analysis of casino guichard group

CASINO GUICHARD-PERRACHON SA IN RETAILING (WORLD)

February 2015

© Euromonitor International PASSPORT 2RETAILING: CASINO GUICHARD-PERRACHON SA

Disclaimer

Much of the information in this briefing is of a statistical nature and, while every attempt has been made to ensure accuracy and reliability, Euromonitor International cannot be held responsible for omissions or errors.Figures in tables and analyses are calculated from unrounded data and may not sum. Analyses found in the briefings may not totally reflect the companies’ opinions, reader discretion is advised.

Casino primary focus is modern grocery, although after acquiring the Brazilian GPA group, 16% of its 2014 sales were generated in electronics and appliance specialist channel. The company aims to compete internationally, but lacks scale. It has therefore bought share in emerging markets. It is carving out a reputation as a low-price operator at home, reflecting acute price sensitivity. Its multi-brand strategy looks confusing, but it is an innovative and flexible player.

ScopeSCOPE OF THE REPORT

All values expressed in this report are in US dollar terms, using a fixed exchange rate (2014), unless otherwise stated.

2014 figures are based on part-year estimates.

All forecast data are expressed in constant terms; inflationary effects are discounted. Conversely, all historical data are expressed in current terms; inflationary effects are taken into account.

STRATEGIC EVALUATION

COMPETITIVE POSITIONING

DOMESTIC STRATEGY

INTERNATIONAL STRATEGY

MULTI-CHANNEL STRATEGY

BRAND AND PRIVATE LABEL STRATEGIES

OPERATIONS

RECOMMENDATIONS


France-based retail group Casino Guichard-Perrachon SA held a 0.4% share of world retailing in 2014. It is primarily a grocery retailer, generating 84% of 2014 value sales in this channel.

However, this is down from 99% in 2009. In 2012, the company acquired a controlling interest in Grupo Pão de Açúcar (subsequently changing its name to GPA in 2013) in Brazil, whose portfolio includes electronics and appliance specialists Casas Bahia (607 outlets) and Ponto Frio (400 outlets). The acquisition also added grocery retailers, making Casino the leading retailer in Brazil.

Although the company still trails behind fellow French international retail groups Carrefour SA and Auchan Group SA, it is building momentum. The acquisitions improved Casino’s global ranking in total retailing from 21st to 17th between 2009 and 2014.

The company is still looking to develop international sales, with five new openings in the United Arab Emirates and 10 openings in Tunisia planned for 2015. However, France remains its core market, generating 44% of 2014 value sales.

Key company factsSTRATEGIC EVALUATION

Casino Guichard-Perrachon SA

Headquarters: Saint-Etienne, France

Regional involvement:Latin America, Middle East and Africa, Western Europe

Category involvement:

Hypermarkets/supermarkets, convenience stores, discounters, electronics and appliance specialist retailers, drugstores/parapharmacies, internet retailing

World retailing value share:

0.4% (2013); 0.4% (2014)

World Casino value growth:

15.3% (2013);

5.6% (2014)


In FY 2014, Casino's revenues grew by a healthy 16% to reach €49 billion. Growth was driven partly by boosted by the fully-consolidated results of GPA and Monoprix, acquisitions from 2012.

However, the company enjoyed organic growth at all of its international subsidiaries, which saw collective revenues rise by 24%. Latin America was the key to this performance, with the success of the Assaí cash-and-carry banner and the Minimercado Extra convenience store network in Brazil especially strong.

The company also undertook substantial repositioning in France, significantly reducing prices and opening stores in the most promising channels. The price repositioning strategy rolled out at Géant and Casino helped drive up footfall at Géant hypermarkets by 2%. The French retail environment is stagnant, but the company’s convenience formats held firm.

Casino’s online business also saw solid growth, with the Cdiscount site achieving a 16% increase in business volume.

Financial analysis STRATEGIC EVALUATION


The company’s most recent financial data were affected by unfavourable exchange rates. A growing part of its business was generated by international subsidiaries; in organic (ie fixed exchange rates) terms, Casino actually saw encouraging year-on-year growth in H1 FY 2014.

Casino saw solid performance from its convenience stores and supermarkets banners in France, helped by aggressive price cutting. Together with a strong performance from its international businesses, especially in Brazil, this drove a 6% increase in underlying net profit in constant terms.

Ongoing weakness in the French retail market meant that domestic organic sales dropped by 2%. Investments in pricing in France also hit value growth as well as domestic product development. Operational restructuring offset this to a degree, but international sales are clearly the more dynamic part of the business.

Finally, its online business continued to thrive. Its non-food e-commerce business in France and Brazil saw volume growth of 24% at Cdiscount and 44% at Nova Pontocom in Q2 2014.

Latest financial data STRATEGIC EVALUATION


International expansion is now a key strategic goal for the company, with international operations representing over 60% of revenue and

almost 75% of trading profit in FY 2013. As well as wholly-owned stores, Casino also operates franchised stores outside France, mainly in Africa and the Middle East. It also sells private label Casino and Monoprix products to retailers in markets as distant as Hong Kong and the Philippines. This offers revenue possibilities, but also allows Casino to evaluate future expansion opportunities.

Dynamic international expansionSTRATEGIC EVALUATION


STRENGTHS

OPPORTUNITIES

WEAKNESSES

THREATS

Casino’s international sales are now the largest and most dynamic part of its business, and offset the company’s exposure to the problematic French retail market.

Global footprint

The company operates across a broad spectrum of retail channels with a number of different banners. This allows for a more segmented offer, as well as stronger retail synergies.

Multi-channel presence

36% of 2014 value sales were generated by hypermarkets. The most dynamic part of the market is convenience led. Hypermarkets are also most threatened by online retailers.

Hypermarkets may be outdated

Although Casino is rapidly reducing its dependence on its domestic market, and restructuring its business there, 44% of 2014 values were generated in this stagnant retail market.

France

Casino sells many of its private label products via local partners in a wide range of markets. This strengthens brand equity and may pave the way for new market entry.

Brand roll-out

The company is committed to growing sales in new markets, and has identified Africa and the Middle East for expansion in the short term. Asia Pacific may also hold potential.

International expansionC

asino’s international development strategy is also being copied by peers such as Wal-Mart and Auchan. At the same time, local retailers in key emerging markets, notably Brazil, are becoming more effective.

Other global retailers

Casino has invested heavily in price cutting in its domestic market. Reportedly, this has helped sales stabilise, but may undermine long-term growth.

Price pressure

SWOT: Casino Guichard-Perrachon SASTRATEGIC EVALUATION


The company operates a large number of brands, and is active in a variety of channels, even more so since completing the GPA acquisition in 2013. While this allows the company to easily cater to local tastes, as well as greater flexibility, it limits the strengthening of global brand equity. It is also more expensive to run multi-brands, which may become more of an issue going forward as the company seeks to cut costs in France.

Cdiscount in France and Nova Pontocom in Brazil are Casino’s main online businesses, and it has sought to use them to create strong multi-channel (essentially click-and-collect ) synergies in both markets. Casino launched Cdiscount in Colombia, Thailand and Vietnam in January 2014, and regards cross-channel retailing as a high priority. However, it faces a challenge to differentiate its offer from other larger retailers with similar strategies.

Casino spent much of 2014 rolling out new stores in the most dynamic parts of the French market, notably opening 134 discounters under the Leader Price banner. The French modern grocery retailing market, where Casino made 99% of its total 2014 sales, has become highly price sensitive and is set to see limited growth through 2019. Casino might want to test smaller stores, focus on its successful online business and divest or close its hypermarkets.

Modern grocery is forecast a CAGR of 1% through 2019 in France. Domestic value development will be a challenge, as confidence is weak and price pressure from Auchan, Carrefour and Leclerc limits opportunity. Casino needs more international sales to maintain growth and offset domestic weakness, and might want to buy share in more dynamic markets.

Stagnant French market prompts portfolio overhaul

Offset weak domestic market in new dynamic ones

Multi-channel trading is crowded International and domestic organisation

Key challenges: Flat demand at home and new markets STRATEGIC EVALUATION



DOMESTIC STRATEGY




OPERATIONS

RECOMMENDATIONS


Casino outperformed the global retailing market through 2014, generating a CAGR of 11% compared to a global figure of 5%. Much of this growth was driven by acquisition, notably GPA in Brazil, as Casino sought to reduce its exposure to mature Western European markets.

A: 2009-2010: Global economic weakness and the Eurozone sovereign debt crisis see Casino struggle in Western Europe, but decline is offset by success in new markets in Asia Pacific and Latin America.

C: 2013-2014: Consolidation of Monoprix’s remaining 50% and strong international growth fail to offset domestic stagnation. However, a weak euro masks relative solidity in the company’s business.

B:2010-2012: A series of acquisitions, including Carrefour's interests in Thailand, Galeries Lafayette's 50% stake in Monoprix and a controlling interest in GPA help Casino outperform the global market in 2011 and 2012.

Acquisition and new markets reduce French exposure COMPETITIVE POSITIONING


The three leading players in the global modern grocery retailing market, and Casino, outperformed the global market through 2014. Much of this has been driven by acquisition, as in the case of Casino, or aggressive store openings, as in the case of Wal-Mart. Large-scale operators are clearly at an advantage, even more so because grocery markets in key mature markets were characterised by price pressure, led by discounters or very large players, whose dominance forced smaller competitors out of the market.

This has seen considerable disposal and acquisition activity, as operators try to reduce their exposure to weaker markets and move into new ones. In 2014, for example, Wal-Mart announced it would close 30 of its Seiyu stores in Japan, while seeking to expand in China.

Companies that have performed best tend to be those that have aggressively bought into emerging markets. Casino, for example, saw its share of sales generated in Latin America rise from 34% to 46% over the review period. Building scale is therefore essential to staying competitive, as it allows players to dictate pricing, build economies of scale and invest in new grocery formats such as click-and-collect.

International development and scale key growth COMPETITIVE POSITIONING


Casino saw a slight drop in share in 2014, as the dramatic gains made following the GPA acquisition were offset by its exposure to France. Peers such as Seven & I, which generated the bulk of their sales in Asia Pacific, are less prone to this, but most leading retailers hold significant share in developed markets.

Wal-Mart leads the global market by some distance, and has built such a large network and such advantageous economies of scale that its leading position appears unassailable.

US-based retailers dominate, although Seven & I has made US expansion of its 7-Eleven chain a strategic priority and is therefore coming into more direct competition with these players.

The scale of the global market means that dramatic share evolution has been rare in the past. However, with new retail models this has changed; online giant Amazon has built sales at high speed. Casino is aware of this challenge and is attempting to compete with these players by improving its own online offer, as well as developing multi-channel strategies.

France focus limits Casino gainsCOMPETITIVE POSITIONING



DOMESTIC STRATEGY




OPERATIONS

RECOMMENDATIONS


French sales generated 44% of Casino’s global retailing sales in 2014, down from 56% in 2009. This reflects the dynamism of the company's international markets and stagnation at home, as well as its strategy of buying share in new markets; the leap in 2012 followed the purchase of GPA in Brazil.

Casino’s French peer Auchan Group’s French sales fell from 42% to 34% of total values through 2014, as it pushed into China. Again, this reflects underlying weakness in the French market, although Carrefour actually increased its share of sales generated there from 45% to 49% following its exit from a number of international markets, notably Colombia, over the review period.

Domestic value development will continue to struggle over the forecast period, as Casino is locked into an escalating round of price cutting across its network of banners in France that was continued and accelerated in 2014. This has led to a recovery in footfall and a significant rise in sales volumes, and has led the company to invest heavily in the Leader Price discounter chain.

Value development slowing in France DOMESTIC STRATEGY


Internet retailing has evolved strongly over the review period for Casino, generating 8% of 2014 values compared to 5% in 2009. This compares favourably to the overall French retail market, where internet retailing generated 6% of values in 2014. Casino is the second largest internet retailer in France after Amazon with a 6% share in 2014.

However, its Cdiscount site slipped from first to third in ranking over the review period, possibly because Casino is not a pure play internet player. Primarily it is a modern grocery operator at home, although its willingness to straddle multiple channels means that it has interests in vending and mixed retailing (ie mass merchandisers). This flexibility is characteristic of the company.

Casino diversifies, but slowlyDOMESTIC STRATEGY


Modern grocery retailing is Casino’s primary business in France, with which it generated 91% of 2014 sales. Within the channel, supermarkets generated 47% of sales, followed by hypermarkets (26%), discounters (18%) and convenience stores (9%).

Hypermarkets, supermarkets and convenience stores are set to see the strongest growth in absolute value terms through 2019, and the company holds solid positions in each of these. What seems odd is that the company is investing heavily in discounters, a channel that is set to see far weaker growth going forward, and where it faces the might of German operators Lidl and Aldi.

Casino opened 134 new discounters under the Leader Price banner (around 85 of them conversions of the Norma and Le Mutant chains, acquired in 2013) in 2014, at the same time as closing 35 convenience stores. Although price remains king in France, the company may do better by focusing on convenience trends. It has started to roll out Franprix Nano, a small c-store format that it has high hopes for, but smaller supermarkets are also a way forward.

As in other mature markets, convenience stores and local supermarkets are benefiting from changing consumer demand to shop closer to home, partly driven by higher travel costs and an unwillingness to buy more than necessary. Tracking these trends, rather than price cuts, may be better long-term goals.

Casino’s price cutting may not be best long-term strategyDOMESTIC STRATEGY


Despite pursuing a strategy of aggressive price cutting, Casino saw stronger growth in sales over the review period than in outlet numbers; values posted a CAGR of 5% compared to 2% for outlet numbers. Much of this was due to the Monoprix acquisition in 2012, which added 300 new supermarkets to the company’s portfolio.

This saw Casino’s supermarkets sales jump by a CAGR of 11% over the review period. This is strategically a strong move; many French consumers are less willing to drive to shop, and prefer the convenience of urban supermarkets. Food accounts for a smaller percentage of household budgets and time spent shopping has fallen. Monoprix is also more upmarket, with a strong convenience alignment allowing Casino to preserve price positions in some of its stores.

At the same time, the company is reducing its exposure to hypermarkets; it closed five of these outlets over the review period, and saw sales fall by a CAGR of 3% as a result. Hypermarkets are set to generate the greatest total absolute value through 2019, but Casino may be looking to reduce direct competition with E Leclerc and Carrefour, which held a combined 53% of the channel in 2014, compared to Casino’s 5%.

The company is therefore actively pursuing a far more multi-channel strategy. This, allied with its burgeoning internet businesses and online cross channel strategy, puts it in a strong position to adapt to what has become an unpredictable market in France.

Multi-channel offers flexibility and strengthens competitiveness DOMESTIC STRATEGY


Of the leading five modern grocery retailers in France, Casino has the most diverse portfolio by some distance. This is deliberate. The acquisition of the Monoprix supermarket chain allows it to pursue urban convenience trends (as well as strengthen its presence in Paris and its suburbs), more Leader Price discounters as result of the network-strengthening acquisition of the Norma and Le Mutant store chains allows it to address extreme price sensitivity in much of the consumer base, and the reduction of dependence on hypermarket sales reduces its exposure to competition with heavyweights such as E Leclerc. This balance is likely to shift through 2019, as Casino looks to roll out more convenience stores. The Franprix Nano format, for example, is anticipated to enjoy a boom in outlet numbers.

Wider French grocery footprint than peersDOMESTIC STRATEGY


The competitive environment in modern grocery retailing will harden over the forecast period, and the company should therefore look to exploit its internet strength to sharpen its edge. It is investing in click-and-collect in France, but may also look to develop online grocery delivery. This is a comparatively undeveloped format in France, and rising demand for convenience, as well as growing internet penetration could drive demand.

Casino’s large number of urban supermarkets, in particular its upmarket Monoprix chain offer promising synergies; distribution is over a smaller area, it is aligned with the convenience demands of urban workers, it allows the company to add value and differentiate its offer and its lack of scale in comparison to Carrefour is less of an issue.

Internet sales are set to generate a CAGR of 11% through 2019, equivalent to 79% of total retailing absolute value growth over 2014-2019. Casino's Cdiscount business, which retails a wide variety of non-food products with a focus on large price cuts, is the third largest online retail brand in France, and has regularly delivered double-digit growth for the company over 2009-2014.

This channel will help offset hardening market conditions elsewhere. None of the four other channels in which the company is primarily involved is forecast a CAGR of more than 1% through 2019, with even strong forecast discounters will be offset by price cuts.

Internet dynamism to offset grocery weaknessDOMESTIC STRATEGY


Internet retailing is forecast a CAGR of 11% through 2019 in France compared to less than 1% for modern grocery retailing. Casino’s Cdiscount banner is losing share to pure play internet retailers such as Amazon, but remains a serious player in the market.

Cdiscount, its core business, has a reputation for low prices, an increasingly important factor in the French market and a very useful marketing tool. However, the company might do better by investing in home delivery, especially via its Paris-centric, upmarket Monoprix banner. An emphasis on convenience and service would help preserve prices and margins.

Using online to offset stores

Casino has invested substantially in price cutting across its network, in response to very solid consumer price sensitivity. This is understandable, but its lack of scale compared to the likes of Leclerc and Carrefour make this a very challenging strategy for the company.

Although the effects of the Eurozone crisis linger, and consumer confidence is weak, the company may find in the long term that price cuts will be difficult to sustain, hindering sales and margins, and hurt investment elsewhere in France.

Long-term pricing

The company acknowledges that of all of its grocery operations, convenience stores and small supermarkets (which are frequently convenience aligned thanks to their central urban locations) fared best in 2014 in what has been a zero demand market.

Casino ranked second in the French convenience stores market, and had a network of 3,259 stores in 2014. There may be scope within this network to add more value, improving foodservice and fresh food offers to meet convenience demands and the decline in cooking at home. Again, this offer will allow the company to preserve domestic value.

Adding value in c-stores

France: Finding ways to add valueDOMESTIC STRATEGY



DOMESTIC STRATEGY




OPERATIONS

RECOMMENDATIONS


Casino is currently present in just one of the 10 global retailing markets, Brazil, set to see strongest growth in absolute value terms through 2019, having exited Saudi Arabia in 2009. The company has limited international scope, with Brazil, Thailand and Colombia generating 93% of total 2014 international sales, and a presence in just nine international markets in total. Historically, Casino had a broader footprint, having exited markets in the Baltics, Western and Eastern Europe, and Latin America.

Although 44% of 2014 values were generated in France, this is its only Western European market, unlike Auchan and Carrefour, which operate large store networks in Italy and Spain and are more exposed to regional economic weakness. Brazil, forecast to generate 2% of absolute global growth in retailing through 2019, became Casino's largest international market in 2012 following the GPA acquisition. It is its prime international opportunity, generating 35% of 2014 sales. The company has identified markets in Africa and the Middle East as holding potential. It opened Monoprix stores via franchise in Libya, Lebanon, Tunisia and Qatar in 2013 and 2014, and aims to open more in 2015.

Limited international presence at present INTERNATIONAL STRATEGY


Casino was visibly present in nine international markets in 2014, although it has nascent markets in the Middle East via franchise agreements. fu-com is developing Géant hypermarkets in the United Arab Emirates, Bahrain, and Kuwait, while Al Meera is spearheading Géant in Qatar. The Monoprix banner is managed by the Ali Bin Ali Group in Qatar and ADMIC in Lebanon, and in Tunisia, the Géant and Monoprix banners are franchised to Mabrouk.

Its international presence is therefore more modest than that of Auchan, Carrefour and Wal-Mart. With the exception of Brazil, the company’s focus tends to be on small, relatively dynamic markets. Unlike these three competitors, it has no presence in China, the world’s most dynamic retail market. The fact that it is expanding into new markets via franchise, as well as distributing Monoprix and Casino branded products via local retailers in 40 countries worldwide, suggests that it continues to struggle with scale.

International presence solid in smaller marketsINTERNATIONAL STRATEGY

Key Point: Casino’s retail presence in Asia Pacific is confined to Vietnam and Thailand. Other regional markets such as Indonesia offer potential to find partners or buy share. China may be out of the question.


Casino grew its share in Thailand from 3% to 4% in total retailing through 2014. Much of this was driven by network expansion. The company acquired Carrefour’s Thai business in 2011, and added it to its Big C operations in which it is a majority shareholder. Other acquisitions of small local players as well as aggressive store openings saw store numbers rise from 97 to 731 over the review period.

Casino generated 99% of 2014 value sales in Thailand via modern grocery retailing. Hypermarkets are its core business, generating 88% of 2014 value sales. However, this is down from 99% in 2009, as Casino has pushed into new channels, putting hypermarkets and large supermarkets into shopping centres and expanding its convenience store and small supermarket networks elsewhere, mostly under the Big C banner.

Like France, Casino operates a low price strategy, but acquisition-led growth has let it broaden its customer base, and cater to upper- and lower-income consumers. However, it is coming under threat; it lost share in its core hypermarkets business to Tesco in 2014, as the larger player accelerated its building programme. Again, lack of scale is a weakness.

Big C widens consumer and channel footprint in all directionsINTERNATIONAL STRATEGY

Key Point: Convenience stores is forecast to be the most dynamic store-based channel, and the company may look to improve its position here.


The company operates 28 Big C hypermarkets and 10 New Cho supermarkets in Vietnam, and has identified the market as one of its strongest opportunities. Vietnam is set to see a CAGR of 9% in modern grocery retailing through 2019, compared to a global average of 2%, with growth driven by a strengthening economy and rising urbanisation.

It has therefore invested to its fullest ability in the market, adding 21 hypermarkets to its network over the review period. As a result, it ranked second in modern grocery retailing in 2014, a market where peers such as Carrefour and Tesco are absent.

Again, low price positioning is a key strategic plank for the company. In addition to price cuts, the company used aggressive promotional campaigns in 2014, as well as extending its WOW value line and Big C brand.

Although the company describes the market as immature, it has made solid use of innovation, notably the Big Xu electronic wallet. It aims to grow by network expansion, focusing on opening hypermarkets anchored in shopping centres.

The market is clearly underdeveloped; there is no visible share for either discounters or forecourt retailers in modern grocery retailing. Given Casino’s experience in the channel, it may look to build a discounter market and enjoy the advantages of early entry.

Vietnam ripe for development INTERNATIONAL STRATEGY


Casino’s 2012 acquisition of GPA significantly altered its portfolio, increasing its share of internet retail from 4% to 12%, and giving it a market-leading 27% share in electronics and appliance specialist retailers in 2014. As a result of the acquisition, the share of sales generated by modern grocery retailing fell from 93% to 51% between 2009 and 2014, and by electronics and appliance specialists grew from 2% to 42%.

Casino operated 1,862 stores in Brazil in 2014: Extra hypermarkets, MiniMercado Extra convenience stores, Extra Supermercado supermarkets and the premium banner Pão de Açúcar, as well as Assai, its cash-and-carry chain, as well two fasciae in appliances, the upmarket Ponto Frio and the middle class-aligned Casas Bahia. It also operates 158 chemists, and its Cnova Brazil online division including extra.com.br, pontofrio.com and casasbahia.com.br.

Brazil is by a distance the most fragmented part of its retail business, a legacy of the GPA acquisition. In the long term, it needs to try and rationalise banners and build synergies across the channels.

Casino in Brazil looks chaoticINTERNATIONAL STRATEGY


The Brazilian economy is slowing down, after a period of dynamic growth. According to government data, the country slipped into recession in the second quarter of 2014, despite the much-hyped affects of the World Cup, and consumer confidence and investment fell. Unemployment is rising, as is inflation, although figures for 2014 were better than expected.

This leaves Casino facing growing price pressure in all of its local retail channels, but especially in food. Hypermarkets, where it generated 26% of total retail value in 2014, is forecast to generate a CAGR of less than 1% through 2019.

The company may need to invest more heavily in low price positions. It currently has no presence in discounters, a channel that is set to generate a CAGR of 5% over the forecast period, equivalent to 21% of total absolute growth in modern grocery. Although it holds 100% of the dynamic but diminutive convenience stores channel, growing price sensitivity will be key through 2019, and it may seek to buy share in the channel rather than hammer down prices in its other businesses.

Brazil: Casino may need to brace for recessionINTERNATIONAL STRATEGY


Colombia, where Casino generated 9% of global sales in 2014, is its third largest market. Its Éxito banner is the country's leading retail brand, with presence in convenience stores, hypermarkets, supermarkets, electronics and appliance specialist retailers and internet retailing. It also operates the Home Mart home and garden banner, although 98% of 2014 sales came from modern grocery retailing.

The company invested in reshuffling its Colombian operations in 2014, closing two hypermarkets and investing in supermarkets and convenience stores. The latter is set to be among the most dynamic parts of the market. Casino is looking to bolster its presence in Colombia's cities by expanding its discounter and convenience store formats, and in 2014 signed an agreement to acquire and manage 50 Super Inter stores located in the Cali and coffee growing regions.

The company’s e-commerce platform is also strengthening. Its Éxito platform is the leading online retailer in Colombia and according to the company, saw a 37% sales increase in FY 2013 and expanded its delivery coverage to include 1,100 Colombian towns and cities.

This reflects Casino's multi-channel strategy, and this scale of investment helped improve its share of the Colombian modern grocery retailing market from 29% in 2009 to 38% in 2014. This share is likely to rise as the company plans to spend heavily on outlet expansion and acquisition.

Colombia characterised by diversity INTERNATIONAL STRATEGY



DOMESTIC STRATEGY




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Hypermarkets generated 36% of Casino’s global sales in 2014, down from 49% in 2009, following the GPA acquisition. This trend has also been driven by its pursuit of a multi-channel strategy. It has done this by acquisition, for example, the Norma and Le Mutant discounter chains in France, as well as by store openings. However, the trend has also been partly driven by the company’s step away from hypermarkets in France. Since 2009, it has closed five outlets in its domestic market while opening 73 outside France.

The saturation of the channel in France, declining demand for non-food in hypermarkets and intense price pressure all hit Casino’s French hypermarkets sales. At the same time, its lack of scale made direct competition with the likes of Carrefour and E Leclerc difficult. In emerging markets, the one-stop shopping trend is still emerging, and many of its newer markets remain underdeveloped, especially in Southeast Asia and North Africa. Casino is unlikely to step away from the channel altogether, especially as it seeks to integrate its online and store businesses in France, but the channel is no longer the heart of its business.

Hypermarkets fall in importance for CasinoMULTI-CHANNEL STRATEGY


Casino added 417 new supermarkets to its store network between 2009 and 2014, the largest addition of stores to any part of its network. In truth, a large number of these came in the wake of the Monoprix acquisition, but adding the smaller format to its portfolio has emerged as a strategy for the company over the review period, both domestically and internationally; this includes 38 new supermarkets in Thailand and 39 in Colombia over the review period.

The reasons for this are straightforward. In France, the company has historically been weak in the north of the country and especially in Paris, where the hypermarkets channel is saturated. Supermarkets are easier to build, and avoid direct competition with players such as Carrefour. They also allow the company to roll out new stores at speed, part of an aggressive expansion policy.

The same is true in new markets, where rapid urbanisation and fewer car owners drive demand for supermarkets above hypermarkets. The format is also more convenient for shoppers, a key global retail trend.

Supermarkets allow Casino to push on at speedMULTI-CHANNEL STRATEGY


Casino’s Cdiscount.com website, with its focus on non-food products, is a major operator in the French internet retailing market. Despite achieving a CAGR of 14% through 2014, it slipped from second to third over the review period, losing ground to Amazon, which benefited from the widening of its product offer in categories and an aggressive pricing strategy, and E Leclerc’s bundle of price comparison and online retail sites.

The latter is the most alarming. Like Casino, Leclerc has invested heavily in click-and-collect, opening its stand-alone, internet dedicated Drive format in 2007 which lets customers place orders via www.leclercdrive.fr, then pick up the order by car at their chosen time and location. Leclerc had more than 400 of these by 2014.

Casino operates a click-and-collect service in France; from an initial test at 200 hypermarkets and supermarkets in early 2010, by 2014 it had 3,000 Cdiscount pick-up locations at its fasciae, with more than 400 Casino stores and 200 partner newsagents accepting payment for Cdiscount purchases. However, the success of Leclerc’s Drive format prompted Casino to test the Casino Express banner, with a dedicated site, casinoexpress.fr. Like Drive, this is a stand-alone "dark" store that completes orders placed online, for collection at the Express site by the shopper; by 2014, Casino operated six of them.

The popularity of click-and-collect in France may explain Casino’s ongoing acquisition of sites in France, most recently 38 convenience stores from German discounter Norma and 47 from French discounter Le Mutant. These let Casino bring collection points closer to consumers, as discounters and convenience stores are typically located in the suburbs.

In terms of pure play internet, the company will lose share as more specialists enter the market; eBay is set to overtake Casino during the forecast period. This is inevitable. However, the competitive environment for modern grocery click-and-collect is heating up, and the company will need to invest more, possibly in stand-alones, to remain competitive.

Casino losing ground in click-and-collect in FranceMULTI-CHANNEL STRATEGY


Internet retailing was the strongest performing part of the company's global business in France over the review period, and is increasingly offsetting underperforming parts of its other retail operations. In 2014, its e-commerce activities were gathered into Cnova, an entity that includes Cdiscount (operating in France, Belgium, Côte d’Ivoire, Senegal, Colombia, Ecuador, Thailand and Vietnam) and Cnova Brazil (extra.com.br, pontofrio.com and casasbahia.com.br). This is part of the company’s aim to launch a potential initial public offering in the US market, and if successful should enable the company establish itself as a Europe-based competitor to the likes of Alibaba.

Casino’s main online sales in France are almost entirely limited to non-food. Given that online food and drink is set to be the largest single-definition growth market in absolute value through 2019 and Casino is a grocery specialist, this seems odd. Again, home delivery is undeveloped in France, and the company could look to build this up, even if only in key urban markets such as Paris.

France is still its key online market, generating 62% of online sales in 2014. However, this is down from 85% in 2009, and Casino's online sales are evolving at pace elsewhere, notably in Brazil which generated 36% of internet sales. Its Nova Pontocom subsidiary is the second largest e-tailer in Brazil through its various websites: pontofrio.com, casabahia.com.br, extra.com.br, barateiro.com, partiuviagens.com.br and eHub.com.br.

Clearly, non-traditional sales channels are performing extremely well for the company, and it continues to invest heavily in them. It is easier to compete against retailing giants such as Carrefour in the digital channel, and this is becoming a keynote Casino strategy.

Casino seeks to become global e-commerce playerMULTI-CHANNEL STRATEGY


Casino is increasingly looking to develop new digitally-based retail formats. It was the first retailer in France to introduce its own NFC-enabled mobile app, mCasino, for contactless shopping with a smartphone.

Most interestingly, the company has unrolled a series of digital walls and virtual storefronts that are located in stores as well as in busy pedestrian areas. Customers use a smartphone to add to a shopping cart using NFC tags or QR codes that are digitally displayed, then choose home or in-store delivery and a payment method.

Casino has launched these in Lyon, France, in Thailand, where Big C has erected two digital walls in the Bangkok metro, as well as actually on and inside a metro train, and in Colombia, where Éxito rolled out its first virtual store in 2012. In São Paulo, Pão de Açúcar also opened its first virtual storefront, offering a mix of 300 products that is updated on a regular basis.

The format is fast, intuitive and offers a more convenient experience, whether in stores, at home or on the move. It also ties in consumers more strongly to the fascia, allowing stores to capture and retain a new and active clientele.

This is effectively a new retail channel, limited only by the condition of a market's digital networks. However, as these evolve, virtual stores are likely to emerge strongly (as they already have in South Korea) and Casino' early start gives it a strong competitive advantage.

New ways to shopMULTI-CHANNEL STRATEGY

Above: Big C's virtual shop/train on the Bangkok metro. Consumers can capture QR codes below items to place orders while in transit, and either collect or have the order delivered



DOMESTIC STRATEGY




OPERATIONS

RECOMMENDATIONS


Casino operates an unusually large number of brands, both domestically and internationally. With the exception of Thailand and Vietnam, where the company’s primary modern grocery banner is Big C, each of its international markets has a different modern grocery banner. This is unusual, but is partly a reflection of the company’s recent growth by acquisition.

Where possible, it has tried to bring new acquisitions under a larger banner, for example rolling the Norma and Le Mutant acquisitions into Leader Price, and integrating of Carrefour’s Thai outlets into the Big C portfolio. However, the company has historically acquired local retailers in emerging markets without fully integrating their operations, in contrast to Carrefour and Tesco, which prioritise re-branding.

In France, Casino's main modern grocery brands are Géant, Monoprix (fully acquired in 2013) Casino and the discounter Leader Price. There is a certain amount of channel straddling; Casino, for example, is present in hypermarkets, supermarkets and convenience stores, but in general the company operates specialists in each channel. Its largest brand, Géant, for example, is purely a hypermarket brand.

Its principal international brands include Extra in Brazil, Éxito in Colombia and Big C in Thailand and Vietnam. Big C is the only brand with multi-channel coverage, with convenience stores and supermarkets supporting its main channel, hypermarkets.

The multi-brand strategy prevents brand harmonisation and synergy development across the company’s portfolio. However, it does let the company develop far more localised offers than many of its peers, and gives it flexibility.

Multi-brand key to global and domestic strategy BRAND AND PRIVATE LABEL STRATEGIES


Casino’s modern grocery retailing sales, which generated 83% of its total 2014 value sales, posted a CAGR of 6% over the review period, compared to a global market CAGR of 5%. This is despite the company’s exposure to the mature French market, and is a reflection of a fairly brand aggressive acquisition strategy.

Logically, the company has been buying into more dynamic markets; its purchase of the controlling share in Extra, for example, makes the Brazilian brand the largest in its portfolio. The 2012 acquisition of the French Monoprix brand widens its footprint in Paris, and gives it a premium aligned brand. However, growth by acquisition for its own sake appears to be the strategy; this makes good sense in a very competitive market where margin pressure continues to rise.

More brands, more growthBRAND AND PRIVATE LABEL STRATEGIES


Leader Price is the company’s primary discounter banner, and one that it has invested substantially in. According to the company, by the end of 2014, Leader Price had 1,001 outlets in France, including a drive-through click-and-collect service available at over 100 stores. The banner outperformed the market over the review period, as rising price sensitivity drove demand.

At the same time as German discounters Lidl and Aldi are investing in their outlets by improving their offer and trying to make themselves a credible alternative to supermarkets, Casino is also innovating with its brand. In January 2015, Casino launched a new concept in France called Leader Price Express, basically a cross between a convenience store and a discounter.

This will strengthen the brand’s local retail presence, offering low prices in smaller stores ranging from 75 sq m to 300 sq m with varied offerings ranging from 1,180 products at small outlets to 2,900 at 300 sq m stores. In line with discounter strategy, 80% of these items will be Leader Price private label products.

This cross-channel step is in line with other parts of the company’s strategy, although convenience stores have historically been better able to protect prices within the limitations of their offer. Casino has been taking prices down in other parts of its business, but may risk cannibalising sales in its convenience store business.

Leader Price convenience/discounter hybrid looks riskyBRAND AND PRIVATE LABEL STRATEGIES


Casino appears to be chasing prices to the bottom of the market. Its aggressive price cutting at Géant saw sales stabilise in Q1 FY 2014 and grow by 2% in Q2, and its investment in Leader Price as well as price cutting initiatives in Brazil, Colombia and Thailand all appear to be securing a low price position.

However, the multi-brand strategy cuts both ways. Most grocery operators focused on undifferentiated middle-class consumers, but growth is forecast for the premium end of the global market.

The 2013 completion of the Monoprix acquisition allows Casino a more nuanced approach, and it may be able to develop a more "boutique" approach to grocery retailing. Monoprix is a predominantly Parisian urban banner, with a higher number of consumers with more disposable income.

A focus on better quality and convenience-led lines could strengthen value sales for Casino, reflecting changing buying patterns as French consumers increasingly opt for smaller, more frequent shopping trips in-town in order to lower petrol costs and cut food waste.

Monoprix suits this approach. However, Casino could look to develop more premium positions in other global markets. Its Extra and Éxito brands in Brazil and Colombia in particular offer the company scope to create stronger value positions as levels of disposable income rise. In Brazil in particular, the Casino brand offers a strong possibility, as it is regarded as a premium brand in the country.

Monoprix allows premium differentiation BRAND AND PRIVATE LABEL STRATEGIES


The company's private label strategy, is, like its brand operations, extremely diverse. Within France, the company operates Franprix, Monoprix, Leader Price and Casino, the last of which is France's leading private label brand.

These have a multitude of sub-brands, including Casino Bio (organic), Casino Fairtrade, Casino Bien pour Vous!, Casino Famili, Leader Price Kids and the "Tous les jours" value brand product line.

Casino also operates private label for its international banners, although not to the same extent as it does in France, where it is estimated private label generates over 50% of Casino's volume sales at its hypermarkets, supermarkets and convenience stores. Nonetheless, international markets enjoy local private label development.

The company's increasing adoption of a price-led strategy is driving much private label development, both at home and internationally. This includes an extension of Big C's range of value-priced products; WOW! in Vietnam and Happy Baht in Thailand, as well as ongoing range extensions for the group's discount banners, Leader Price in France and Surtimax in Colombia, as well as the Assaí cash-and-carry format in Brazil.

Private label is also multiple BRAND AND PRIVATE LABEL STRATEGIES

From top: A selection of Casino's value brands. Colombia’s Surtimax, Vietnam's WOW!, France's Tous les jours


Casino has developed an interesting strategy to get itself into new markets without actually investing in new stores. Part of this is the roll out of franchises, and its partnership department has set up alliances with 35 retailers in 40 countries worldwide, mainly in Africa and the Middle East, where there are large numbers of French speakers.

Just as interestingly, the company has made a number of distribution agreements for parts of its private label offer. Casino and Monoprix private label brands are thus sold in markets including Hong Kong, Singapore and the Philippines. In addition to providing revenue, these partnerships allow the company Casino to assess future growth opportunities. The fact that the company appears to be tip-toeing around Southeast Asian markets may suggest that in the long term, it is looking to insert itself more fully, and possibly enter China. Using its brands as an equity building bridge may simplify this.

Above - Casino has distribution and franchising agreements in a large number of small, possibly marginal markets. These include St Martin, Guadeloupe, Martinique and Guyana in Latin America, Senegal, Burkina Faso, Niger, Benin, Congo, Cameroon, Togo, Côte d’Ivoire and Gabon in West Africa, Kuwait, Qatar and Bahrain in the Middle East and Hong Kong and Singapore in Southeast Asia. None of these is likely to deliver massive revenue, but all help to build brand equity and could be used as bridges to larger neighbouring markets.

International growth via label, not storeBRAND AND PRIVATE LABEL STRATEGIES



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Banner Names and Numbers in France

Market Retail name Number of stores

France Géant Casino hypermarkets 126

Casino supermarkets 444

Franprix supermarkets 885

Monoprix supermarkets 585

Leader Price discount outlets

619

Petit Casino superettes 1,314

Spar superettes 930

Casino Shop superettes 161

Vival superettes 1,688

Source: http://www.groupe-casino.fr/en/activities/france

Casino operates in a variety of retail channels in France, of which its principal brands are listed below. Convenience stores represent the majority of the network, although most of this is franchised; all of its Vidal Superettes, for example, are franchised, as are almost all of its Spar stores.

Convenience stores remain the backbone of Casino's networkOPERATIONS

21.5


Banner Names and Numbers in Latin AmericaMarket Retail name Number of storesArgentina Libertad hypermarkets 15

Other stores 7Brazil Extra hypermarkets 138

Pão de Açúcar supermarkets 168Sendas supermarkets 17Extra supermarkets 213CompreBem supermarkets 113Assaí discount outlets 75Extra Facil and Minimercado Extra superettes 164Ponto Frio 397Casas Bahia 601

Colombia Éxito hypermarkets 85Pomona, Carulla and Éxito supermarkets 145Surtimax discount outlets 415Éxito Express and Carulla Express 91Other stores 3

Uruguay Géant hypermarkets 2Disco supermarkets 28Devoto supermarkets 24

Casino's primary international markets are listed below. The company’s focus is on a small number of emerging markets, having exited a number of others over the review period including Venezuela and Switzerland. Following the GPA acquisition, Brazil is the company's largest market.

International retail operations 2014 (1)OPERATIONS

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International retail operations 2014 (2)OPERATIONS

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Banner Names and Numbers in Asia Pacific

Market Retail name Number of stores

Thailand Big C hypermarkets 119

Big C supermarkets 30

Mini Big C superettes 278

Pure 132

Vietnam Big C hypermarkets 25

Superettes 10



DOMESTIC STRATEGY




OPERATIONS

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Casino has a well-established online operation in France, and has shown itself to be an adventurous and innovative retailer. Its completion of the Monoprix acquisition in 2013, a more premium positioned fascia, gives it a platform to develop home delivery, at least in the more compact and affluent Parisian market. Online delivery remains underdeveloped in France, and this could be a good opportunity to differentiate itself from peers such as Carrefour. At the same time, it could offer greater value protection at a time when the company is engaged in price slashing throughout most of its domestic and international businesses.

Online delivery may add value

The company has rejigged much of its retail portfolio over the review period, partly thanks to acquisition and also as part of a strategy to have the most effective offer. Much of its recent activity in France has been focused on the Leader Price discount chain. French consumer price sensitivity is likely to worsen over the forecast period, as the economy shows few signs of recovery, and as such Casino’s strategy is well timed. However, it could also look to develop alternative price positions in other parts of its business, as the pursuit of the lowest possible price will limit margin development.

Segmenting value

Casino is a leading French retailer with ambitions to expand internationally. However, it lacks the scale to compete with its larger peers, and in the current economic climate, which favours massive chained grocers, able to build economies of scale, needs to bulk up. Buying share in emerging markets to strengthen its position, ideally within range of its international markets in Latin America and Southeast Asia is one way of doing this. Not only will it drive value growth, but as the company seeks to build brand equity and its click-and-collect business, new outlets let it sell more private label and reach more consumers.

Acquisitions to build scale

Key recommendations RECOMMENDATIONS


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