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Interesting piece in BusinessWeek about Carrefour, the French retailing goliath that is second only to Wal-Mart in terms of revenue, but that is considered by analysts to be operating on such “shaky” ground that it could be ripe for a takeover – perhaps even by Wal-Mart.

The problem, according to the magazine, is that while Carrefour has a forty-year history of operating hypermarkets, and currently has more than ten thousand stores in 29 countries, its traditional marketing position is being undercut by discounters such as Germany's Aldi and Lidl, and, of course, Wal-Mart.

Part of the problem that Carrefour is having in its home market can be attributed to government regulations that require that products be sold to all retailers – big and small alike – for the same price, thus making it tough for Carrefour to get any kind of pricing advantage. Discounters, however, have circumvented the rules by carrying cheaper own-label products, an approach that Carrefour has been trying to mimic without a great deal of success.

Carrefour has responded to tough international competition by saying that it will pull out of markets where it is struggling. Asia and Latin America are seen as key markets for future growth, though also not without challenges – in Brazil, for example, Carrefour bought the Bompreco chain from Ahold, but is facing off against Wal-Mart. In Mexico, Carrefour runs a poor second to Wal-Mart. And in China, Carrefour has a size advantage at the moment, with more than 100 stores and growing at the rate of one per month. But even though Wal-Mart is just half Carrefour’s size in China, almost nobody expects that this disadvantage will be long-term.

BusinessWeek reports that Carrefour’s troubles could mean that CEO Daniel Bernard is in trouble – and this scenario is made even more likely by the fact that former Marks & Spencer CEO Luc Vandevelde recently was appointed to Carrefour's board, making him a de facto “CEO in waiting.”
KC's View:
We have a hard time believing that the French government would allow a takeover of one of its retail jewels by the Bentonville Behemoth. And there almost certainly would be other countries where local officials would object to Wal-Mart gathering that much power.

Still, it doesn’t look good for Carrefour. We’re not sure, however, that Vandevelde is the answer – as charming and experienced as he may be, it isn’t like he left Marks & Spencer in such great shape. It sounds like what they need at Carrefour is a real change agent who can shake the place up and impose discipline and inspire innovation in the ranks.