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Carrefour at a Crossroads

By: Greg Seminara, Export Solutions
Topics: France Brasil Italy

Carrefour is the world's number two retailer with sales of around $140 billion dollars. The French giant claims market leadership in 15 of the 37 countries where it operates. Impressive footprints in emerging market powerhouses such as Brazil, Indonesia, and Turkey offer important sources for future growth. Sales have flattened in recent years, as Carrefour struggles with soft business conditions in their core markets of France, Italy, & Spain. Severe restrictions on building new hypermarkets impede growth of their signature format. Future hopes are planted on an estimated 2 billion dollar investment into 500 hypermarket retrofits to their Planet concept and increased penetration of their multi-format approach. Failure to ignite growth engines could result in further market exits such as departures from Thailand, Russia, Mexico,and Chile.

18,000 stores in 37 countries

Carrefour represents the world's most international retailer, with 60% of its sales outside of France. This position includes the top slot  in  Europe, Middle East, and South America. Approximately 50% of their sales are through hypermarkets, 30 % in supermarkets, 15 % in discount (Dia) and the balance in small format convenience stores. Mature western European business accounting for 65 % of sales are offset by promising ventures in China,Poland,Saudi Arabia, and Argentina. In recent years, Carrefour has shifted strategy from opening 1-2 stores in many new countries to focused investments in markets where they maintain the #1 or #2 share.

Selling to Carrefour

Carrefour has well established global, regional, and local programs to interact with suppliers of all sizes and product categories. It is reported that over 75 % of Carrefour contracts are with small-medium size companies. Much of their buying activity centers around a rigorous "annual negotiation" process which determines the terms and conditions for each one year period. It is important to recognize that the majority of all food buying decisions are made at the country level. Exceptions include global brands which have the pleasure of dealing with Carrefour buyers at Global and local procurement centers. There are four different routes to market to conduct business with Carrefour, including two viable options for international exporters.
1. Sell through Local Distributors

Carrefour purchases from local distributors in every country, even their home turf in France where they maintain $ 50 billion in buying power.  A distributor based strategy allows you to have local inventory, store level servicing, and sell to all market customers, not just Carrefour. On the other hand, Carrefour's annual negotiation process puts pressure on distributor margins. Export Solutions Distributor database covers 32 of 37 countries where Carrefour competes. This includes more than 1,500 local distributors selling to Carrefour and other market customers.

2. Sell Direct to Carrefour

Carrefour purchases direct from leading manufacturers of international brands. This efficient process allows you to streamline the supply chain and offer a lower price to Carrefour and the consumer.
This approach can work when you have a local subsidiary and sales team. Selling direct from abroad can create a challenge to develop an equitable pricing strategy to sell to other market customers who do not enjoy the massive buying power of Carrefour.

3. Carrefour World Trade
Carrefour operates their World Trade office in Geneva, Switzerland. This office is dedicated to negotiation and interaction with suppliers of leading consumer products brands. Normally, this office collaborates with existing suppliers that desire global agreements or Carrefour's help in expanding into new countries. The World Trade office shares responsibility for transferring best practices and success stories. Carrefour offers a Business Development Program (BDP) which provides added performance for incremental spending. Carrefour reported an 8 % sales increase for companies designated as "privileged partners" in their BDP program versus companies not participating in BDP.

4. Global Sourcing

Carrefour has been a pioneer in global sourcing, with more than 500 people dedicated to this activity around the world. Initially, this area was focused primarily on "non-food" products. Currently, Global Sourcing is deeply involved in private label development. Carrefour's 2011 plans includes a heavy emphasis in private label with 1,500 new items planned, plus the reformulation of 5,000 items. Carrefour's long term objective is to grow dry grocery private label from 25 % of sales to 40 % of sales.

 

Carrefour Top Ten Markets

   
 

(* 2013 Sales - billions of euro )

     
           

Rank

Country

Sales*

Stores

   

1

France

41.9

5311

   

2

Spain

14

1171

   

3

Brazil

12.4

365

   

4

Italy

6.5

1370

   

5

China

4.8

184

   

6

Belgium

4.3

430

   

7

Argentina

3.4

248

   
           

9

Poland

2.3

312

   

10

Turkey

1.8

426

   
           

Total

 

101

18,000

   

Hot Markets

Emerging market growth remains a bright spot for Carrefour. Argentina,Brazil, China,Colombia,Malaysia, and Turkey represent 25 % of Carrefour's sales. These countries enjoyed average 2010 growth rates of 14 % . Carrefour's long history in these markets is paying dividends. They entered Brazil in 1975, Argentina in 1982, Turkey in 1993 and China in 1995. For years, Carrefour dominated emerging markets while Walmart created scale in the USA by rolling out Supercenters. Now Walmart is focused on international growth and competes effectively with Carrefour particularly in pivotal markets like Brazil & China.

Brazil represents one of their biggest challenges. On the surface, the Brazil business appears healthy with 2010 sales growth of 13 % accounting for 12 % of worldwide volume. They have pioneered a "cash & carry" format called Atacadao which has rapidly expanded to 50 units and appears poised for region wide expansion. However, sales at their flagship hypermarkets are flat and in 2010 they took a sizable write off due to accounting irregularities. Rumors are flying through the market regarding a blockbuster combination with Casino's Pao de Acucar.

China sales grew 15 % in 2010 with 184 hypermarkets now open. Carrefour has learned a lot since they revolutionized the retail environment with their first store in Beijing in 1995. The modern retail battle has shifted from the saturated cities like Beijing and Shanghai to secondary cities. This is good news for exporters as retailers like Carrefour ( plus Walmart & Tesco) feature a wide selection of  International brands. Expansion into the interior of China provides a new route to market for international products.

Export Solutions can Help !

Export Solutions has worked on projects across three continents which include strategy development for selling to Carrefour. Our database provides more than 1,500 distributors in 32 countries selling to Carrefour's local buyers. Carrefour should be designated as a priority for exporters. In many emerging markets, their hypermarkets are showcases for international brands. Carrefour faces challenges, but my guess is that they will continue as the world's most global retailer.