The hypermarket is within the doldrums and it’s taking its toll on Carrefour | Business | EUROtoday

It was 2001. Walmart led the world rating within the distribution sector. The podium was accomplished, in second place, by the French firm Carrefour, and in third, the Dutch firm Ahold. More than 20 years later, that rating bears just one similarity: Walmart stays the undisputed chief, however now surrounded by e-commerce giants and the German low cost grocery store leaders, Lidl and Aldi. Carrefour, as soon as the biggest European retailer, not seems within the prime 10 and drops till the fortnight.

Its lack of positions is an instance of the difficulties that the French large has confronted for years in adapting to extra on-line commerce, and the place customers prioritize proximity and low costs. Another instance is its value: in the beginning of the century the share exceeded 60 euros, and right this moment it’s buying and selling beneath 15. In the final yr and a half, its shares have misplaced near 30% of their worth.

In this context, rumors of an operation are ringing once more. As anticipated Bloombergthe corporate is finding out all choices to revitalize its value: sale of property, a merger, inside restructuring or perhaps a sale. Three years in the past, the Canadian group Couche-Tard provided 20 euros for every title, valuing 100% of Carrefour at 16,145 million euros. The French authorities vetoed the operation, and right this moment considered one of its nationwide prides is value lower than 10 billion on the inventory market.

Carrefour’s decline is essentially defined by the lack of relevance of its star format, and of which it has been the best exponent: the hypermarket. At the top of 2023 it had 1,182 around the globe, of which 204 have been in Spain and 253 have been in France. Those positioned in its home market generated 48.7% of the turnover in that nation, with 20,702 million euros, which is equal to 22.4% of its international gross sales. That determine was already decrease than that of 2022, and the development continues in 2024. In the primary 9 months of this yr, French hypermarket gross sales on a comparable floor space, the one market the place they’re damaged down by format, fell by 4.3%. .

“There is a general trend that explains what is happening at Carrefour: people find it less and less interesting to move to buy food,” explains Javier Pérez de Leza, advisor to distribution corporations by the Future Retail agency. “Now proximity is prioritized and there is a shift towards discounts. And if it is received at home, the better,” says the skilled for example the decline of hyper.

In latest years, this format has skilled a double assault on its mannequin. In the meals sector, the low cost and white label operators: Mercadona in Spain, Lidl and Aldi in half the world. And within the non-food half, the rise of specialists akin to Leroy Merlin in DIY, Decathlon in sports activities, Inditex in trend, Ikea in furnishings… and Amazon in all of them.

“Now, hypermarkets are more food-intensive than ever. And that has a problem: they compete with discounters and its orientation to distribution brands. And the hypermarket has always been the place for brands,” explains José Luis Nueno, professor and holder of the Intent HQ Chair at IESE. “Now the consumer finds that, basically, they have a very similar offer of food and fresh products in the corner supermarket. And that is why they no longer go to hypermarkets as much, which is linked to the withdrawal of bazaar products,” factors out alongside the identical traces, Andrés Núñez, professor at EAE Business School.

One extra instance: Carrefour is right this moment the second meals distribution operator in France, with a market share of 21.4%, at a distance of two.7 share factors from the chief, E. Leclerc, in response to knowledge from Kantar Worldpanel. In 2018 that distinction was half some extent. “AND. Leclerc has a lower price positioning, with a very agile and decentralized operation. In agility, all their rivals beat them,” says Pérez de Leza.

Adaptation to trends

Carrefour tries to adapt to trends by diversifying its formats. It now has around 4,300 supermarkets and around 8,800 smaller convenience stores worldwide that operate under the Carrefour Express banner through franchisees in Spain. But they also have more than 600 cash and carrywholesale format and lower prices, and 136 discount format stores with which it tries to compete on price with Lidl and Aldi. In Spain, through the Supeco brand.

“This variety represents great complexity. Manage assortments, prices, negotiations with suppliers for a different type of customer. Mercadona or Lidl have standardized a format,” says Pérez de Leza. Andrés Núñez, from EAE, advocates disinvesting in hypermarkets, even if it affects the income statement. “Adaptation is key to surviving in such a competitive and constantly changing market,” he says.

To respond to the demand for proximity, Carrefour has had to resort to acquisitions. Spain, its third main market after France and Brazil, is a great example: last year it acquired 47 Supercor stores, the supermarket format of El Corte Inglés. Three years ago, it did the same with 172 Supersol stores. A path that is also complex. “To buy a supermarket three circumstances have to be met: that it is cheap, that you believe you can make it work better, and that it generates synergies. I have doubts that all of them will be fulfilled in those who are acquiring,” says José Luís Nueno.

They are also trying to respond to the rise of private label. In its strategic plan, Carrefour has set the goal of reaching 40% of food sales, four points more than currently. “Making white labels well is a craft. It involves an organizational change. Mercadona has been doing this for many years and the Germans are going one step further,” adds the IESE expert. “It is the only bastion they have to maintain sales in a market as saturated as mass consumption. But they have to present it very well, since it will penalize the brands,” says Andrés Núñez. For his part, Pérez de Leza doubts that this four-point step can make a difference. “The price positioning will continue to be higher than that of its rivals, unless you ask the brands for more promotional efforts.”

The strategic plan towards 2026 is completed with 4,000 million euros in cost savings, while aiming to gain market share and improve comparable sales with a price reduction. For experts, it is the squaring of the circle. “Sales rise by improving prices or volumes, or both. Be careful with cost reduction if it is at the cost of worse service: the stores that are opening the discounters They are not worse,” says José Luis Nueno.

The future is posed with a variety of uncertainty. “There is talk of merger because in mature markets it is what you can do to compete: buy or associate with your rival. But it is bread for today and hunger for tomorrow. Carrefour is not going to be among the top 10 retailers in 2035 either,” says Javier Pérez de Leza.