In order to turn around the somewhat negative mood surrounding Colruyt Group, the Belgian retailer invited the press for an extensive strategic update. The central message: the group responds to changing customer needs with an increasing focus on services. But how solid are the four growth pillars really?
Parrying criticism
For the first time, Colruyt Group invited journalists and analysts to a presentation of its updated strategy. The company felt this was necessary after the negative reporting during the past few months. Not only did Barclays publish a very critical analyst report, but more recently – and somewhat surprising – Colruyt’s Lowest Prices chain announced it would adapt its price communication in such a way that it triggered a lot of speculation in the media about the end of the lowest price guarantee. The company’s hare price has already dropped 40 % this year.
CEO Jef Colruyt, together with COOs Jo Willemyns and Stefan Goethaert, countered the recent criticism and provide more clarity on the company’s vision for the future during a very extensive presentation. “We look two generations ahead, not just to the next quarter”, he said. And: “Colruyt is much more than a retailer.”
Retailer becomes service provider
However, the company is judged on results, not on long-term perspective. “Maybe those things should be a bit more similar.” The pandemic has cost Colruyt some market share, the CEO admits, but his chain is now gaining that back. The current instability worries him more: “It will not be a walk in the park, we will have to get through all of this together.”
Colruyt’s main message: he wants to make life easier for his customers. The retailer is becoming a digital service provider. Besides that, sustainability is the most important theme for the coming decades. Growth for the group has to come from four pillars: food, health, non-food and energy.
Focus on cities
In food retail, Colruyt first wants to guard the consumers’ purchasing power. “That is a core competence for us. 120 employees compare 62,000 prices every day”, Willemyns stresses. “We are in talks with the agricultural and FMCG sectors.” No word, however, on the company’s new price communication. Instead, a remarkable statement: Colruyt still sees room to invest in physical shops, in Belgium, Luxembourg and France. There is potential especially in cities, where Colruyt is going to serve customers better – with shops and e-commerce.
“Historically, we have had a somewhat smaller market share there, and we now want to close that gap at an accelerated pace.” The fact that Colruyt wants to do this with its own stores and not with franchise shops, which can open more easily on Sundays, does raise questions. According to Colruyt, it is also an ethical choice: the group does not want to pass on the risk to independent entrepreneurs. “We will have to be creative about opening hours, efficiency, service… We think we have found some openings.”
The retailer has finally stated it is now ready for grocery home deliveries. It will carry these out with its own drivers, from a new logistical centre in Londerzeel (in between Antwerp and Brussels). Home deliveries will come at a hefty delivery cost though: between 10 and 15 euros. Jef Colruyt does admit that Belgian labour costs are a handicap: “Quick delivery will never be profitable under Belgian labour conditions”, he believes.
New categories
In the supermarkets, the retailer will focus more on a few ‘new’ categories: flowers, parapharmacy, food boxes and bread. Colruyt has lagged behind in most of these categories so far: here, too, it is more a case of catching up. “The fact that some competitors are indeed stronger in these categories does not matter”, Willemyns believes. “We have to offer the right categories in the right context. Twenty years ago, after fierce discussions, we decided not to focus on bread; twenty years later, the situation is completely different.”
Slightly less well known, but certainly not unimportant, are Colruyt Group’s own production activities. By producing in-house, the retailer retains control over costs, while it is able to also keep production local and ecological, Goethaert explains. “One third of our sales under our own private labels, we produce ourselves.” The group is going to build a new production unit for slicing cheese, is developing more and more of its own agricultural activities, and even invests in its own farmlands – the sector is not entirely happy about this – and in a sea farm. The protein transition is a point of attention.
Fitness potential
The step from food to health is not a big one, Jef Colruyt emphasises. The investments that Colruyt makes in this pillar do create synergy. There were questions about the acquisition of fitness chain JIMS, but there are 1.2 million fitness enthusiasts in Belgium and expanding an existing Colruyt store with a JIMS is quite simple, the CEO says. “We can assist those fitness enthusiasts with recipes, digital support, knowledge and insights.”
In non-food, Colruyt Group focuses on markets where consolidation is underway. The ambitions with bicycle chain Bike Republic are high: a hefty 130 million euro turnover is the goal. There are also opportunities in the fashion sector. “But we will not take over a travel agency, for example”, Colruyt explains: that is just too far removed from the current business.
Xtra as a digital layer
Colruyt Group’s plans with the Xtra card, which is much more than a typical loyalty card, are interesting. The app is to form the digital layer above all the group’s activities. There are now four million Xtra-card holders, 800,000 of whom use the app. That number should rise to 1.5 million. The app is to become a true shopping assistant, including a payment function and an improved shopping list. Collect&Go, the supermarket chain’s pick-up offer, will also be integrated into it: “We are going towards a one-app strategy. We will build this app like WeChat does, with mini-apps next to the core functions”, Willemyns points out.
In conclusion, the participants received an interesting update on the ever-expanding action radius of Colruyt Group, but we were still left in the dark about current hot topics, such as the price competition with Albert Heijn or Jef Colruyt’s succession. Not all points of criticism were tackled, and all eyes are now set on the publication of Colruyt Group’s annual results on 14 June…
