In a highly competitive landscape, the world’s second-largest retailer, Carrefour of France, is striving to create a unique profile. It is introducing customers to products from small and midrange suppliers based in France, but also Germany, Italy, Spain and the UK. Carrefour has set its sights on expanding its activities to stage special themed weeks that will showcase food products from different European countries, as CAD-News & Catherine Sleep report.
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Carrefour is putting its money on showing that it is different from other retailers, and on Europe in particular. “Having cracked down on everyone, retailers are now finding they only have one supply partner, which is making negotiations very difficult. Another upshot is that supermarket shelves everywhere look the same, creating an urgent need for retailers to get into talks with small and midrange suppliers and start making their offering look different from everyone else’s,” comments Thierry Renard, director of Ardia in the province Aquitaine (Ardia is the ‘association régionale de l’industrie agroalimentaire’, the regional agribusiness association).
According to the international panel of the FCD (the ‘Fédération du commerce et de l’industrie’, the federation of commerce and industry), the number of lines stocked in hypermarkets increased by 26% between 1999 and 2003. This strategy, which initially benefited small French producers, has already been extended to include suppliers from other European countries who are able to supply alternative products to the global power brands.
At Carrefour Spain, for example, the shelf space dedicated to British, German or Italian products is just as significant as that dedicated to French products, depending on the geographical relevance of the given country to the neighbourhood in which each store is located, and on the size of the expatriate community that might shop there.
In general they occupy several units which bring together 40 or 50 product lines from each country. For its part, the ‘Reflets de France’ range of local products has already been taken as a model for the ‘De nuestra tierra’ range supplied by Spanish producers and the ‘Terra d’Italia’ range supplied by their Italian counterparts. “Our goal is not to remain a purely French company. In the long term we expect to have organised 15 or so ranges dedicated to local products from European countries,” explains Jean-Michel Marin, who oversees relations between Carrefour and its small suppliers. In Japan, “we are even thinking about European food ranges”, says Michel Lamoot, merchandising director for Carrefour Japan.
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Depending on the openness of the individual market and the purchasing power of its consumers, the strategy proves more or less profitable. Japan is a great example of this strategy working at its best. Products from small French producers represent some 5% of product lines and account for 15% of turnover. Carrefour Japan also stocks some hundred lines from Italian producers, and the market is particularly open. “The Japanese are very keen on new products, which makes Japan an ideal test market for new lines, all the more so because the premium price attached to these products is not an obstacle, because Japanese purchasing power is strong,” emphasises Lamoot.
In other markets in which Carrefour operates, the percentage of lines supplied by small producers rarely exceeds 1-2%, but the chain is working to increase this figure. In 1997, Safca was established in Hong Kong (Safca being the ‘Structure d’appui aux fournisseurs de Carrefour’, a support structure for Carrefour suppliers). The concept has since been transplanted back to Paris, and a Safca branch will also shortly be set up in Latin America in the near future. Membership of Safca is free of charge, and reserved for small suppliers. It operates on a ‘win-win’ principle, with the aim of “helping small and midrange companies to develop their export business,” while providing Carrefour stores in Mexico or Osaka with very specialist products, explains Safca official David Dertier. Last year 116 suppliers were able to export their products onto Carrefour shelves overseas using this platform, which handles the physical passage of goods from order to delivery.
Sharing the costs
The other source of help that Carrefour has leveraged to implement its strategy is the organisation Partenariat France, founded in 1997 and based at the Ministry of Economics and Finance at Bercy. Thirty French organisations are members, including Carrefour. “The objective is to build up a combined strike force for the benefit of small and midrange companies. For Carrefour, this means helping to bolster French companies and making sure that the group serves as their bridgehead,” explains Philippe Rabit, Partenariat France president for the last two years, and adviser to Carrefour president Daniel Bernard.
There again, Carrefour’s initiative was first taken with French producers but would soon be rolled out to their European counterparts. To be specific, since 1997 the retailer has organised nine joint trade missions to Brazil/Argentina, Portugal, Japan, Korea, Poland, Spain and three times to China. Carrefour assumes complete responsibility for these study tours to foreign markets, which last at least two days. So far they have seen the participation of between 17 and 70 companies. They focus on meetings with local Carrefour buyers.
“We need to expand the horizons and product offerings of small and medium-sized companies in order to develop the interest and range of buying partners they can talk to. In future, we hope to take foreign producers along to these meetings too,” emphasises Carrefour’s Marin. This idea has already borne first fruit as Carrefour’s most recent trade mission in Spain included the business director, France, of Belgian industrial baker Poppies International.
“More and more we are prioritising larger-scale tests, involving around 80 to 100 lines in a French or European week. And I think we need to ramp up this kind of operation so that the maximum number of small and medium-sized companies can benefit,” says Safca’s Dertier. The costs of presenting the products on show during the themed weeks generally lies somewhere between 30% and 50%, and rises to 80% in Japan. This is a price worth paying to introduce products to consumers right around the world, especially in view of the fact that, once the products are on the shelves at Carrefour stores in a given market, this can be used as a springboard to introduce them to other retailers. It can even lead to the creation of a foreign subsidiary or a joint venture in the new market.
Catherine Sleep translated this article from the French with permission from its authors, French retail news service CAD.
