Sally Wang

WAL-MART China Investment Co. announced yesterday that it had acquired a 35 percent stake in Taiwan-based Bounteous Company Ltd., expanding its presence in the world’s most populous country.

Bounteous operates 101 supermarkets in 34 Chinese cities under the Trust-Mart banner. Wal-Mart said it eventually expects to acquire control of the company, subject to unspecified conditions.

Terms of the acquisition were not disclosed. But according to Reuters, a source familiar with the situation said Wal-Mart will pay a total of US$ 1 billion for all of Bounteous.

Wal-Mart China confirmed that it will acquire control of the chain by 2010 if conditions are met.

Michael Duke, Wal-Mart’s vice chairman called the investment “an important step in bringing our additional scale to our China retail business.”

Yu Rijiang, president of Bounteous Company, said the collaboration would make a marked advance in customer service for Trust-Mart, and provide new opportunities for Trust-Mart’s suppliers to enter Wal-Mart’s global supply network and further develop in China.

Trust-Mart stores employ more than 31,000 people, and will continue to operate under the Trust-Mart name, Wal-Mart said, with both companies continuing to open new stores.

Wal-Mart China now operates a total of 68 supermarkets, three Sam’s Clubs and two community stores in 36 Chinese cities, employing more than 37,000 people. It was selected the best employer in China’s retail business last year.

Analysts said the acquisition would challenge France-based Carrefour as the largest foreign operator of supermarkets in China. Carrefour, the world’s No.2 retailer and the largest foreign operator in China, has added 23 stores since last year to bring its total in the country to 93.

Trust-Mart posted 2005 sales of about 13.2 billion yuan (US$1.7 billion) at its Chinese hypermarkets, according to the China Chain Store and Franchise Association, well above Wal-Mart’s 9.9 billion yuan in its Chinese stores.

By comparison, Carrefour had 17.4 billion yuan of sales in 2005 at its Chinese hypermarkets.

“It’s all about tiering and market share — Wal-Mart has a history of buying local operators, and this could make them No. 1 in China,” said an analyst at a European investment bank in Hong Kong.

Hua Tao, general secretary of the Shenzhen Retail Business Association, said acquisition and consolidation among supermarkets would be a natural trend in China’s chain store business after China’s retail business started to open to foreign capital.

“In a few years, a state of some giant hypermarkets dominating the retail business will soon be formed in China. Domestic retail business, especially small and medium ones would definitely be affected,” said Hua.

Wal-Mart’s China expansion follows exits last year from its operations in Germany and South Korea.

The company is also close to striking a joint venture with Bharti Enterprises to enter India, a fragmented retail market where foreign operators are restricted.

International expansion has grown more important for Wal-Mart as U.S. sales growth slows. In its fiscal quarter ending Jan. 31, total sales rose 10.9 percent to US$98.09 billion, but international sales rose 29.6 percent to US$22.73 billion. U.S. sales at stores open at least one year rose only 1.6 percent.