Lotte Shopping Co Ltd, a hypermarket arm of South Korean conglomerate Lotte Group, announced yesterday that it has acquired 51 percent of discount store operator CTA Makro, which has conducted cash-and-carry business in China for almost a decade.

 

The firm has spent 640 million yuan on the deal. Together with the earlier acquisition of a 49 percent stake in the firm, Lotte now wholly owns all eight Makro outlets, which are based in Beijing and Tianjin.

 

CTA Makro is a joint venture between Dutch SHV Holdings and China National Cereals, Oils and Foodstuffs Import and Export Corporation (COFCO), a State-owned company with businesses ranging from food and real estate to retail, hotel and financial services.

 

The move will be a starting point for Lotte, which aims to open 100 hypermarkets in China in the coming five years, competing head-to-head with Western retail giants like Carrefour, Wal-Mart and Metro, said Noh Byung-yong, CEO of Lotte Shopping Co Ltd, at the signing ceremony in Beijing.

 

"We have ambitious plans to open 300 outlets in the coming decade, with revenue of 100 billion yuan," Noh said.

 

The first store under Lotte Mart brand will be launched in Qingdao in November, and the company will start renovating the existing eight stores in Beijing and Tianjin after it gets Ministry of Commerce approval.

 

"Hopefully the existing eight stores will be operated under our own brand within the year," Noh said.

 

Starting from northern Chinese cities and provinces, such as Beijing, Tianjin, Shandong and Liaoning, Lotte will penetrate the east and the south in the second phase, such as Shanghai, Zhejiang, Jiangsu and Guangdong.

 

CTA Makro, targeted at wholesale to professional customers, mainly provides large packaged products and does not meet the needs of numerous individual customers in the community, Noh said, adding Lotte will serve individual customers while maintaining the membership-based cash-and-carry business model.

 

CTA Makro made a profit of 20 million yuan in the last fiscal year but lost money in 2005 and 2006.

 

"Makro earned record revenue last year, and I feel a bit sad selling it," said Shi Zhuowei, vice-president of COFCO.

 

Lotte Group has been rapidly expanding in China in recent years. In addition to the growing food business, the conglomerate will open its first department store in Beijing's Wangfujing Street in June.

 

(China Daily January 25, 2008)