Carrefour: Company profile - just-food group after Promodes was taken over by Carrefour in ......

All content copyright © 2003 Aroq Limited

Carrefour: Company profile

Published May 2003

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Carrefour: Company profile


Table of Contents

Table of Contents ................................................................................................................................................................... i

List of Tables ......................................................................................................................................................................... ii

Chapter 1 Overview ............................................................................................................................................................... 1

Chapter 2 Company structure .............................................................................................................................................. 3 Operations in Europe............................................................................................................................................................... 3 Operations in South/Latin America.......................................................................................................................................... 4 Operations in Asia ................................................................................................................................................................... 5 Other operations...................................................................................................................................................................... 6

Chapter 3 Outlets and services............................................................................................................................................ 7

Chapter 4 Financial performance....................................................................................................................................... 11

Chapter 5 Strategy............................................................................................................................................................... 13

Chapter 6 Product development ........................................................................................................................................ 15

Chapter 7 Prospects............................................................................................................................................................ 17

Carrefour: Company profile i


List of Tables

Table 1: Numbers of food retail outlets, 2001-2002 ................................................................................................................ 7

Table 2: Carrefour financial performance 2000-2002............................................................................................................ 11

Table 3: Carrefour sales by region 2000-2002...................................................................................................................... 12

Carrefour: Company profile ii

All content copyright © 2003 Aroq Limited Chapter 1 Overview

Chapter 1 Overview Carrefour ranks as the second largest retailer worldwide after Wal-Mart and

the largest retailer in Europe. This is due to the formation of the giant

Carrefour-Promodes group after Promodes was taken over by Carrefour in

1999. The company is primarily a food retailer with formats in the hypermarket,

supermarket, convenience store, discount store and specialist food store

categories. It also has interests in cash & carry stores and a network of

affiliated independent food retailers.

The merger was given the go-ahead by the European Commission at the

beginning of 2000. In those countries where the group dominates the retail

market (ie. France and Spain), some divestment of operations has been

necessary. For example, as part of the Promodes takeover plan, Carrefour has

had to dispose of its stake in fellow French retailer Cora and sell off 34 outlets.

In a move to ease anti-competition concerns from the Spanish government,

Carrefour España is putting 12 large hypermarkets up for sale. Throughout

Spain, 3 Champion supermarkets, 15 Supeco Maxors supermarkets and 12

Dia discount stores are also due to be sold, subject to the approval of the

Spanish competition authorities.

The founding families of the retail groups Carrefour, Promodes and Comptoirs

Modernes hold one third of the shares and voting rights in the new group.

Almost two thirds is publicly owned.

The origins of Carrefour date back to the late 1950s and the first French

hypermarket was opened in 1963. In 1970 the company floated on the Stock

Exchange and soon afterwards embarked on its first foreign expansion into

Spain. In 1986 the group launched the Ed hard discount fascia in France. By

the end of the 1980s Carrefour had established a position on the Brazilian,

Argentine and Taiwanese markets.

The 1990s was a decade for rapid expansion for Carrefour as the group

pursued its overseas operations (Portugal, Mexico, Malaysia, Turkey, Italy,

China, Hong Kong, Thailand, South Korea, Poland, Singapore, Czech

Republic, Colombia, Chile and Indonesia). Carrefour also grew through a

number of important acquisitions, most notably acquiring a 41% stake in fellow

French retailer Cora in 1996 followed by the takeover of Comptoirs Modernes

two years later.

Carrefour: Company profile 1

All content copyright © 2003 Aroq Limited Chapter 1 Overview

After its takeover of Promodes in 1999, the Carrefour group now stretches to

just over 9,500 stores in 30 countries worldwide. This includes 727

hypermarkets, 2,380 supermarkets and 4,035 discount stores. In Europe

Carrefour is market leader in France, Belgium, Spain, Greece and Portugal

and number two in Italy. Carrefour is now active on all continents except

Australia but is marked by its absence from the significant markets of USA and

Canada, Germany and the UK. (Although the company entered both the UK

and US markets in the late 1980s, it withdrew from both markets in the mid

1990s).

In 2000, Carrefour was one of the founding members of GlobalNetXchange, an

online business-to-business marketplace serving global retailers. The

company also established a separate subsidiary @Carrefour for its worldwide

e-commerce activities. The company also took a majority stake in GB of

Belgium and GS of Italy, and entered the Slovakian market.

In 2001 Carrefour opened on the Romanian market with its first hypermarket in

Bucharest as well as launching on the Oman market via its franchisee Majid Al

Futtaim. At the end of 2002 Carrefour launched on the Egyptian market via its

franchisee Majid Al Futtaim.


All content copyright © 2003 Aroq Limited Chapter 2 Company structure

Chapter 2 Company structure

Operations in Europe

In its home market of France, Carrefour, after its acquisition of Promodes,

ranks as one of the market leaders in the food retailing sector. With well over

3,000 retail outlets, the operation has complementary positions in large urban

areas as well as in medium sized towns. The company now manages 216

hypermarkets controlled or operated entirely by partner regional groups.

Carrefour runs the second ranking portfolio of supermarkets (1,000 odd

outlets) in France operated directly or by franchise under the Champion name.

Its frozen food distribution chain, Picard Surgeles, was sold off to the UK

private equity investment firm Candover Investments in 2000. In addition the

group operates a network of neighbourhood convenience stores (1,538),

discount stores (480) and cash & carry outlets (127).

In Spain, Carrefour also ranks as the leading food retailer. The company

operates 118 hypermarkets, 175 supermarkets, 2,500 odd discount stores and

29 cash & carry outlets. In neighbouring Portugal, Carrefour operates six

hypermarkets and 340 discount stores.

In Italy in early 2000 Carrefour acquired control of the GS Group, the second

largest retailer of food in the country. This comprised the Continente and

Euromercato hypermarkets, the GS supermarkets, the neighbourhood outlet

chains Supersconto and Di per Di and cash & carry outlets. Since then there

has been substantial integration work carried out with the hypermarkets all

converted to the Carrefour banner and the convenience stores regrouped

under the Di per Di banner. Carrefour is presently expanding its operations in

Italy with five hypermarkets under construction, scheduled to be opened in

2003 and 2004. Carrefour is also to purchase three Italian hypermarkets from

franchise partner Hyparlo, one of them still under construction.

The company consolidated its position in Belgium during 2000 with a 100%

stake in GB, which controls 60 outlets and a 25% stake in Mestdagh with 63

supermarkets. Through Mestdagh, the Champion supermarket fascia is to be

further developed in Belgium. Carrefour now has a total of 54 hypermarkets,

429 supermarkets and 26 convenience stores on the Belgian market.



In Greece, Carrefour joined up with local retailer Marinopoulus in early 2000 to

become one of the leading distribution chains on the domestic market, now

operating 13 hypermarkets, 142 supermarkets and 265 discount stores.

In the Eastern European markets of the Czech Republic and Poland, Carrefour

has a smaller scale presence. In Poland, the Stoc supermarket banner was

launched in 1999 to complement the hypermarket operations (now standing at

12 outlets) which was followed during 2000 by the launch of a number of GB

Globi supermarket fasciae. There are now 55 Champion/Globi supermarkets.

Given that planning permission for stores continues to be forthcoming,

Carrefour plans to open two hypermarkets in 2003 and three to six

hypermarkets in 2004 as well as ten to 12 new supermarkets this year. In the

Czech Republic at the present time there are just eight hypermarkets in

operation.

Carrefour entered the Romanian market in 2001, opening its first hypermarket

in Bucharest via franchise partner Hyparlo, with plans for a second opening in

autumn 2003 to be followed by a third store in 2004. Longer term the group

believes that Romania holds greater potential with plans to build a 25-strong

hypermarket network in the country. In 2000 Carrefour entered the Slovakian

market opening two hypermarkets with a further two opened in 2001.

In Turkey Carrefour has chosen to penetrate the market primarily through

hypermarkets (11) and discount stores (120). The Dia fascia was introduced

during 1999 in response to growing consumer demand. The Champion

supermarket fascia was also introduced in 2000 with three stores now

operational and plans to build the network further.

In October 2000 Carrefour announced its arrival in Switzerland, via a joint

venture with Maus Freres. Family owned Maus Freres sold a 40% stake in ten

food hypermarkets. After five years Carrefour's stake may be increased to

50%. The Jumbo hypermarket chain has been rebadged "Carrefour", but the

35 DIY stores remain fully under the control of Maus Freres.

Operations in South/Latin America

Carrefour has operations in five South American countries, mainly through

hypermarket and supermarket formats.



Up until 2000, in Brazil, Carrefour was ranked as the leading food retailer.

However this position was taken at the end of the year by Casino’s Brazilian

operation CBD. Carrefour is now concentrating on narrowing the gap by

implementing better synergies between its hypermarket and supermarket

operations in a bid to reduce costs, improve performance and strengthen the

Champion supermarket brand. The retailer has outlined plans to triple

investment in the country during 2003 to US$175 million with a focus on

opening new stores rather than acquiring them. Carrefour plans to open seven

to eight hypermarkets and five supermarkets this year and will concentrate on

reducing supply, logistics and warehousing costs, product wastage and shop

theft. Carrefour currently operates 77 hypermarkets and 124 supermarkets. In

2001, Carrefour introduced its Dia discount banner onto the Brazilian market

with 65 outlets operational by the end of 2002.

In Argentina, Carrefour is the number one hypermarket operator with 23

stores. The company took a 51% stake in Supermercados Norte in May 2000,

adding 132 supermarkets to its retail portfolio. Carrefour also has a network of

discount stores (290 in 2002). Despite the ongoing economic difficulties in the

country, Carrefour has stressed that it is not intending to pull out of the market,

with a focus instead on consolidating its market leadership.

In both Chile and Columbia, Carrefour’s presence is much smaller with four

operational hypermarkets in Chile and eight in Colombia. In Chile, the group is

looking to further develop its hypermarket presence and may also consider

opening supermarkets in the country, whilst in Colombia Carrefour is planning

to open two hypermarkets during 2003 as well as its first supermarkets in the

country. In Mexico, the group runs 21 hypermarkets with plans to open a

further two to four stores on an annual basis.

Operations in Asia

Carrefour is active in eight countries in Asia, including China, where it is

ranked as the leading foreign distributor. The favoured store format is the

hypermarket and there are now outlets in Taiwan (28), China (32), Japan

(four), Korea (25), Thailand (17), Malaysia (six), Indonesia (ten) and Singapore

(one). In 2003 Carrefour is also to open its first discount stores under the Dia

fascia in China followed by supermarkets in 2004.



At the end of 2000 Carrefour decided to withdraw from Hong Kong, where it

had operated four hypermarkets. The group had been unable to find new

locations on the island suitable for developing its hypermarket portfolio, and

decided to dispose of its existing stores and seek market share elsewhere.

In both South Korea and Japan, Carrefour has found the market more difficult

to crack than originally anticipated. In 2002 the retailer declared that within less

than five years it would be operating 40 hypermarkets in South Korea.

However, in that year, only three new openings were achieved and in early

2003 Carrefour announced plans to close one of its stores due to continuous

losses. Also in Japan, Carrefour is to delay its store-opening plan due to

protracted negotiations to acquire land and legal procedures related to large-

scale stores. Only four outlets have opened since its market entry in 2000 and

Carrefour now expects to operate about seven stores by 2003, compared with

its initial plan for 13.

Other operations

At the end of 2002, Carrefour opened its first hypermarket in Egypt, in Cairo.

Franchisee Majid Al Futtaim (MAF) has long term plans for 13 to 15 more

outlets in Egypt.

At the end of 2001 Carrefour opened its first hypermarket in Oman, via its

franchisee Majid Al Futtaim. Carrefour, via Majid Al Futtaim, also operates one

hypermarket in Qatar and has a minority stake in one hypermarket in Tunisia.

In the United Arab Emirates, Carrefour operates eight hypermarkets via

franchisee Majid Al Futtaim.


All content copyright © 2003 Aroq Limited Chapter 3 Outlets and services

Chapter 3 Outlets and services Up until 1998, Carrefour was a multiple chain specialising in hypermarkets

(and discount stores in France). With the takeover of Comptoirs Modernes,

Carrefour took on franchisees, supermarkets and neighbourhood stores.

In France, Carrefour has numerous different food retail formats. Outside of

France, expansion has been mainly through hypermarkets but to a lesser

extent with supermarkets and discount stores.

As the table below shows, Carrefour operated just over 9,550 stores in 2002,

the vast majority of which (90%) are located in Europe.

Table 1: Numbers of food retail outlets, 2001-2002 Numbers 2001 2002

France 3,341 3,364

-Hypermarkets 214 216

-Supermarkets 1,003 1,003

-Convenience stores 1,538 1,538

-Discount stores 459 480

-Cash & carry 127 127

Belgium 483 509

-Hypermarkets 57 54

-Supermarkets 404 429

-Convenience stores 22 26

Czech Republic 7 8

-Hypermarkets 7 8

Spain 2,687 2,797

-Hypermarkets 113 118


-Discount stores 2,384 2,475

-Cash & carry 29 29

Greece 367 420

-Hypermarkets 11 13



Italy 913 1,007

-Hypermarkets 37 37




-Convenience stores 582 636

-Cash & carry 12 13

Portugal 325 346

-Hypermarkets 5 6


Poland 60 67

-Hypermarkets 9 12

-Supermarkets 51 55

Romania 1 1

-Hypermarkets 1 1

Slovakia 4 4

-Hypermarkets 4 4

Switzerland 11 11

-Hypermarkets 11 11

Turkey 99 134

-Hypermarkets 10 11

-Supermarkets 3 3


Europe Total 8,298 8,668

Brazil 222 266

-Hypermarkets 74 77



Argentina 401 451

-Hypermarkets 23 23



Mexico 20 21

-Hypermarkets 20 21

Chile 4 4

-Hypermarkets 4 4

Columbia 5 8

-Hypermarkets 5 8

South America total 652 750

Taiwan 26 28

-Hypermarkets 26 28

China 27 32

-Hypermarkets 27 32

Japan 3 4



-Hypermarkets 3 4

Korea 22 25

-Hypermarkets 22 25

Thailand 15 17

-Hypermarkets 15 17

Malaysia 6 6

-Hypermarkets 6 6

Indonesia 8 10

-Hypermarkets 8 10

Singapore 1 1

-Hypermarket 1 1

Hong Kong 4 4

-Hypermarkets 4 4

Asia Total 112 127

Egypt - 1

-Hypermarkets - 1

Oman 1 1

-Hypermarkets 1 1

Qatar 1 1

-Hypermarkets 1 1

Tunisia 1 1

-Hypermarkets 1 1

UAE 7 8

-Hypermarkets 7 8

Grand Total 9,072 9,557

Source: Carrefour

Carrefour is in the process of harmonising its many trading fasciae.

For hypermarket outlets, the plan is that the Carrefour banner will be used

worldwide. The average Carrefour hypermarket offers up to 70,000 product

lines, with a higher proportion of non-food items. In its native market, there has

been more emphasis on fresh food and more value added lines in the food

section since 1999 with the non-food sections organised into themed areas. In

early 2002, a change in the marketing strategy of hypermarkets in France was

announced to include a refined logo, an emphasis on quality and own label

and a new, more sympathetic visual approach. In August 2002, a new flagship

hypermarket was opened at the Carre Senart shopping centre, described as a

synthesis between a general store and a food discounter.



Similarly with supermarket outlets, the plan is that the Champion banner will be

used worldwide. The Stoc, Supeco, Maxor, Marinopoulous, Mega and Fresco

outlets are all being or have been converted. However, in countries where the

recognition of existing supermarket trade banners is very strong and carries a

positive image (for example, GS in Italy and Norte in Argentina), these will be

retained for the short term at least.

In an initiative to attract a younger clientele, the group has now begun

targeting smaller shops. In its native market, where the retailer operates an

extensive network of convenience stores, it is taking a look at its 'Huit à Huit'

('eight till eight') chain in a bid to revitalise its convenience store operations.

Carrefour believes that convenience retailing can be successful based on

attracting a younger consumer with concept marketing. Likewise, the group’s

Shopi convenience format has been working on such new concepts in its city

centre shops, which now boast express tills and a range of food-to-go.

In the discount store sector, the group’s Dia fascia is expanding rapidly.

Carrying an average of 1,000 product lines, the banner is present in Spain,

Portugal, Greece, Argentina, Brazil and Turkey with the banner due to launch

on the vast Chinese market in 2003.


All content copyright © 2003 Aroq Limited Chapter 4 Financial performance

Chapter 4 Financial performance In 2000 internal expansion (with the opening of 376 new outlets) contributed to

growth as well as the acquisition of GS in Italy, GB in Belgium and Norte in

Argentina with group turnover reported at Euro 64.8 billion. However, the

group's operations in South America were hit by the economic crisis in that

region and the exit of the Pryca and Continente banners in Spain penalised the

hypermarket division. Net profit rose by 14% to Euro 1,050 million, results in

line with the forecasts made by the company. However, Carrefour confirmed

that it would not attain its objective (announced at the time of the Promodes

merger) of doubling profits between 1999 and 2002.

In 2001, Carrefour met its sales targets for the year, reporting a 7% rise in

group turnover to Euro 78 billion and so maintaining its place as the world’s

second largest grocery retailer after Wal-Mart. Particularly high sales rises

were recorded during the fourth quarter in France and Spain. In contrast, the

year was extremely difficult in Latin America, marked by the Argentine crisis

and the sharp devaluation of the Brazilian currency. Finally, growth in

Carrefour’s Asian markets remained healthy during the year.

Carrefour reported full year 2002 turnover of Euro 68.73 billion, an increase of

4.6% on constant exchange rates reflecting the company's prediction of a rise

"close to five percent" – helped by a plethora of new store openings. After the

strong impact of exchange rates the change was -1.1%. Although currency

effects in emerging markets impacted on underlying growth (devaluations in

Brazil and Argentina and weaker Asian currencies knocked sales growth back

by 6.1%), the retailer reported a 15.1% rise in net profits before exceptional

items to Euro 1.389 billion for 2002.

Food retailing represents roughly 95% of group turnover with the remaining 5%

share coming from the cash & carry and wholesaling activities.

Table 2: Carrefour financial performance 2000-2002 Euro mn 2000 2001 2002

Total group turnover 64,802 69,846 68,729

EBIT/operating profit 2,725 2,826 3,025

Net profit 1,050 1,207 1,389

Source: Carrefour


All content copyright © 2003 Aroq Limited Chapter 4 Financial performance

The retailer aims to increase sales by more than 5% at constant exchange

rates and achieve double-digit growth in earnings per share for the 2003 full

fiscal year. As Latin American markets continue to drag down performance,

Carrefour is to invest further in its European core markets. The retailer points

out that 85% of its sales (and 94% of EBIT) are generated in Europe, and 81%

of sales in five core countries: France, Belgium, Spain, Italy and Greece. Over

80% of its sales are made in food. The medium term objective is to get back to

the growth rates of the 1990s: between 1993 and 1998, Carrefour's sales grew

by an average of 7.4% per year, on constant exchange rates.

By far the greatest share of turnover for Carrefour is still generated in its home

market of France (51% in 2002). The rest of Europe represents a further third

of turnover, followed by the Americas and Asia. Although the group stands as

the world’s second largest retailer, it is interesting to note that Carrefour has no

interests in the UK, USA or Germany.

Table 3: Carrefour sales by region 2000-2002 2000 2001 2002

France 52 49 51

Rest of Europe 26 32 34

The Americas 15 12 8

Asia 7 7 7

Total 100 100 100

Source: Carrefour


All content copyright © 2003 Aroq Limited Chapter 5 Strategy

Chapter 5 Strategy Much of 2001 and into 2002 was marked by the completion of the integration

between Carrefour and Promodes. Now completed, Carrefour's base strategy

continues to be to expand market share in all countries where it operates via

an aggressive marketing strategy based on pricing, product ranges and

innovation as well as the ongoing development of its three core formats, ie

hypermarkets, supermarkets and hard discount. These three core formats

have been progressively rationalised to three core banner names in most

countries since 2001 – Carrefour for hypermarkets, Champion for

supermarkets and Dia for hard discount.

The group set itself three priorities for 2002: to gain market share in all

countries, to improve EBIT through cost control and to increase its return on

capital employed. According to CEO Daniel Bernard, the company is

approaching the "height of its powers" and believes it can generate greater

synergies between its three retail formats.

One of the major objectives is to concentrate on growing the number of

countries in which it has all three formats from the current handful. Out of the

30 countries in which the retailer operates, it has supermarkets in only nine

and discount stores in only seven. Carrefour is the only international retailer

that has successfully established (almost) one single banner in three retail

formats (hypermarkets, supermarkets and discount stores) worldwide, and is

actually operating all three of them in some markets. With over 80% of

Carrefour's net turnover still achieved in Europe (51% in France alone), and

given that the company is present in many of its markets with only one or two

of these formats, the potential for the group is enormous. The group also

remains open to "tactical acquisition" opportunities, particularly in emerging

markets.


All content copyright © 2003 Aroq Limited Chapter 5 Strategy

Specifically, in terms of its discount business Dia, at the end of 2001, Carrefour

announced plans to invest roughly Euro 1.2 billion over the next five years to

open more than 2,000 new outlets. During that period, the operation is aiming

to open 130 outlets in Spain and 270 elsewhere in the world on an annual

basis. Launching onto the Asian market is one of the key objectives of Dia in

this expansion programme as it is believed that the continent offers large

opportunities for growth. Indeed, in 2003 Dia opens its first Chinese outlets in

Shanghai, in a joint venture operation with plans to achieve a 300-strong

network in the city in the next two to three years. Similar objectives are

planned for Beijing.

In early 2003, Carrefour's President Daniel Bernard reiterated that the retailer

has no intention of pulling out of troubled emerging markets such as Argentina

despite currency problems which impacted on underlying sales growth in 2002.

The retailer has pledged to continue to expand this year despite being

"cautious" on the economic outlook for 2003. Carrefour plans to open 830 new

stores this year, increasing the total number of outlets to more than 10,000.

One key strategy in Carrefour’s growth programme, particularly in its core

European countries, is diversification through a greater non-food offering. In

markets such as Spain, Italy and Greece, Carrefour has placed greater

emphasis in recent years on expanding market share through diversification of

the product range, including financial services, clothing, petrol stations, travel

agencies and opticians.

In its domestic market of France, as planning permission for new large-scale

stores becomes ever more difficult to obtain, Carrefour from 2003 is to place a

greater emphasis on hypermarket extensions. The retailer is to invest between

Euro 300 and 400 million on extending 13 French hypermarkets this year, so

adding about 30,000 square meters to existing sales floor area, equivalent to

adding three new hypermarkets to its 216-strong French network.


All content copyright © 2003 Aroq Limited Chapter 6 Product development

Chapter 6 Product development Carrefour is heavily service oriented and is regarded as offering the best level

of customer service in France with financial services, travel agents and car

service stations all in situ. The group is now increasingly using this service

expertise to good effect in its retail network worldwide, particularly in its core

European markets.

The company adopted a low price policy at the outset of its operations and has

maintained it ever since. Own brands are often used in the price competition.

In every European country where Carrefour operates, the emphasis is on

aggressive low price promotions. In essence, the company is seen as offering

extremely good value for money, an extensive range of own label lines plus

good customer service. In 2002 own brands had an estimated share of 22% of

Carrefour's food sales in France and 28% of total group sales.

Carrefour sells own label products in most of its markets. Reflecting the

group's three-pronged banner strategy, there are the Carrefour label for

hypermarkets, the Champion label for supermarkets, and the Dia label for

discount stores. Although these brands are identical worldwide, the product

range in each country is adapted to local tastes and to a large extent produced

locally. In some countries, Carrefour offers a range of national recipes or

specialities, for example Reflets de France in France, Souvenirs du Terroir

(Belgium), Terre d'Italie (Italy).

In France, in addition to the standard brands for each of the three store

formats, Carrefour has developed a range of labels for organic products

(Carrefour Bio), ecological products (Carrefour Nature), local (Reflets de

France) and international (Destination Saveurs) specialities as well as

delicatessen (Escapades gourmandes). In mid 2002 Carrefour launched a new

own label, J’aime, claimed to be the first private label range concentrating on

health/fitness.

With 'Filière Qualité Carrefour' the retailer has since 1993 developed quality

criteria and established contracts with suppliers for more than 118 fresh food

categories (predominantly agricultural products, such as cheese, bread, fish,

meat, fruit and vegetables and coffee). The introduction of a further 30

categories is planned. The quality controls are contracted out to independent

institutes, and 35,000 producers and producer associations in France have

adopted the Carrefour charter.


All content copyright © 2003 Aroq Limited Chapter 6 Product development

With an increasing emphasis on online operations, the group’s international e-

commerce activities were put into the newly founded @Carrefour during 2000.

At the beginning of 2001 the retailer unveiled its brand new full-scale portal at

Carrefour.fr where shoppers were able to access links via the portal to Ooshop

(online grocery shopping), Carrefour Beauté (cosmetics), Verywine (wines),

Carrefour Jardin (gardening equipment), Meubles.com (furniture site) and Web

City (a city guide site). In 2001 Carrefour’s goal was to triple sales from online

retailing.

However, by the beginning of 2002, with only a disappointing sales

performance from the e-commerce unit, Carrefour announced plans to

dissolve the @carrefour Internet unit, with the grocery online shopping service

Ooshop passing under direct control of the management at Carrefour France.

Indeed, the only other country where Carrefour has ventured into online

retailing is in Spain where an Internet grocery service (modeled on Ooshop in

France) was set up in late 2001. The unit’s ambition is to capture 25% of the

online grocery market in Spain in the future. Carrefour also set up an online

shop specialising in books, CDs, DVDs and other leisure products,

carrefourocio.com. At the end of 2002 these two online portals were integrated

under one banner, carrefouronline.es.

Carrefour has offered loyalty card programmes for some years in its French

outlets. Carrefour Pass, the hypermarket scheme, is held by 16% of Carrefour

customers (2.5 million consumers) with the aim by the end of 2003 of one in

every four Carrefour customers becoming a cardholder. The Champion

supermarket loyalty card has five million cardholders and generates more than

70% of the turnover of the banner. The use of loyalty card schemes is being

rolled out to other Carrefour markets, particularly in Europe.


All content copyright © 2003 Aroq Limited Chapter 7 Prospects

Chapter 7 Prospects Given that only two years have elapsed since the largest and most challenging

merger ever to take place in food retailing, Carrefour has progressed

reasonably well. The group has virtually completed the harmonisation of its

numerous banners and fully integrated most of Promodes' minority

shareholdings in other retailers,

Carrefour has been keen to stress that unlike many rivals it met its 2002 key

targets and that "rigorous depreciation and amortisation methods (with) no risk

on fees and rebates" have been used for the financial statements of 2002.

Carrefour has a strong home base in a huge French market, which still

accounts for half of the group's turnover. In the past, this was often considered

as a weakness by analysts, but with the difficult situation in several Latin

American and Asian markets, this may now turn out to be a strength. The profit

contributions from the business in France and some European operations are

substantial (following the turnaround in Belgium, only Greece remains loss-

making).

Carrefour's concept of an enlarged home market of five European countries

(where Carrefour claims to have a market share of 23.4%) is starting to have a

real impact. The group is confident of leveraging its critical mass to generate

better purchasing terms in own-label and non-food and deriving productivity

gains in the supply chain. In most of its core European countries, Carrefour is

present with its multi-format strategy of operating hypermarkets, supermarkets,

hard discount and convenience stores, and in all of them it is the number one

player in more than one of these formats.

On its key home market of France, Carrefour has lost market share in recent

years and is renewing its emphasis to regain market position. Although

Carrefour hopes to retain its image as a price leader, more emphasis is being

placed on developing other brand attributes, including quality, food safety

standards, further diversification of the non-food service offering, an increased

range of more sophisticated own label items and a massive range assortment.


All content copyright © 2003 Aroq Limited Chapter 7 Prospects

The group has stressed its commitment to staying put in the more troubled and

challenging Latin American markets. In Brazil, in particular, Carrefour is keen

to catch up lost ground and regain its former position as market leader. Whilst

the group has stated its position to grow organically on these markets, it is

widely expected that Carrefour will be one of the front runners in the race to

acquire the Ahold assets on the continent, recently put up for sale by the

embattled Dutch retailer.

Carrefour sees particular growth potential on the Asian market, a continent

which in future will account for 50% of the group’s growth, in terms of store

openings. China is the key market for expansion where Carrefour is now

embarking on its three pronged fascia development strategy. The first Dia

discount stores open towards the end of this year, and the group has also

revealed plans to open supermarkets in 2004. However, all is not rosy on the

Asian continent as the group remains loss making on the Japanese market

and has had to scale back its original ambitious development programme for

the country.

According to CEO Daniel Bernard, strategy remains firmly focused on organic

growth and to the development of all three key store formats. Greater

emphasis is likely to be placed on the smaller discount and neighbourhood

formats as a way to further expand market share. Major acquisitions have

been ruled out in the short-term future as the group looks to generate growth

from existing stores, opening new outlets plus minor “tactical acquisitions” of

local store outlets. Although Bernard has strongly dismissed any bid for

troubled Dutch counterpart Ahold, it is widely expected that Carrefour will

benefit from asset disposals arising from Ahold’s bid to reduce debt levels. In

the words of Bernard, “We are not candidates to acquire Ahold, but if portions

of the company were up for sale we would look at them with our investment

criteria in mind."

Reducing costs and lowering prices will also be a high priority for the company.

Indeed, Carrefour, acknowledging that its superior food merchandising alone

will not carry it forward, is likely to seek to reduce costs in order to lower

prices.

Ongoing reports continue to emerge as to Carrefour’s intention to launch on

other overseas markets, notably Russia and the Philippines. Carrefour has

expressed interest in both countries but has confirmed no opening plans to

date.


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