France’s fifth distributor, Auchan, wants to start competing with market leaders Carrefour and Casino through price drops and aggressive promotions, in an attempt to stop the drop in market share.
France and Western Europe drop
France still represents 42 % of the total turnover, but the French turnover fell 1.1 % in the past year, to 20 billion euro. The hypermarkets, the most important part of the company, even doubled that drop at 2.5 %.
Western European sales decreased by 2.8 %, because of the negative economic situation in the Eurozone. Turnover growth was achieved in Central and Eastern Europe, while Asia managed a record growth of 11 %.
Auchan is the second largest distributor in China and its expansions in Poland, Russia, Ukraine and Romania (ever since it purchased Metro’s Real hypermarkets) helped achieve a 4.1 % turnover increase, to 62.1 billion euro. Net profit grew 19 % to 767 million euro, but the divestment of its retail branch, worth 268 million euro, had a lot to do with that.
Price drops and promotions
Auchan lost ground in France (- 0.2 % to a market share of 11.3 %), with Carrefour (20.3 %), Leclerc (19.6 %), Intermarché (14.2 %) and Casino (11.7) pulling away even more. Moreover, CEO Vincent Mignot had to admit his group has suffered because of Carrefour’s price offensive, which entails price-comparing ads and a lowest price guarantee for 500 products ever since 2012.
Auchan will invest 230 million euro in its stores and its prizes this year, to turn that tide. The group will expand its array of products below one euro (fruit, vegetables, processed meats, …) and it wants to promote seasonal products with stunt prices, starting in June.
A large promotional campaign, comparing shopping carts, will be placed at the entrance of each store to make it clear that Auchan is the cheapest. “For day-to-day purchases, we are the cheapest, but we have failed to inform the audience of this fact”, Mignot concludes.