Carrefour, the French retail giant, has attempted to diffuse union anger in Belgium over plans to scale back its business with revised plans that would mean the closure of fewer stores. However, unions are still unhappy and, strategically, some industry watchers believe the world’s number two retailer is stuck with little room for manoeuvre in a market with some fierce competitors. Dean Best reports.

On Thursday (1 April), just before the Easter break, Carrefour watered down its plans to close stores and shed over a 1,000 jobs in Belgium, a market that has long proved problematic for the the world’s second-largest retailer.

After talks with unions angry at its initial proposals, Carrefour, which was planning to close 21 stores in Belgium, has proposed to axe fewer outlets. 

The retail giant is looking to shake up its business in Belgium, one of its “G4” or four most important markets, but the company is now looking to save “seven to nine” of the outlets planned for closure.

However, the unions remain unhappy. Although deciding not to call for a national strike, the unions have stood by and watched as groups of Carrefour stores have closed in protest. Just this weekend, over 30 shops were shut and the head of Carrefour’s operations in Belgium told a local newspaper that sales had tumbled by 15% in the last two weeks, with “workers losing their motivation” after the initial restructuring measures were announced.

Carrefour’s fresh proposals, which also include the possible disposal of a further 20 stores to the Mestdagh Group, a local retailer, will go before the unions in the coming days. With sales sliding, Carrefour will want to see a speedy end to this saga. For their part, union officials insist they will take their time to decide on their response.

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However, while Carrefour deals with strikes by less-than-motivated employees, unhappy unions and a lack of clarity in its restructuring plans, its rivals are sure to benefit. Carrefour remains the market leader in Belgium: according to data from the IGD, the company accounted for just over 25% of grocery sales in Belgium in 2009, with its nearest rival Colruyt on a little more than 15%. However, Colruyt and fellow Belgian retailer Delhaize stand ready to lure disaffected Carrefour shoppers.

Carrefour’s problems in Belgium have prompted some analysts to question the retailer’s long-term future in the country. Some industry watchers argue that the jury is out on whether Carrefour’s restructuring – closing the less profitable stores and upgrading the ones left – will work, given the competitive nature of the market.

For its part, Carrefour insists it is committed to Belgium, telling just-food that it plans to spend some EUR300m upgrading all the stores it keeps by the end of 2012.

“Belgium is still part of Carrefour’s G4 – the four most important countries for Carrefour. Belgium is a competitive market but we are still one of the leading retailers and, if we do this plan, it will form the basis to relaunch the company [in the country],” a spokesman for Carrefour in Belgium insists.

Fernand de Boer, an analyst at investment bank Petercam, concedes the likes of Colruyt and Delhaize are benefiting from the uncertainty at Carrefour but believes the French firm should stick to its guns and stay in Belgium.

“If you manage the business properly, I think you can still earn a very decent living in Belgium with good margins,” de Boer says. “Colruyt proves you can do quite well in Belgium.”

In December, Colruyt booked an 8% rise in half-year profits and, although it cautioned its margins were “stable”, the company said it had been gaining share. 

Last week, Colruyt, which is seen as one of the more value-oriented retailers in Belgium, outlined plans to open more stores at home and in France this year. The company is planning to open 17 outlets in Belgium as its value proposition proves popular with cash-strapped shoppers.

Talking to just-food last week, Colruyt tried to play down the impact the protests and strikes at Carrefour stores was having on its shopper numbers but the retailer is sure to be quietly pleased that one of its major competitors is facing such distractions.

According to de Boer, Carrefour has never really got things right in Belgium. “Carrefour has not done its job well and it gave the opportunity to someone else to take over. If you look at it now, it’s going to take a lot of money to get it right,” de Boer insisted. “To get back to a growth scenario is going to be extremely difficult.”

That view is echoed by Pascale Weber, a retail analyst at KBC Securities in Brussels. Weber says that, after previous “soft” measures failed, Carrefour is taking tougher action to revitalise its business in Belgium, namely making their hypermarkets smaller and focusing more on food.

However, Weber says Carrefour is facing formidable competitors, with Colruyt the “price leader” and Delhaize have the “best level of service and assortment”.

And, intriguingly, Weber adds that Carrefour has always faced the disadvantage of having to deal with different unions to its rivals. Colruyt, she says, face “Christian” unions, while Carrefour bargains with “socialists”.

“Carrefour has always been in a weak competitive position because of the strong position of the socialists,” Weber argues.

And, for some weeks yet, the destiny of Carrefour’s business in Belgium remains in the hands of a set of unhappy union officials.