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Carrefour Strategy Update: Reinventing the Hypermarket

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Carrefour Strategy Update: Reinventing the Hypermarket Carrefour strategy update: Reinventing the hypermarket 'En avant' Transformation Plan and strategy It's been a little over a year since you presented your Transformation Plan to the market. Where does Carrefour stand now? I think we can be very satisfied with the results so far. If you look into it, we started the Transformation Plan in June, July last year. Last year we delivered for instance 500m - 590m, even - in operational savings. This year we will save another 500m. If we then talk about purchasing savings, also then we're up to target and we will be up to target even this year. In terms of stock reduction, we reduced more than two days last year so we really delivered what we said last year. And this year we are also on track in order to deliver the improvements. So I think it's very, very encouraging to see in terms of the cost improvements. Now the other side, I also said that we need to enrich and renew the management team and here I'm pleased to say that we now have a complete Executive Board with some, I would say, exceptional international talents, and today we have a complete team. And I must say that it is the best team in my point of view that any retailer is putting up and it's for sure the team that will take Carrefour to the levels that we want to do. So I think it's very satisfactory to see that. Now the last initiative, we had seven initiatives and one initiative that we so far haven't presented, is what we are doing today in this Analyst Day and where we're presenting the reinvention of the hypermarket. I remember when we were talking a year ago I got the question, is it really going to be a reinvention. And yes, it was a tough point that we took but I hope today that everybody sees that it's really about the reinvention of the hypermarket. Or should I say it's an invention of Carrefour Planet. Carrefour Planet - the new concept Hypermarkets as a format are losing ground across the board in mature markets. How do you plan to counteract this and to reinvent the hypermarket? It is true if you look at hypermarkets in general in Europe that they have been losing ground, around 1-1.5 per cent in frequency over the last five to six years. I would say that these are things that can happen in any industry or in our industry now when you are not inventing. In fact we've been challenged about an environment that has been evolving where the hypermarket in itself has not been evolving at the same time. So really it's about lack of innovation in this format. And that's really what we are addressing with Carrefour Planet. It is a reinvention of the hypermarket where we are offering a complete new shopping experience as such. Now if you look into what is a hypermarket or what was a hypermarket in Carrefour, it was basically everything - as we said - everything under one roof. This is for me part of history. And when you look at the Carrefour Planet you can see now that this -- it's all about basically three different parts. It's about delighting the customer which means really enhancing the shopping experience; it is about getting greater efficiency, the way we are operating the hypermarkets; and it is about enhancing our culture and developing our people. Now, delighting, that is to become the preferred retailer; enhancing our efficiency is to lower the cost in order to improve the profitability, hence become the preferred retailer also for the shareholders. And when you see what we are doing in order to get really our employees to embrace this reinvention, it is all about evolving our culture so it becomes a sustainable progress of what we are doing with the Carrefour Planet. And hence we should be the preferred employer as well at the same time. You mention 'delighting the customer', how exactly will the transformation benefit customers? Well Carrefour Planet, you can see it as three distinct offers under one roof. There is the multi-specialist where we have chosen in fact nine categories where we're going to be specialists and make the difference. Now that's been choices taken where we really know we can make the difference. That also means there are other categories that have to leave even the space or leave the stores completely. But that really, really is what's going to challenge the environment that has evolved around us. On the other hand we have the fresh food. Well here we'll have the best quality, the best freshness wherever you can compare us with any one of our competitors. That will be the best in class in terms of quality and freshness. And the third part is the dry grocery where we will be price competitive because this is often about manufacture brands and here we just have to be price competitive. Now on top of that we have the Carrefour brand which will be expressed in the three areas. Now the Carrefour brand is a brand where we are known for the quality, we are able to sell it at a level of price which is about 15-20 per cent less than the producer brands. So this is also enhancing our competitiveness. On top of that we are staffing up at this point in time so that we will be much more innovative. So we will come up with new products and not only products that exist already in the market. So the Carrefour brand is at the centre of this Carrefour Planet at the same time. If you look then further down, further down or look further into the concept, you will see that we have added on a lot more services. Whether it is how you can get help to take care of your children while you're shopping for instance. We have put a lot more comfort in the store where the aisles are much larger so you can easier move around. We have taken down the height of the gondola so you can have a better view of the store and where you can find things. There is another signage so you know constantly where you are. There is another signage of pricing so it clearly tells you about the pricing. We will change the economic equation as well where you will have fewer promotions but much bigger promotions which also enhance the competitiveness. So I'm absolutely sure that we have invented Carrefour Planet to become a destination shop again as it was, or used to be, years ago. But this is in the new area where I'm sure that this is going to be a destination shop. What have initial reactions from customers been? They are very encouraging. As you know we have five pilot stores in Belgium, in Spain and in France. Now there are different results. First of all you have the qualitative where we are asking the customers about feedback. And I must say we are, on a scale to 10, we are at 9.5 out of 10 in terms of comfort, in terms of service, in terms of facility etc. etc. Very encouraging. Then you are asking me probably what are the sales results because that is the proof of the pudding in a certain sense. And here we can say, if you take the fresh food for instance, well we have both experience here in Spain and in France, well the sales are up around 25 per cent. If I then go into the clothing, between 20 to 30 per cent. So if you take the different pilots and look into the different categories it is very, very encouraging results. A store that has not been fully changed which is for instance Mont-St-Jean in Belgium where we basically put in two to three different poles, upgraded a little bit on the fresh food but it's far from being the Carrefour Planet, well the sales in Belgium in this store is up 8-9 per cent while the rest of the stores are unfortunately still negative. So if I take the difference it is a 10 per cent difference on this store. So that just shows that some of these poles can already enhance the performance of the existing hypermarkets. So to conclude I would say very encouraging and very encouraging not only for short term, but thinking through what the rollout can give us. Carrefour Planet - roll out and financials The Carrefour hypermarket network is highly varied. Do you really think you can transform them all to Carrefour Planet? What's the scope? It's true that they vary and we have today two categories, big categories. There are those that are going to be under the Carrefour Planet brand and there are those that are going to maintain the Carrefour brand. But they are all going to be changed as such. So of the universe of 500 stores about half of them will go under the Carrefour Planet and the other half will be, let's call them, remodelled where we are taking all the best practices but unfortunately we cannot put in all the services for instance or the hypermarket is not big enough to really be expressed in the nine major poles that we are putting in in France.
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