Tesco builds Korean business

Related tags Tesco Hypermarket Wal-mart

Hot on the heels of last year's entry into the Chinese market,
Britain's leading food retailer Tesco has strengthened its business
in South Korea with the acquisition of a number of stores from the
Aram Mart group. The move will help it stay ahead of its
international rivals in Korea and further bolster Tesco's ambitions
on the global stage, Chris Jones reports.

Samsung Tesco Homeplus, the British group's subsidiary in South Korea, has acquired twelve Aram Mart based in and around Pusan in the south west of the country. The deal consists of three compact hypermarkets and nine supermarkets. Tesco declined to comment on how much it had paid for the stores.

The move fits well with Tesco's strategy in South Korea, according to Robert Gregory of retail analysts M+M Planet Retail​. "At the moment, Samsung Tesco has stores mainly centred around Seoul. The Aram Mart stores are located in Busan, so geographically, it provides a good fit. Busan is the second largest city in the country, after Seoul, so it has good growth potential."

Tesco has around 28 stores in South Korea, and last year launched into the supermarket sector with the roll out of its Super Express chain, according to Gregory. "It has eight such stores at present, and with opportunities for hypermarket expansion likely to become limited in the coming years, the retailer is likely to focus more on these smaller stores which it can open in locations unable to support a full hypermarket.

"So, by acquiring the nine supermarkets from Aram Mart, Tesco is immediately doubling its number of supermarkets. Long term, by 2008, Samsung Tesco hopes to have a network of 165 Super Express stores."

But Gregory stressed that the addition of three compact hypermarkets will also have sweetened the deal. "Of course, Samsung Tesco also picks up three hypermarkets as part of the deal, helping it to grow in what is THE growth channel in South Korea."

Tesco is the largest foreign grocery retailer in the country, Gregory said, and is third overall behind local players Lotte and Shinsegae. "Both these groups have sales more than double Tesco's, so while this acquisition is unlikely to close the gap significantly, it will help Tesco move away further from the chasing pack - such as Carrefour and Wal-Mart."

Asia is becoming an increasingly important market for Tesco, with 200 or so stores in six countries. Having had operations in Thailand, Taiwan, South Korea and Malaysia for several years, the company moved into the regions key markets in 2004, acquiring a convenience store chain in Japan and investing in a hypermarket operator in China.

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