With Ramadan approaching, The Daily News Egypt interviewed Herve Majidier, the Executive Regional Director of Carrefour in Egypt, Saudi Arabia, Yemen and Libya, to inquire about how the retail store is preparing for the season. Majidier also announced the locations of Carrefour’s new branches and his outlook regarding Egypt’s economy.
How do you assess Carrefour’s performance in Egypt compared to Saudi Arabia, Libya and Yemen?
Right now, in my portfolio, I have only two countries in operation, because Yemen and Libya are still in [progress]; but we have done their feasibility studies to start their operations. Regarding the Saudi market, our business there is running well. But we don’t want to compare between them and say which country is better than the other. Egypt’s revolutions, elections and all these things can’t affect the fundamentals of the market. I believe the fundamentals are still here, such as the large population, the geographical location and above all, the demographical characteristics.
Has Carrefour’s performance been negatively affected by the political and economic turmoil of the past three years?
No, it wasn’t affected because, simply, Carrefour is accepted by the population. Egyptian customers are very intelligent; they know well how to compare prices. And also, I was proud to hear that former Minister of Defence Abdel Fattah Al-Sisi applauded Carrefour’s performance and our role in fighting inflation. We are trying to provide cheap products, but not a cheap quality of product; we are offering the best products with the best value of prices. We are contributing in making people’s life easier economically, and at the same time, we are focusing on gaining people’s trust.
Have you recorded losses in the past three years?
No, because as I said, the population is growing and our customers have increased. What enhanced that is that one of our competitors, Makro market, has recently closed down in Egypt, which promoted the chance of increasing our market share.
How about the market demand, was it negatively affected?
The market demand is very high. And I expect that after presidential elections, the market demand will grow higher. But in 2011, we were affected by curfew hours, [resulting in the] early closures of our stores for security reasons. And for the same reason, most of our suppliers were suffering in transferring their products to us. And also, several administrative changes have affected the business, but we know well that all these changes are normal. When comparing the situation of the Egyptian market today and few months ago, our confidence is growing. There are still a few problems, such as the value of foreign currency against the Egyptian pound— that’s a thing that can affect the importing process. Also, the banking system should be a little more flexible in terms of money transfer and daily routine process. And above all that, people should contribute in increasing the success of their country, and for example, instead of starting strikes, they should think of the effect of it on the work process. I can’t judge which strike is valid and which is not, but I can say that today is the time for citizens to support their own country and contribute to its success.
Are you planning to expand your activities or open new branches?
Of course, everyone who loves and knows Egypt is saying that it’s [the] time of opportunities. Our first priority is to increase the number of stores to pursue our development. Right now we have branches in Alexandria, Cairo and Sharm El-Sheikh. Within a few weeks, we are opening in Hurghada and we are planning to open in Menufiya, Tanta and Mansoura. In the next five years, we are targeting to have at least 20 hypermarkets in Egypt; today, we have 8 only.
The Hurghada branch is about to launch within a maximum of five weeks. Regarding the Menufiya branch, that governorate represents a good opportunity because there are around four million people there and I have had a very successful meeting with the governor to discuss methods. [With regards to] the Tanta and Mansoura branches, we are still studying whether they are already-established buildings of hypermarkets there or we are going to build it from A to Z; but anyway, the average time of establishing a hypermarket takes nine months and a supermarket from five to six months.
What is the cost of establishing those branches?
It depends on many parameters, you can build something that is easy and cheap and some other thing may be very costly. I will not compare the Maadi branch to Hurghada branch, which is [one-fifth the size of] the former. But, building a hypermarket in Egypt will not cost less than EGP 100m, subtracting the land price.
What is the market share of Carrefour?
It’s a very difficult question, even if I have all the numbers, because anywhere else customers are buying from is my competitor. But at the same time, I can’t compare my business to them. In terms of modern retail, our market share isn’t far from 28%, and this percentage is increasing year after year.
How are you preparing for Ramadan?
Ramadan for us is not starting on the first day of Ramadan; it starts here two or three weeks before Ramadan, as people start buying their needs at that time. We’re selling all the basic items such as rice, food oil, sugar, dates and so on. We know that people buy a large amount of items because they not only want to stock for their own needs, they are also giving some items for charity; so the average consumption in that month is higher than any other month, it is like one person eats equal to two persons.
We started preparing [by] selling items with very attractive and low prices; our prices of basic items will be 8% cheaper than the cheapest seller in the market. We are also going to sell some products with the prices of last year at the same time. The volume of the items will be 12% higher than the normal.
In March, Carrefour’s owner, the UAE’s Majid Al-Futtaim Group, announced that it will establish five commercial malls in Egypt in the next five years, with EGP 16.5bn in investments. Will these malls include Carrefour branches?
Of course, I know that Mr Majid Al-Futtaim believes in possibility [in the] Egyptian market. A very big commercial mall is under construction, Mall of Egypt in 6th of October. And there’s no way to see a market retailer other than Carrefour in any Majid Al-Futtaim mall.
What are the developments of the Metro supermarket deal?
No, this deal wasn’t done and we will not buy Metro, but I respect the decision of the owner, businessman Youssef Mansour and his family. Of course, I’d be happy to see this deal happening because it would help Carrefour grow by five or six times more than our development plan. But maybe one day the two companies could resume talks.
Are you considering buying other supermarket chains?
Yes, but we are not looking for anything with any price. A few days ago, Mahmal supermarket chains were sold to Ragab Sons chains, who added around 40 branches to his portfolio through this move. But we were never [planning to apply for buying Mahmal, for example, because we have a worldwide standard. We can’t operate in any size or design; we need something close to our business. One reason we applied to buy Metro is because their level of performance is close to ours.
From your point of view, what are the challenges facing foreign investors in Egypt?
There are many challenges today. But I’m sure that the confidence rate in the Egyptian market is going to increase and I’m more than confident that Egypt’s economy is going to show signs of success in a short period of time. I think the banking system has to be more flexible. Foreign investors should also be sure that they will operate effectively in Egypt. They should know what the levels of costs are, be they labour or electricity costs. The challenges are many, but I believe everyone should contribute to the success of the country and everyone should consider himself part of the government.
Did the government cooperate or facilitate something for you before?
You know, I consider Prime Minister Ibrahim Mehleb a very active and hard worker and I’m sure that under the rule of General Al-Sisi, Egypt will not fail. Other countries can’t ignore Egypt and what it can achieve with the help of the young generations.
What if Al-Sisi does not win in the elections?
I’m a businessman and I am distancing myself from politics. But the reason why I mentioned the name of General Al-Sisi is that I’m very honoured that he talked very positively about Carrefour in one of his recent interviews by saying that Carrefour is a good example of fighting high inflation. We believe that we have a big social responsibility; for example, 99% of my workers are Egyptians. And in the future, we can establish a training centre in Egypt to transfer expertise to other countries or companies.
How do you evaluate Egypt’s economic performance after 30 June?
Some parameters are becoming better and the rate of confidence in Egypt’s market grew more than before. The signs are really positive. But globally speaking, the government is spending a large amount of money on the energy subsidies, for example. But in order to maintain balance, the government should give subsidies on one hand and at the same time increase their resources through imposing an income tax, increasing exports and so on. Also, the rate of unemployment became higher than before. But again, amid all these negative signs, Egypt can do better.
Why do you think prices and inflation rates continue to rise in Egypt?
No reason at all; you know when you are buying something in US dollars and sell it in Egyptian pounds, you have to make profits. But unfortunately, some businesses are taking the opportunity to make benefits and increase the prices. As I said, it is the time to sacrifice some of our net profits in order to better serve the country. In Carrefour, we are trying to be the best example in that regard and to be followed by other retailers.
How can the government control prices?
It has already started to control them better than before. But of course, not all the items can be controlled; only basic items can be controlled, such as bread, food oil, rice, meat and so on. Again, the government can’t control everything. I believe, in order to improve Egypt’s economy, everyone should consider himself a minister and try to help his country.
What is the first economic move the new president should consider?
Everybody is talking about economy in Egypt because if people are hungry, they won’t be able to do their duty towards their country. I think that the CPI [Consumer Price Index] should be lower in Egypt. In order to address this, businesses can import their products at lower prices; another way is reducing the profit margin, [and] they are many ways to contribute in this. He [the next president] should also address the minimum wage system to make employees happy. The biggest challenge facing the new president is how to activate the economy.