Carrefour Belgium is on the right track but will not yet be profitable this year, CEO Geoffroy Gersdorff expects. A franchising of hypermarkets is not on the cards, nor is a takeover of Louis Delhaize.
Successful discounts
Earlier this week, Carrefour released strong quarterly figures, with Belgium moving from problem child to being the fastest grower within the group. An excellent moment to ask the CEO for some clarifications: the first thing he wants to stress is that the good results are certainly not only due to Carrefour being able to benefit from the turmoil at Delhaize. “Even before the problems at Delhaize began, the trend was good: the first quarter was also positive. Importantly in this inflationary period is that we see that our volumes are also rising, in all three of our formats. Hypermarkets are rising the most in market share of all banners in Belgium. This is an important signal: customers increasingly understand our raison d’être and our commercial dynamics respond to their issues, including purchasing power.”
The discounts pointing to the cost-of-living crisis have been a success, thanks in part to the focus on Carrefour’s private label, which is 30 % cheaper than national brands. “We have frozen more than 200 prices, we are now on the third wave of price cuts and it is not over yet.” Today, Carrefour has a different promotional policy for hypermarkets than for supermarkets. “Supermarkets are there for weekly shopping, hypermarkets for monthly or less frequent shopping. That calls for different promotions, with different dynamics.”
Improved productivity
In its stores, Carrefour is improving performance with the so-called “Maxi method”, inspired by experiences in Argentina, France and Spain. “We revise our range, we reduce the supply and we present the products on pallets, and in ready-to-sell repacks. This way we reduce our out-of-stocks and improve productivity. We present our Carrefour and Simpl products in big quantities. For customers, the offer becomes easier to read and to choose from. We do this in both hypermarkets and supermarkets, in both food and non-food. By the way, we still have the widest range in Belgium.”
Carrefour focuses on niche products such as world cuisine and differentiates more between the different parts of Belgium: after all, the dynamics in Flanders are not the same as in Wallonia. “In the North we compete with Albert Heijn, in the South with Intermarché. Customers’ expectations differ, so our response cannot be the same. That is where we have made adjustments.”
“Inflation will ease”
Meanwhile, the big brand manufacturers publish excellent quarterly figures and continue to raise prices. What evolutions does the CEO expect? “In the second half, we will definitely see inflation ease. Looking at the P&L (profits and losses, ed.) of our main suppliers, I see the potential of our discussions in the short and medium term. From our suppliers, we expect two things. First, an evolution of their purchase prices as we see raw material prices falling. Second, also an increase in their service levels: there are too many out-of-stocks today.”
These negotiations are ongoing: not only in Belgium, but also at European level through the Eureca purchasing centre in Spain. “The weight of the group should improve our purchasing conditions. But not only the purchase price is important, also the commercial dynamics. Enforcing the best price without commercial dynamics makes no sense. We have to find the balance there. Today, in all our countries, we have the opportunity to positively evolve national or own brands.”
Personalised promotions
Gersdorff also stresses that the intensified cooperation within the Carrefour group benefits the Belgian operations considerably. “Thanks to our relationship with Spain, Argentina, Brazil or France, we have access to a huge wealth of ideas and best practices. Think e-commerce, digitisation or the reduction of our paper leaflets: how can we better inform our customers? We are moving from mass communication to one-to-one. We have very good examples in Romania or in Spain, for example, with the app, with personalised promotions based on the customer card.”
In France, meanwhile, Carrefour franchises some of its hypermarkets. Is that also an option for Belgium? “No. We concentrate our efforts on commercial dynamics, our identity, customer comfort… After that, we will see. We are familiar with franchising for supermarkets and proximity shops, but for hypermarkets we have other strengths.”
Too early for profits
In Romania and France, Carrefour took over Louis Delhaize’s operations. The future of that retailer in Belgium is a big question mark, but an acquisition here is not imminent, Gersdorff says: “The French and Belgian situations are not comparable. There is a real complementarity in France. I focus on our current range of more than 700 stores. We have other challenges.”
Conclusion? “The direction of travel is good, the first results are there, now we have to work on profitable growth. This is just a first step, we still have a lot of work to do.” Becoming profitable this year will be difficult, the CEO admits, partly due to the automatic indexation of wages and the evolution of energy and distribution costs… “The trend is good, but for 2023 it will be a bit too early.”
