Carrefour’s Moroccan partner Retail Holding raises MAD600m ($62.5m) in a bond issue as it looks to increase its stake in Côte d’Ivoire’s #2 grocery retail player CDCI. The investment will also be used to expand CDCI’s penetration in the country and take on market leader Prosuma.
Retail Holding owns 51% of Label’Vie, which is Carrefour’s Moroccan partner and a major player in the Moroccan grocery retail sector. It is also the franchisee for apparel retailer Kiabi, Virgin Megastore and Burger King. Retail Holding chairman and co-CEO Zouhaïr Bennani has had to give subscribers to the new MAD600m, five year, bond solid guarantees, pledging some of its shares listed on the Casablanca Stock Exchange. In 2014, Amethis Finance and Retail Holding jointly invested in CDCI, which operates supermarkets and cash and carry grocery outlets in Côte d’Ivoire under several banners: CDCI Gros, CDCI Demi-gros, King Cash and (Casino’s) Leader Price franchise.
Having acquired the retail brand from Unilever in 2002, Ivorian and Lebanese entrepreneur Yasser Ezzedine expanded the network from 12 shops to 127 in 2014, and 160 today. The stores typically target low to middle income Ivorian consumers and are situated across the country, with a strong presence in Abidjan.
Côte d’Ivoire is seen as the flagship market for francophone supermarket chains and investors: more stable and far less risky than DRC, more developed and with a more robust middle class than Cameroon, more open than Gabon and larger than Senegal. Casino has been present via partner Prosuma for more than a decade. Carrefour’s West and Central Africa partner CFAO launched its first store in 2017. Super U has a single store via partner Civadis. Auchan, the market leader in Senegal, has previously partnered with local chain Top Budget. To add to to this the Spar franchise, which operates in Cameroon, has explored opening in more francophone markets and Spanish chain Dia operates in Côte d’Ivoire via partner Mata Holding.
There had been rumours earlier in 2019 that CFAO was in talks to buy CDCI. The logic makes sense: Label’Vie is already exporting some of its savoir faire to CDCI as part of the Retail Holding investment and Carrefour has enjoyed a strong working relationship with the Moroccan retailer. Furthermore, CFAO’s preferred strategy of opening Carrefour stores in CFAO shopping malls has meant a glacial pace of expansion: far behind the 100 stores in eight countries within ten years it spoke about in 2014. By contrast, Carrefour’s Egyptian and East Africa partner Majid al Futtaim is on track to become the largest supermarket chain in Kenya within the next 2-3 years, having opened its first store in 2016.
We think Prosuma is under a bit of pressure and is itself an acquisition target. For years it was the undisputed king of the supermarkets in Côte d’Ivoire. It is facing significantly more competition in Abidjan than ever before and has been slow to expand the premium Casino brand, leaving the door open for international chains. Although Prosuma did launch the premium neighbourhood format Casino Mandarine in 2016 there are still only eight Casino stores in total.
Prosuma’s main banners for targeting the mainstream of the Ivorian consumer market, Bonprix, Cash Ivoire, Miniprix and Cash Express are where CDCI can really exert pressure, given investment to modernise and expand. CDCI has better national coverage than Prosuma but its store estate is poorer and its overall distribution capabilities are also inferior to those of Prosuma.
Given the timeline of the bond, and the lengths Zouhaïr Bennani has had to go to secure it, we think CDCI is being prepared for sale – possibly to Carrefour but there will be other suitors if it can overtake Prosuma and establish a dominant position in the Ivorian market.
