Whatever happened to Carrefour’s positive outlook?
I recently met a man at a crossroads.
“Where are you going?” I said.
The man looked rather embarrassed and after quite a while he eventually said, “To be honest, I really don’t know. You see I have been on a long journey. When I started I knew where I was going, but I have travelled a long way and many things have changed. I find myself rather stuck, unsure what to do for the best.”
“Really, I’m sorry to hear that. I’m Mark, what’s your name?”
“Hi. I’m Lars and I used to run Carrefour, the hypermarket company.”
“Oh, yes, Carrefour, doesn’t that mean crossroads in English?”
“Yes, it does…”
He looked a bit put out and scowled at me.
“I suppose you think that’s funny?”
With my childish sense of humour, I do find it rather amusing that “crossroads” is at a crossroads. Lars Olofsson is the outgoing chairman and chief executive of Carrefour, the world’s second largest retailer by sales. Sadly, I haven’t met him, but wish I had. I’d love to hear his story about the business which has been going through hard times of late. I don’t know what Carrefour’s remuneration committee thought of his performance in the job, but under his command the company’s value reduced by 40 per cent.
It is my contention that you can’t squeeze another baguette of profitability out of food retail, so I’m not surprised that hypermarkets are struggling. That said, some of them clearly present an upside for the Warren Buffetts of this world, if his recent investment in Tesco is anything to go by. Interestingly though, the Carrefour share price is still quite rich and doesn’t seem to reflect its rather dull performance of late.
Has Carrefour been too reliant on the fiercely anti-competitive French marketplace, I wonder? The French know how to look after their own, but now things are becoming a little more competitive at home, so if Carrefour wants to compete, it needs to change its tired format and adapt to changing fashions.
I can’t emphasise enough how staying different is vital to ongoing business success if you are competing in an open market. Not everyone has to do it; some industries and some countries are not quite as open as others. But, when real competition finally arrives it can be a very painful experience.
I think strap lines can say a lot about strategic thinking. Here is what Carrefour have used in France, its biggest market, over the years.
- 1988-2003 : “I have a positive outlook with Carrefour “
- 2003-2007 : “Energy wise”
- 2007-2009 : “Quality for all”
- 2009-2010 : “The positive outlook is back”
- Since 2010 : “Positive outlook every day”
To paraphrase influential economic thinker E.F. Schumacher, who wrote a book called Small is Beautiful way back in 1973, my impression is that today, in food retailing, smaller is beautiful for many reasons. And Carrefour is at the wrong end of the size spectrum to compete as well as it once did.
Sadly, I think it’s going to need a little more than a “positive outlook” for Carrefour to have a positive outlook once again.