Size and dynamism make the USA a market with many opportunities and also many risks. While some European trading companies have been able to develop strong commercial positions or at least take over niches in the market, many others have failed to make a mark and have given up.
German, Belgian and Dutch companies in particular were already active in the USA at an early date. They were followed in the 1980’s by many other concerns, mainly from France and Great Britain. After that, a noticeable decline took place so that over the last decade only a few firms appeared on the market. Up to the 1980’s, it was very largely the food market that attracted companies but since then the emphasis has moved to the non-food sector.
To get into the market, the usual course was to take over an American firm or acquire a stake in one. The expansion that followed was based on additional acquisitions and internal growth. Companies with attractive types of distribution attempted to transfer these and to establish branches of their own or organize a franchise system. It was only seldom that joint ventures were formed with American organizations.
Of all the European trading companies, it was Ahold that made the biggest commitment. To begin with, the Dutch group acquired the first regional supermarket chain in 1977. External and internal growth resulted in the spread of a network of more than 1 300 supermarkets up to now, extending over 17 States and Washington, D. C. in the east of the USA plus five operating companies. In their distribution areas, they hold leading positions.
Stop & Shop operates mainly in the three northeastern states of Massachusetts, Connecticut and New Jersey. Of the two Giant Food chains, one is mainly based in Maryland and Virginia, the other in Pennsylvania. Tops is active in the western part of the State of New York and in Ohio. Bi-Lo serves the states of Tennessee, North Carolina, South Carolina and Georgia in the South. With a turnover of 21 billion dollars, the five Ahold chains are the biggest supermarket operator in the east of the USA and rank No. 4 on the national level.
In the past year, the Dutch group has added a powerful cash-and-carry sector to its food activities. For this purpose, US Foodservice - the second-biggest C&C supplier – and two other wholesalers with a total turnover of twelve billion dollars were acquired. Peapod, the leading Internet food distributor and two operators of gas station shops were also taken over. The intention is to provide supermarket, C&C, convenience and Internet trading as an integrated multi-channel distribution system.
After Ahold, it was Delhaize that invested most heavily. From the narrow basis of Food Town Stores taken over in 1974, the Belgian company emerged as the leading supermarket operator in the south-east of the USA and the seventh-biggest in the whole of the country. With some 1 420 branches, the last turnover achieved amounted to 12.7 billion dollars. A total of four billion dollars of this came from the acquisition of Kash n’ Karry and Hannaford. In cooperation with the American wholesaler Supervalu, Delhaize is also operating 30 supermarkets and discount markets in the Atlanta area with a turnover of 300 million dollars. The Belgian company earns about three-quarters of its turnover in the USA, a ratio not attained by any other organization.
For a long time, Tengelmann headed the European trading groups operating in the USA. The German company had acquired a stake in 1979 in the then third-largest American food chain Great Atlantic & Pacific Tea Company, known as A & P. The necessary restructuring reduced the network in the USA and Canada to 815 supermarkets at the last count. For some years, turnover has remained at somewhat more than ten billion dollars.
Four years after Tengelmann, the renowned British chain store of Sainsbury’s acquired a share in the Shaw regional supermarket chain. With internal and external growth, the number of distribution points rose to 185 with a turnover potential of more than four billion dollars so that the company now ranks second after Ahold in the five New England states.
Of the other European companies active in the food sector in the USA, Aldi Süd with more than 550 discount centers in the Middle West achieves sales of an estimated 2.2 billion dollars. The company entered the market in 1976 when it bought a small chain-store outfit in Iowa. Through minority holdings, Aldi Nord and Metro are indirectly involved in food retailing. Aldi Nord has an interest in Albertsons, the second-biggest supermarket organization and Metro has a stake in Jetro, a Cash & Carry company.
Of the big French food retail groups that ventured into North America, only Casino and Auchan remain. Casino, since 1984 majority shareholder in Smart & Final, attained in the past business year a turnover of almost two billion dollars with its 221 Warehouse Convenience Stores and Cash & Carry units, including its bulk-consumers. Its network of branches extends over six states in the west of the USA with a few retail centers in the Mexican frontier area and in Florida.
Of the three French trading groups Auchan, Carrefour and Leclerc that tested their hypermarket concepts a decade ago in the USA, only Auchan has survived with a market in Houston/Texas, to which was added a second one last year.
At the end of the 1980’s, the old-established British company of Marks & Spencer turned its attention to the North American market and in addition to the men’s outfitter chain of Brooks Brothers also acquired the small Kings supermarket chain. The consolidation program of the company, now faced with economic problems, envisages the sale of both these businesses. The firm had already withdrawn from Canada at an earlier stage. In the past year. The 27 Kings supermarkets last marked up a turnover of 0.8 billion dollars. In contrast to its European competitors, Marks & Spencer was very reluctant to extend its network of branches.
Apart from the two exceptions of Otto and Pinault-Printemps-Redoute, the commitment of European trading companies in the non-food sector did not attain the magnitude of that of the food retailing branch. After the Otto Group had acquired Spiegel, the fourth-biggest American mail order organization, in 1982, it took over at long periodic intervals the Eddie Bauer Company specializing in sport and leisure clothing via mail order and OTC channels in 1988, the New Hampton mail order firm in 1993 and the Crate & Barrel home furnishings chain in 1998. The German group thus developed into the leading mail order organization of the USA and as an important OTC supplier with a turnover in the past business year of 4.4 billion dollars.
The business in the USA of the big Pinault-Printemps-Redoute conglomerate is based on the three main sectors of electrical wholesaling, mail order and luxury goods. Numerous acquisitions have made the French company the No. 3 wholesaler in the North American electrical trade. The status of the Group has also been enhanced by the acquisition of Brylane, the fourth-largest American mail order store, and the takeover of Gucci, Yves Saint Laurent and Sergio Rossi. This means that the USA accounts for 36% of mail order sales and 27% of the sales of luxury goods in the Group turnover. In all, sales in the USA amount to about 4.4 billion dollars.
Many of the other European trading companies represented in the USA come from the fashion business. On the one hand, there is designer fashion, established in the best areas of the big cities, especially in New York and Los Angeles, on the other high-price shops such as Burberry’s, Stefanel, Bally and others. Of late, however, European fashion chain stores such as Hennes & Mauritz and Zara have opened their first branches. In the cosmetics and perfume area, there are not only Body Shop, Yves Rocher and Douglas but also the new arrival Sephora. The undertakings of Ikea and Vendex KBB are likewise significant. The Swedish company operates a good dozen furnishing markets in the USA while the Dutch firm runs the leading toy specialist chain FAO Schwarz with about 40 branches.
A great number of companies have subsequently departed again from the American scene. From France, mention may be made of Galeries Lafayette, Printemps, Promodès, Leclerc and Rallye and from Great Britain Gateway/Isosceles, Sears, John Menzies, Storehouse, Dixons and Laura Ashley. The Belgian GIB Group gave up its three DIY chains that once had sales of 1.5 billion dollars. Carrefour and Vendex have closed their investment portfolios.
The development of the European trading companies illustrates the difficulties of making a mark in such a large and dynamic market as that of the USA. Large investments are called for to achieve a size that is competitive. Even undertakings that apply vigorous marketing methods are not necessarily successful. A permanent threat is represented by the mighty American trading corporations with their highly competitive warehouse clubs, discount stores, supercenters and superstores. Under there circumstances, it is not really surprising that in the early 1990’s the United States lost their position as the preferred target area of European commercial activities to Eastern Europe, East Asia and Latin America.
- Study by EHI