GLOBAL CONSOLIDATION: THE GIANT SLUMBERS

Much has been written about the swift end to the substantial number of large-scale mergers that rocked food retailing in recent years, and that touched off a parallel spasm of manufacturer consolidation.You'll recall that while the big mergers involving companies such as Kroger and Safeway were playing out in this country, there were parallel events in Europe, events such as the merger of French retailers

Much has been written about the swift end to the substantial number of large-scale mergers that rocked food retailing in recent years, and that touched off a parallel spasm of manufacturer consolidation.

You'll recall that while the big mergers involving companies such as Kroger and Safeway were playing out in this country, there were parallel events in Europe, events such as the merger of French retailers Carrefour and Promodes, Ahold's continued worldwide spread, and even Wal-Mart's foray into Germany and the United Kingdom. Those combinations had some observers predicting that major shares of food retailing would boil down to be controlled by five or so worldwide players.

That didn't happen. Why not?

As is shown in the news feature on Page 1, it has now developed that the very philosophy behind global consolidation came into question, that being "big is better." Instead, it was found, local is better and global is irrelevant to some degree. (This week's news feature about global retailing was written by James Fallon of SN's London bureau.)

Let's take a closer look. Much of the consolidation that happened elsewhere in the world was motivated by the same factors that drove some portion of consolidation in this country, that being the fear of being left out of a great surge of events.

Perhaps the best example of an acquisition motivated by such a factor occurred in the United States when Delhaize, the Belgian company that operates Food Lion and Kash N' Karry in this country, set out to buy New England's Hannaford Bros.

That deal proved to be at the apex of the consolidation trend in this country, and a very costly one to boot. The cost came not only in the shape of the multiples paid, but in the number of stores that the Federal Trade Commission required be divested, and in the time involved. The deal took a year from the time it was announced to when it closed last summer.

Seemingly, that sequence of events proved to be a cautionary tale read on both sides of the Atlantic, and events took a rest. To be sure, there is still consolidation activity going on, but the global players are now concentrating more on local marketing -- which implies internal growth -- than on making sure they are represented on every continent.

Another reason is that some of the global deals just haven't worked out as hoped. Many glitches emerged in the integration of Carrefour and Promodes, and Wal-Mart's ventures in Germany and the U.K. have been disappointing. And, it's instructive to see that the world's quintessential global player, Ahold, while still quite active on the acquisition stage, has also turned its sights on a huge nonretail sector, namely food service in this country.

None of this is to suggest that global consolidation can't start again. Many observers are of the opinion that European players such as Carrefour and Tesco might try to establish a beachhead in this country, or make an acquisition. Carrefour, of course, had established a couple of stores in this country more than a decade ago, which subsequently failed, but clearly there's interest there. Tesco said at SN's e-commerce conference in March that it is seeking a partner in this country to help roll out its version of business-to-consumer retailing, another clear indication of interest.

In any event, at the moment the job for many global players is to make sure their retail proposition is consistent with what local shoppers are seeking.