Carrefour’s chief executive José Luis Duran is an ambitious man. In the retailer’s 2006 annual report he promised to add at least 1.5 million square metres of selling space in 2007, meaning 1,000 new stores including 100 hypermarkets. Duran’s ambitions are not only focused on further expanding the Group, he also actively exits markets that are non core or where Carrefour was underperforming. Since “coming to the helm” of the French multinational in 2005, he has reorganised the retailer’s international operations and reorganised Carrefour’s position at home. In France, he had to restore Carrefour’s price perception to gain back lost market share.

What are the strategic considerations of Carrefour for France?

“In France, as in mature markets such as Spain and Italy, Carrefour focuses on innovation and differentiation. Since 2005, we have mainly worked on the price repositioning of Carrefour versus its competitors in France. Compared to the competition we had accumulated a price gap which harmed us. With this gap closed, we are now among the most competitive retailers in France. If we want to continue to consolidate and capture more market share, we need to differentiate. Thereby, we established potential sources of growth that we have already begun to exploit: customer service and the ranges we offer, in particular the growing non-food categories. We manage our assortments on a quantitative and qualitative plan. Carrefour must capitalise on its brand strength, which allowed us to get a leading 26 per cent market share in France. The brand strength must be stressed. Therefore we are placing all our stores under the Carrefour brand, and we will continue to develop our private label products under the Carrefour trademark.”

How important are the BRIC markets (Brazil, Russia, India and China) for Carrefour internationally?

“These countries represent real sources of growth and profitability for Carrefour in the future. In all these large, emerging markets, middle classes are developing strongly and consumption levels are constantly improving. These markets allow us to spread our investment risks and opportunities. No one is safeguarded from a disappointment, but a portfolio of some thirty counties of operations allows us to balance the risks.”

How does Carrefour intend to strengthen its positions abroad?
“From 1995 to 2005, Carrefour went through a huge phase of internationalisation. The new management team that I have been leading since 2005 believes that we pushed our internationalisation strategy too far. I do not believe in too high levels of geographical spread.

“I do not believe in too high levels of geographical spread.”

Sure, we must certainly seek sources of growth but not at any price. Our current strategy is simple and comprises three necessary requirements for a good implantation in a country: sustainable growth, a strong awareness of the brand which should be widely accepted and appreciated by local customers, and guaranteed good results and return on investment in the medium term. Based on these criteria we decided to increase our efforts in certain markets while withdrawing from other markets, like Japan, Mexico, and recently Portugal and Switzerland. It’s our objective to belong to the top three retailers in any country where Carrefour is represented.”

What are the medium-term levers of international growth?

“Carrefour is ready to accelerate its growth, both organic and via acquisitions.”

“We increased our investment budget, which we allocate to a limited number of countries where we believe that we can win and create value. Now that we have restored our assets base, the Carrefour group is ready to accelerate its growth, both organic and via acquisitions. That’s why we have doubled the number of store openings. We have also done several acquisitions in Brazil, Poland and Spain. Today, I believe that there are other acquisition opportunities that Carrefour must seize in order to consolidate and even increase our presence and our market shares in some countries. However, integration of an acquisition is always complicated, so that’s why our priority for the next three years is organic growth. Hence, Carrefour is ready to expand to new emerging markets like India or Russia, where long-term growth perspectives and the development of consumption levels offer good perspectives for the future.”

How does Carrefour adapt in its new markets of operation?

“Carrefour must be a local brand in each of the countries where it operates. To optimise cost levels we focus on back-office synergies, e.g. in information systems, logistics, procurement. But on the other hand, everything involved in customer relations should be completely local. We are Chinese in China and Brazilians in Brazil. Actually, it is essential to present local ranges in store, especially when it comes to fresh products. We also adapt locally with regard to human resources. From the 475,000 employees working for our group internationally, only 416 are French expats. In 2005, this number was 700. Employing local people is important as they really add value, preserve the local culture of our brand, and support the efficient management of knowledge exchange. This is important, especially in those emerging markets where modern distribution is a totally new concept. Gradually, local teams will develop their own expertise and take more and more responsibilities. In certain countries we probably failed to put this competence transfer into practice. South Korea is a good example. Ten years after we entered the South Korean market, the executive board there comprised only one Korean member. This contributed to our decision to exit that market. In all the countries where we operate we aim at recruiting local store

“Employing local people is important as they really add value, preserve the local culture of our brand, and support the efficient management of knowledge exchange.”

managers, but also country managers. Examples are our operations in Malaysia, Italy or Argentina. This adaptability constitutes one of our big international strengths.”

Does this adaptability also apply to store formats?

“Within a country, particularly in the larger markets, we cannot operate in all cities with a one-size-fits-all strategy. We don’t want to impose a format standardisation. No, that would be a serious mistake. It is necessary to adjust the size of our units according to the customer area. The stores in large cities and metropolitan areas have sales surfaces of some 12,000 m². In smaller, provincial towns where the sales potential is inadequate for such a dimension, a surface of 5,000 m² is more suitable. The Carrefour Group is now much more flexible in terms of formats. I am prepared to affix the Carrefour sign on smaller proximity stores and not only on minimum sales surfaces of 10,000 m². We will develop the relevant formats according to specific local requirements, like we did in Brazil last April. There we acquired Atacadao, which is a chain of discount hypermarkets located in underprivileged areas. Nobody expected this from Carrefour.”

How does Carrefour integrate the many cultures within the group?

“We must take into account the way of life and shopping behaviour of local people: the timing and frequency of their store visit, their storage capacity at home. Take China as an example: there 80 per cent of customers come by foot or by bicycle, because most of our stores are located in the town centres. Access, parking and the flow of customers must be adapted, just like the assortment and the signing. Therefore, we must make sure that our stores, and our products in particular, meet the needs and preferences of the local clientele. For these reasons, the know-how and the expertise of local teams are essential.”

Profile After studying economics, José Luis Duran started his career in 1987 with Arthur Andersen. He joined Pryca (Spanish subsidiary of Carrefour) in 1991 where he held the positions of management auditor (1991-1994), management auditor southern Europe (1994-1996) and management auditor Americas region (until 1997). After being chief financial officer at Pryca he became chief financial officer for Carrefour Spain in 1999. In April 2001, he was appointed CFO and managing director of Organization and Systems for Carrefour and joined the group's executive committee. On 3 February 2005, José Luis Duran became group managing director. On 20 April 2005, he was appointed chairman of the board of management.

 

 

 

 

 

 

 

 

 

When entering a market, how do you manage relations with local authorities?

“In those countries where organised trade is not very developed, the legal environment is generally favourable to a rapid roll-out of modern distribution in the market. Local authorities are mostly in favour of developing a sophisticated retail infrastructure as it supports modernisation and structures economic activity. Furthermore, it offers opportunities of employment and leads to a better food safety situation. In this respect, the knowledge of Carrefour’s supply chain with regard to food safety is renowned among public authorities as a benchmark. Food safety needs to be a best practice because a local food accident could put the credibility of the entire Carrefour Group at stake.”

Can Carrefour affect the economic structure of a country?

“In emerging markets, for instance, the agricultural sector is fragmented and hardly suited to the requirements of large-scale, modern distribution, with a manifold of agents and other intermediaries between distributors and their supplying farmers. Governments ask us to work directly with the suppliers, in order to improve the quality of agricultural products and ensure a fair remuneration for farmers. The arrival of organised trade also means alignment of pricing among retailers and subsequently a moderation of inflation to the benefit of consumers.
Concretely, with the help of one of our partners in China we have just bought a plot of land of some 160 km² northwest of Shanghai. There, 40,000 farmers will settle to produce for our stores. Carrefour is to train these farmers and sign multi-annual contracts with them for the supply of their products to Carrefour’s stores in China. With the product quality guaranteed, we will meet our commitment in the procured volume of products. Based on the experience we will gain here, we shall decide on similar projects elsewhere in order to develop the social responsibility of Carrefour in everyday life.”

“I am prepared to affix the Carrefour sign on smaller proximity stores and not only on minimum sales surfaces of 10,000 m².”

What is the importance of social responsibility for Carrefour?

“Social responsibility is part of Carrefour’s genes. Whether in a mature or an emerging market, governments and customers are increasingly demanding on all elements of the social responsibility of companies. That’s why the project of working directly with Chinese farmers that I just mentioned as an example, is so important. It is a key example for ensuring food safety. In addition, we publicly committed ourselves to reduce energy consumption levels by 20 per cent for each Chinese store to be opened in 2008. Finally, we wish to strengthen the Carrefour International Foundation in all our countries of operation. Our Foundation concentrates on humanitarian aid and the fight against exclusion. We consider this a moral duty.”