The French food retail sector is notoriously competitive and hard to operate in. As the country’s retail giants slug it out for a higher share of a relatively stagnant market, the battle is raging on all fronts. With low overall growth, retailers are zoning in on the areas of greatest potential: online and convenience.
French grocer Casino confirmed yesterday (28 May) it has received regulatory clearance to acquire a batch of convenience stores from German discounter NORMA, a move that could help the company extend its lead in the convenience and online spheres.
The 38 outlets are located in the south east of the country, primarily in Lyon and along the Mediterranean coast. While at first glance the deal may seem relatively small, it is significant because it strengthens Casino’s hand in a region where it already holds a dominant position.
In the context of the highly competitive French retail sector, any advantage will likely be leveraged to maximum effect.
Retailers in France are facing a slow-down in growth. According to research produced by MarketLine, the compound annual growth rate of the French grocery market is expected to slow to an average of 1.6% through to 2016, down from a CAGR of 2.4% from 2007-2011.
The largest proportion of sales are generated in traditional formats – supermarkets, discounters and hypermarkets – which, MarketLine says, account for a little over 55% of sales. However, in recent years French retailers have stepped up investment in the high growth sectors of convenience and online, reflecting changing buying patterns as French consumers increasingly opt for smaller, more frequent shopping trips in-town (to lower petrol costs and cut food waste).
Casino is one of the strongest convenience operators in the country, having stolen the march on many of its peers who expanded into smaller scale formats later and more tentatively. Rivals are now looking to play catch up and many of the country’s grocery majors are eyeing expansion and investing in smaller sized stores.
Carrefour, in particular, is eyeing the opportunity and its efforts appear to be paying off. It has faced a number of well-documented issues in France, where it has seen an erosion of market share. It has struggled with its price positioning – having been viewed by consumers as a high price retailer – and invested significantly in lowering prices. This emphasis helped drive an improved performance across all of its formats, but smaller stores were the star performer, with sales up 4.6% in the first quarter.
Meanwhile, Auchan is also trialling and developing smaller store concepts: the company is dabbling with the idea of small-sized outlets that focus on a fresh offering and in 2011 the group launched a convenience format called ‘A 2 pas’, with a target of opening 50 outlets by 2015.
As competition intensifies, a move to extend Casino’s lead in the fast-paced convenience sector can only be seen as positive. And, by acquiring a batch of existing stores, Casino has side-stepped one of the largest barriers to expansion in the French convenience sector: obtaining planning permission for new stores.
Extending its physical presence in the convenience sector could also carry benefits as Casino looks to grow its online sales. According to Research Farm analyst Daniel Lucht, convenience operators in France look to leverage their convenience presence to boost the popular click and collect offering, by bringing collection points closer to consumers.
“Many of the big players use their convenience store fascias, as they are located in the neighbourhood, to offer click and collect solutions such as Kiala and integrate their online offers with physical retail (Casino operates CDiscount, for many years [the company has been] one of France’s biggest online players).”
Casino’s drive to expand its convenience presence therefore goes hand-in-hand with its attempt to further grow its online sales. And, as the group extends its advantage in this arena, it is positioning itself to capitalise on future opportunities in both of the two fastest growing channels in French retail.