International analysis: Casino's restructure is more than smoke and mirrors

Groupe Casino has gathered all its operations in Latin America under the umbrella of its Colombian subsidiary Grupo Éxito by selling part of its stake in Brazilian Grupo Pão de Açúcar (GPA) and Libertad in Argentina in a deal amounting to €1.7bn (£1.2bn).

As the French retailer will remain the ultimate controlling shareholder and no operations were divested or acquired, it may seem at first as little more than clever smoke and mirrors.

This trick was likely triggered by Grupo Éxito’s substantial cash reserves which remained underused.

While organic expansion is still on the agenda, the retailer is starting to feel cramped in both Colombia, where it recorded sales as high as its next three competitors combined, and Uruguay, where Grupo Éxito holds a 44% share of the market.

Group savings

By gaining a grip on two new markets the retailer will be able to invest and generate synergies.

The retailer is putting a figure on its ambitions, hoping the step will generate a saving of a saving of €145m (£102m). 

It will come as no surprise that around one-third of these savings are expected to be generated from improved bargaining power with suppliers in food but more importantly in non-food – leveraging its leading position in consumer electronics in Brazil.

Similarly, it hopes to reduce administrative costs and purchase of equipment. 

New synergies

The other side of the coin is that Grupo Éxito expects an uplift of its various formats’ sales by improving processes and sharing best practices and products.

For instance, Colombian Grupo Éxito expertise in the loyalty programme domain and textile assortment could be successfully transposed to Brazilian stores.

Following the same logic, Grupo Éxito will wish to capitalise on the experience acquired by each subsidiary on key formats to help their successful implementation in other markets.

This includes Brazilian GPA expertise on ecommerce as well as the Assai cash-and-carry format, which Grupo Éxito has already expressed an interest in bringing to Colombia; echoing a similar move from Carrefour and its Atacadão banner a few years ago.

In exchange, GPA could complement its store portfolio by cashing in on Grupo Éxito’s experience with Surtimax, its price-focused proximity store fascia. This particular format is set for rapid growth in Brazil, but remains largely in the hands of two modern grocers: Dia and Walmart’s Todo Dia stores. 

The greatest beneficiary may be Casino’s Argentinean unit. There, the list of projects on the agenda is a lengthy one, from real estate investment to the introduction of cash-and-carries or establishing an ecommerce presence.

Surprisingly enough, the retailer does not exclude venturing back into the discount format, a decade after the divestment of its Leader Price discount stores.