million) in 2003.

Tesco Chief Executive Sir Terry Leahy said: "China is one of the largest economies in the world with tremendous forecast growth and a market we have researched extensively over the last three years."

According to the anonymous Hymall official, Tesco selected Ting Hsin, the parent company of Hymall, as its partner because the two sides may play complementary roles in terms of business expansion.

Ting Hsin, one of China's leading consumer foods and beverage producers, will bring its extensive local knowledge and operating expertise gained not only from Hymall, but also from its business interests in China. Tesco will add its supply chain, product development and store operations expertise to improve customers' overall shopping experience.

The Tesco Group, the UK's largest chain retailing company, had a turnover of US$60.9 billion with profits of US$3.1 billion. It currently has 2,318 stores and a workforce of 326,000.

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