At the end of 2021 and the beginning of 2022, the company Electra needs Wasa seemed like the big promise in the field of retailing: within a few months, she acquired the franchise to operate two major international brands in Israel – 7-Eleven and Carrefour. This was supposed to be double consumer news, both in terms of prices and competition in the food industry which is considered to be relatively concentrated, and also in terms of the shopping experience – the two well-known and large brands promised an experience abroad and a change in the rules of the game in the industry.
● Electra Nevema has started operations for the “significant closure” of the Saban Ilvan network
● Carrefour’s losses continue to be a weight for Electra Consumers: it lost NIS 101 million in the summation of the year
● Checking Globes | Two chains, an almost unimaginable gap: Shufersal’s value is 20 times higher than that of Carrefour Israel
But two years later, Electra Consumer’s financial statements reveal that the bet is turning out to be mostly a failure. The new chains cause the company mainly heavy losses, and in the last year they even parted ways with the CEOs who led them due to the difficulties in business.
Saban Ilvan became a dumbbell
A negative surprise in the reports for 2023 comes mainly from the direction of Saban Ilvan, the chain of convenience stores that began operating in Israel in January of last year and “contributed” to Electra needs a loss of NIS 68 million in the summary of the past year. The company’s reports state that it “re-examined the business model of operating the stores and began actions to significantly close the activity”, this as part of a reorganization that includes cost reduction and closing branches. The move led to the recording of a one-time expense of 42 million shekels and constituted the bulk of Saban Ilvan’s loss in 2023. Electra Korema states that it is examining the possibility of bringing in an investor for this activity.
Seven Eleven is an international chain based in the USA that was established almost 100 years ago. In October 2021, Electra Consumers, under the management of Zvika Schwimmer, signed a franchise agreement to operate the brand’s convenience stores in Israel, and in January of last year, the first branch was launched in the Dizengoff Center complex in Tel Aviv.
The company rushed to announce the news and planned to establish over 30 branches throughout the country. But very quickly the big promises of a loud launch and a consumer revolution turned into requests for 8 branches that operate in Tel Aviv alone, after two branches have already been closed, and the hand as mentioned is still tilted.
It is not impossible that in the end Bacaltra will have to completely close the Saban Ilvan activity in Israel or part with it. The squeaks on the network began shortly after it began operating, when last August the CEO of Saban Ilvan in Israel, Avinoam Ben Mocha, resigned.
“The main focus concerns the improvement of Carrefour”
In the Elektra consumer environment, they admit that Saban Ilvan has become a weight: “We are in talks with parties who will become sub-franchisees and take the chain under their management”, they say, adding that “our main focus in the field of food retail concerns the improvement of Carrefour”.
Indeed, Carrefour Israel is required to make a significant improvement in view of the heavy losses it is causing to its shareholders, and Electra needs them in mind. In 2021, Electra Kema bought the control of the supermarket chain (then called Yenaum Beitan) along with the Fenix insurance group from the founder Nahum Beitan.
Today, after converting most of the chain’s branches to the European supermarket brand, 85 Carrefour branches operate under it (out of 148 supermarkets, which also include the Beitan and Mega wine brands in the city) – which actually make it the second largest retailer in Israel, after Shufersal. The network’s total revenues in 2023 amounted to NIS 3 billion, a 9% increase compared to the previous year. This was due, among other things, to the closing of branches for renovation purposes, their conversion to the Carrefour brand in 2022 and the efficiency plan implemented at that time.
The gross profitability rate of the food chain eroded and stood at 29%, against 31.7% the previous year, when the reason is, among other things, Carrefour’s aggressive launch promotions. In the bottom line, the Carrefour Israel chain (formerly Beitan Wines) recorded a heavy loss of 188 million shekels, a certain decrease compared to the loss of 207 million shekels the previous year.
In view of Carrefour Israel’s precarious financial situation (a deficit of close to one billion shekels in equity as of the end of 2023), an investment of approximately 180 million shekels was recently made in the chain’s capital, mainly by Electra Consumers and a new investor, the French businessman Simon Pinto.
The investment, which was intended to increase the chain’s capital and its financial flexibility, was made at a value of 300 million shekels (before money) only for Carrefour Israel. As a result, the holdings of Electra Consumers increased to 48% of the chain’s capital, which parted company last year with CEO Uri Kilstein (formerly a senior executive at Shufersal and Azrieli).
The controlling owner of Electra Kovema is the Elco holding company of the brothers Daniel and Michael Zelkind, two of the famous businessmen in the local capital market (extension in the box).
The appetites of the Zelkind brothers turned their star fight into an Achilles heel
Until the beginning of the year 2022, the brothers Daniel and Michael Zelkind, the controlling owners of the Elco holding company, were considered one of the biggest success stories of the local capital market.
The brothers, who inherited control of Elko from their father, the late Gershon Zelkind, several years earlier, led the group’s companies to a series of acquisitions of companies from various fields: real estate, communications, energy, transportation, and more. At the same time, they also knew how to make profitable transactions. of some of the businesses they purchased (Golan Telecom, Ice Auto Depot). The investors in Tel Aviv liked the aggressiveness shown by the group during the zero interest period, and boosted Elco’s stock to a record value of almost NIS 8 billion in February 2022.
However, the Zalkinds’ great appetite for acquisitions is also what led to a drop of more than 50% in Elco’s stock from its peak – to a current company value of only about NIS 3.5 billion. The reference is mainly to two investment moves of hundreds of millions of shekels carried out by the group in recent years – the acquisition of control of the food retail chain Yenat Beitan as well as the controlling shares of the holding company Discount Investments (alongside the Mega Or company of Tzachi Nahmias and other investors).
While Beitan Wines did not succeed, Electra needs to lead a turnaround, and even after changing its branding to Carrefour Israel, the chain still records heavy losses and is required to inject capital – in the case of Discount Investments, the heavy leverage of the holding company led to the loss of most of the value of its shares, and it even recently signed a deal to sell One of its main assets – the controlling shares in Cellcom.
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Following the low value reflected in the investment agreement for Carrefour Israel, Electra had to write off goodwill amounting to NIS 68 million from the value of its holdings in the chain, which, together with Saban Ilvan’s losses, dragged it to record a heavy loss of NIS 101 million in the 2023 summary, against a net profit of NIS 103 million for the year Before.
Elektra Konva remains optimistic about Carrefour
In Elektra Consumers, they point to an improvement in the performance of Carrefour Israel. In the fourth quarter, there was a 25% increase in revenues compared to the corresponding quarter of the previous year, and they amounted to NIS 840 million, while sales in the identity stores grew by 12%. At the end of the year, the sales per square meter in the Carrefour brand branches were around NIS 39.2 thousand – a growth of about 60% compared to the corresponding period a year earlier.
“The reduction in value recorded for Carrefour is not significant for the company,” says the Electra consumer environment. “This is the right platform for the rest of the way. Carrefour will be a super strong leg. This is a careful investment, not billions (alluding to the Amir brothers’ investment in Shufersal, HSH). A food chain was purchased for a relatively modest amount, we are currently paying ‘a little’ in reductions and launch in order to receive significant results in the future.”
Investors on the stock exchange reacted negatively to the financial results and sent the shares of Electra Consumers to a sharp drop of about 8%. The current market value of the company is about NIS 2 billion – a drop of about 60% from the record two years ago.
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