Carrefour is a global food retailer of French origin, operating more than twelve thousand stores in over 30 countries, either in ownership or through franchising. In addition to food products, Carrefour offers, like many retailers in this sector, non-food products (e.g., cleaning and house maintenance, personal care), and in its large hypermarket stores it also offers electric equipment, kitchenware and other products for the home. These days (March-April 2022), Carrefour is being called upon, recruited one may say, to salvage a tumbling food retailer in Israel, Yeinot Bitan-Mega, by the company that acquired the latter only a year ago, Electra Consumer Products (part of Elco Group). For Mega, this is one more stage in the long and twisting saga of its retailing history.
There are three main players relevant in this story: Yeinot Bitan-Mega (the ‘patient’), Electra Consumer Products, a subsidiary in a family of ‘sister’ Electra companies (the local ‘doctor’), and Carrefour (the expert famed ‘healer’ invited from abroad). Electra Consumer Products (‘Electra CP’) has apparently decided, with its parent company Elco, that the best treatment for Yeinot Bitan and Mega would be a ‘re-birth’, that is, to strip them of their former identities and endow their stores with the brand name of a strong global food retailer, namely Carrefour. This is being achieved by receiving the franchise of Carrefour for about 150 stores of Yeinot Bitan-Mega in Israel (a Memorandum-of-Understanding was reached in March, a full agreement is expected to be signed in April). With the name of Carrefour come the retailer’s experience and know-how expertise in retailing, its own-brands of products, advanced technologies, and reputation as a global leading food retailer. For Israeli consumers, the prime promise that Carrefour is expected to bring is lowering the prices of food, and thus helping to lower the cost of living. Electra CP plans to convert the existing stores to Carrefour (supermarket) stores over a period of three years, but Carrefour’s own-brand products are expected to arrive in stores already by the end of summer this year.
Yeinot Bitan, a private family-run medium food chain (Yeinot means ‘wines’) acquired the ailing food chain Mega in the beginning of 2016 from Alon energy group. Mega had twice as many stores (about 130) as in Yeinot Bitan’s own chain (60 stores). Mega includes neighbourhood supermarkets and large main stores. (Alon had to dispose of 55 stores before the transfer to Yeinot Bitan, most of them were discount stores branded ‘You’, shut down or sold to competing discount chains, while ten more stores were closed in the first year of Yeinot Bitan’s ownership.)
The chain of stores currently known as Mega is actually a veteran in the country, originally starting as a cooperative chain named ‘Coop Blue Square’ (established in the 1930s, self-service supermarkets since the 1960s). But in the 1990s Blue Square ran into trouble, until its termination as a cooperative by the end of the decade as the chain was sold to Alon, creating Alon-Blue Square. Notably, during a period of just over twenty years (from 2000 to-date) the retail chain has been passing through three owners: Alon-Blue Square until 2015, Yeinot Bitan from 2016 until 2021, and from May of 2021 it is in control of Electra CP-Elco. Alon Blue Square has already changed in the past the name of the Coop stores to Mega (after an interim phase in yet another name), so the act of re-branding the retail chain is not new in its history. Now it is going to be re-branded again but in a more dramatic way to the brand of an international retailer — Carrefour.
It may sound tedious to repeat this history of the Mega (Coop) stores, but it could be important to acknowledge that this retail chain comes with a baggage of consumer memories and associations, particularly from going through the shake-ups of the last twenty years. Stores remaining in the same locations over decades may be used as cues. reminders of experiences in past periods and as references for comparison. Nahum Bitan probably had an interest to ensure the future of that legacy food chain, for enlarging his existing retail business and for keeping it as a strong competitor to other established food retailers in Israel (especially Shufersal and Rami Levi). However, Yeinot Bitan has taken too much of a load on top of its existing retail business in terms of managing the enlarged network of stores (retaining them as separate chains), its operating expenses, and in returning the investment in Mega; this has led to growing debts (250 million shekels/~US$75m, February 2021) that weakened the company. A previous attempt to get an investor into the company had failed before Electra CP came in, taking up a majority share in Yeinot Bitan.
Carrefour retail business includes actually four different formats of stores: convenience stores, supermarkets, large multi-category hypermarkets, and wholesale stores (‘Cash & Carry’). As can be seen in the table below, the majority of outlets are convenience stores as defined by Carrefour (7,193 out of 12,225 physical stores, 59%) — and they are divided into five sub-formats or sub-chains. Supermarkets constitute 28% of physical stores worldwide. Carrefour furthermore takes pride in its hypermarkets (10%) — Carrefour was first to open a large store in hypermarket format in France in 1963 (just three years after the retailer was founded), taking example from the USA (it was likely first of its kind in Europe).
|Store Chains & Formats||Worldwide||Europe||France||Description|
|Convenience store, sub-chains: |
Proxi, Carrefour City, Carrefour Express, Carrefour Bio, Carrefour Contact
|7,193||6,605||3,959||Adapted for each location, attractive pricing and long opening hours|
Carrefour Market (Marché)
|3,412||2,869||1,071||Sales areas 1000-3500m2 in cities and rural area.|
|Carrefour Hypermarkets||1,207||703||248||For major shopping trips, 20-80k products, 2400-23000m2|
|Cash & Carry (wholesale)||413||146|
- Countries in the network of Carrefour are divided into two categories: (a) Integral countries (physical stores are owned and managed by Carrefour in eight countries, six European + Brazil & Argentina); and (b) Partner countries (physical stores are operated by local franchisees in 23 countries, of which twenty countries are in Africa-Middle East + Turkey, China, Indonesia, & 8 French territories). Israel is expected to join as a partner country given that stores are going to be operated by Electra CP in franchise. [Carrefour Group Locations, viewed March 2022]
- Carrefour is re-aligning its hypermarket format and store design, with planned reduction in sales areas and in products (15% by 2022, mostly in non-food categories), freeing thereof areas for expansion of organic, fresh and bulk offering + service areas, and for handling shopping baskets or orders.
The media in Israel generally talk about the supermarket stores which would be reinstated as respective Carrefour Market stores. But there is no real restriction on why stores in Israel should not be classified into the other formats. This could depend mainly on size of sales areas and locations. On the one hand, some especially large stores outside of city centres (e.g., stores of Yeinot Bitan) could be fitted to apply the Hypermarket format of Carrefour. On the other hand, some of the supermarkets of Mega in urban residential areas might be more appropriate to be defined and designed as convenience stores based on the size of their sales areas. Curiously, one may wonder what would become of ‘Mega (in) City’ supermarkets, where the small ones might correspond better to the format of Carrefour City convenience stores sub-chain. There might also be an opportunity for establishing in Israel other types of Carrefour’s convenience stores, such as the Express or Bio sub-chains.
Electra CP might be heading towards making matters even more complicated, unnecessarily, by obtaining also the franchise for convenience stores of the American-based retailer 7Eleven (gained in-between the acquisition of Yeinot Bitan-Mega and the franchise agreement with Carrefour). One may seriously question now if Electra CP still needs another chain of convenience stores when Carrefour has a large category of its own for this scale and type of stores. While consumers seem to require smaller food stores to be in their vicinity, the competition could already be crowded (e.g., in greater Tel-Aviv area there are at least three retailers of convenience stores or smaller supermarkets: AM PM, Super Yuda, and Tiv Ta’am which is also a delicacy). Working with Carrefour should give Electra CP plenty of room and flexibility to shift between formats of stores, and the addition of 7Eleven could prove to be redundant.
Yeinot Bitan brought some valued improvements to the supermarkets of Mega, particularly in visual merchandising — product displays have become more orderly, convenient and visually appealing. This was best seen and felt in displays of bulk fresh fruits and vegetables (a practice ‘imported’ from the stores of Yeinot Bitan).
In other aspects the situation can be less desirable. For example, the staff continue to arrange merchandise through the day, blocking aisles with boxes and carts, interrupting shoppers in the store and causing discomfort. The employees often seem to be too engaged in moving products around and less free for assisting shoppers. Yeinot Bitan replaced human cashier counters with self-service cashier stands, but provides inadequate service to shoppers who still need the assistance of a human cashier. It often feels that the store gives precedence to online orders and deliveries at the expense of in-store shoppers, making their shopping experience less pleasant. Shoppers might be looking forward to better practices of operation and service brought with Carrefour.
Carrefour is also stepping forward in realigning its retailing operations and customer services with the support of advanced digital and data-driven technologies. First, Carrefour is creating an integration of its physical stores network with its e-commerce network by merging the offline and online product offerings (since 2018) — the global network of physical stores is combined with an online store website unique for each country. Their service apparatus for providing online orders includes drive pick-up point, click & collect and home delivery, with intentions to expand it. Second, Carrefour is implementing a Digital Retail Strategy plan towards 2026, whose key drive is “data-centric, digital first” — a core element in the plan is implementing a ‘Personal Shopper’ programme that learns the preferences and shopping behaviour of customers and enables the generation of better-fitting recommendations and smart shopping aids (e.g., suggesting to customers a shopping list, based on their more frequent orders, which the shopper can either adopt and approve as-is or make modifications as needed). [Also see this report on the enhanced digital retail media platform Carrefour Links, Store Brands, Dan Ochwat, 18 June 2021]
- Carrefour is testing a new format of automated self-service store named Flash. In the trial store, opened in Paris in November 2021, shoppers can receive a billing list at the autonomous payment port without taking items out of their basket, and without scanning them or entering a barcode. Items in the basket are identified once picked-up from shelves by cameras (60) across the store. The content of the shopping basket is recovered with 96% reliability, Carrefour promises. However, unlike in similar stores (e.g., Amazon Go), shoppers will not leave the store before knowing the amount to pay for their shopping (a pain-point for shoppers, as Carrefour discovered). The Flash store is in the size of a Carrefour Express convenience store with the same range of product offerings. [Carrefour ouvre à Paris un magasin tout automatisé (lefigaro.fr), Marie Bartnik, 25 November 2021]
Nevertheless, the foremost attraction that seems to be anticipated by Israeli consumers from Carrefour (according to media news reports) is that it will succeed in enacting lower prices of food products, and possibly other non-food products; subsequently, this will lead through the forces of competition to reduced prices across the market, particularly by other major food retail chains. Much hope is put in Carrefour’s own-brand for everyday products, that are sold in France for lower prices than its equivalents in Israel. But some suspected obstacles may interfere with fulfilling this expectation or ‘promise’. It is unlikely that stores will rely largely on import of Carrefour’s products from Europe, hence the prices of many products will still have to be subject to ‘dealings’ of the retailer with strong local food producers and other manufacturers, and will depend on relations with local farmers. Furthermore, the production of some products under Carrefour’s own-brand could be moved to Israel after a while, and hence be subject again to costs and relationships in the Israeli economy.
In the assessment of a senior retailing consultant in Israel (Tamir Ben-Shahar), if Carrefour succeeds with its own-brand products, and through direct/self import, to bring a reduction in prices of 20%, it will generate a real and significant change in the sector of retail food chains and in the cost of living for consumers in Israel. Yet, franchisees in Israel of retail chains from abroad in other product domains did not have so much success in a similar mission, and they sell products in prices that are 20%-30% higher than in their respective stores in other countries — if that happens, it will be a hard blow. Therefore, the question is if Carrefour will be successful in lowering prices in Israel or will it align its prices to the level prevailing in the country (in interview for a news report of Kan public TV, 6 March 2022, in Hebrew).
- It may be added that Carrefour has two more brands with different kinds of offering that are not price-driven: Reflets de France brand (authentic recipes, promoting regional culinary heritage), and the Bio organic product range — it is unclear if Israeli consumers will also be able to enjoy the contributions of these product ranges.
Electra has accumulated experience and market power in a number of domains, yet food and other perishable consumer products have not been one of them until a year ago. Their business domains, through a number of divisions or subsidiaries, include construction, air conditioning, lifts & elevators (escalators), security, and more; they also are engaged in marketing electric home appliances and related equipment in two (acquired) retail chains as part of Electra CP. They have tried other areas as well (e.g., fashion, home improvement & DIY). The strength of the owners of Elco is said to be in identifying opportunities, and in recent years Elco is behaving more as a holding company with ambitious objectives of growth and entry into more domains. The theme that could be linking the domains in which the company claims for specialisation is getting more loose than twenty years ago or earlier. In the case before us, it was apparently soon realised that the foundations of Yeinot Bitan-Mega are too weak to build on, or perhaps that Electra CP-Elco lacks the expertise and market clamour to do so on its own, hence a strong outside player like Carrefour from France was brought in.
It is yet to be seen if the solution evoked by Electra (Elco), by franchise from Carrefour, is the right answer to salvage Yeinot Bitan-Mega. Carrefour has been acquiring food retail chains in France as well as in different ‘integral’ countries it entered (e.g., Romania, Belgium, Italy, Spain); it was done especially in two ‘waves’ in 2005 and 2014. Since Israel is about to be a ‘partner’ country, Carrefour’s degree of influence is likely to be different, more limited, than in countries it acquired the local retailers. It is unclear what will be the level of involvement of Carrefour in management of the stores, as one chain or more, and on what resources or capabilities of Carrefour Electra CP will rely as a franchisee.
- The entry of Carrefour may stir the market especially at a time that its major competitor Shufersal is going through change. The story of Shufersal is evolving in a chain of events, following the replacement of its CEO after more than a decade. While the retail network of Shufersal expanded, and moreover its online commerce activity grew considerably, some of the initiatives taken raised criticism for being excessive (e.g., investment is stores, establishment of Be pharma chain, creation of an Amazon-like e-commerce website which essentially failed). A new chairman of the board of directors (who was heading Electra CP in the past) rejected the dominant style of the former CEO and led to his dismissal. But subsequently, the chairman was effectively dismissed himself by the board of directors. A new CEO of Shufersal, waiting on hold as candidate for over a month, finally entered office in May 2022 (he was previously CEO in a major food producer Tnuva). Shufersal anticipates a new majority stakeholder to come through in the next few months that will gain control of the company. There is a possibility raised that the last ‘just-retired’ CEO becomes member of the board of directors, and even its chairman. (Last updated 12 May 2022)
It is hard to tell how well Israeli consumers will receive the French-based Carrefour name because it is such a new experience of the first foreign retailer brand in food retailing in the country. Furthermore, former perceptions consumers have of Yeinot Bitan and Mega will not immediately disappear. Electra Consumer Products with Carrefour will have to prove their strength and determination, facing suppliers locally and abroad, to lower prices in Israel. Nevertheless, there are more possibilities and benefits to gain from the arrival of Carrefour, it would be superficial and unfortunate to judge and accept it just on the basis of its ability to lead in lowering the cost of living.
Ron Ventura, Ph.D. (Marketing)
More sources (in Israeli business news media):
“Their Will to Succeed is Much Greater Than Their Fear of Failing”, Adi Dovrat-Meseritz and Shukki Sadeh, MarkerWeek (weekend issue of TheMarker), 11 March 2022 (origin in Hebrew — a news story on Elco-Electra and its owners-chief executives).