May 19, 2014 3:19 am JST

Aeon to expand grocery store biz via merger

TOKYO -- Japanese retail giant Aeon will consolidate its supermarket operations in greater Tokyo by bringing three grocery store chains under a joint venture with trading house Marubeni.

     Under the plan, grocery store operators Maruetsu and Kasumi, both of which are listed on the Tokyo Stock Exchange's first section, and Aeon subsidiary Maxvalu Kanto would set up a holding company by the spring of 2015.

     Aeon and Marubeni would launch a separate joint venture and turn the holding company into a subsidiary through a majority stake. Aeon will likely own 70% of the business, with Marubeni holding the rest. Maruetsu and Kasumi will be delisted, and the holding company will go public instead.

     Aeon directly owns over 30% stakes in Maruetsu and Kasumi. The three chains' combined sales would reach an annual 600 billion yen ($5.85 billion). By leveraging the scale, Aeon will have the three companies promote joint procurement, share logistics and processing facilities and introduce e-money systems to boost competitiveness.

     Following the merger, the holding company would oversee some 470 supermarkets in Tokyo and five surrounding prefectures. Its sales would surpass those of current leader Life Corp. by 10%.

     Food accounts for over 60% of total supermarket sales in the country, according to the Japan Chain Stores Association. While grocery sales are relatively unaffected by economic cycles, consumers closely follow prices and quality, creating fierce competition.

     Amid a shrinking population and intensifying competition from convenience stores, Japanese supermarkets' same-store sales were down by 4 trillion yen in fiscal 2013 from fiscal 1996 levels.