CARREFOUR SETS SUBSTANTIAL PLAN FOR EXPANSION

Byline: Katherine Weisman

PARIS — A billion-dollar Internet plan, mega mergers, massive global retail expansion — Carrefour has staggering growth on its agenda.
At a shareholders’ meeting Thursday, Daniel Bernard, the charismatic chairman and chief executive of the French distribution giant, proudly discussed everything from the promising results of his group’s merger last year with Promodes, another French hypermarket and supermarket chain, to its plans for the creation this year of a Carrefour Internet company, @Carrefour, which will develop and manage Carrefour’s online operations and investments, and go public in 2001.
“Over three years, we will invest some $1 billion” in Internet developments, Bernard said. “The Internet, cellular phones, television — these are all new channels of distribution that can enrich Carrefour and it’s the right time to enter this market.”
He noted that @Carrefour will be chaired by William Anderson, a former Kmart senior vice president and general merchandise manager of hard goods, who joined the French group — the world’s second largest retailer behind Wal-Mart — about 10 months ago.
Anderson, an executive committee member in charge of merchandising and marketing, along with fellow American committee executive Bruce Johnson, operations and systems, delighted shareholders by making their presentations in French, albeit with thick American accents.
“This is neither your language nor mine,” Anderson joked, when he opened his Internet development speech.
Shareholders were also pleased when Carrefour announced the attribution of a free share for every share held, effective April 11.
Anderson and other executives outlined ambitious plans to become a major e-commerce player while continuing aggressive growth on the brick-and-mortar front.
The company feels it can be a powerful e-tailer thanks to its knowledge of its two billion-strong annual customer base and 21 million Carrefour cardholders.
Carrefour’s strength in selling high tech goods — like the 400,000 personal computers or 1 million cell phones sold annually — coupled with the group’s sourcing and logistical strengths make it well placed to move into cyber space, the executives pointed out.
In the last quarter of this year, the company plans to launch a yet-to-be-named portal in three countries that will be a free Internet service provider offering everything from customer feedback windows to local content, like where are the stores nearest to the Internet user that can provide various services.
This will be complemented by what the group is dubbing “Internet Stores.” Here, Carrefour wants to add expanded financial services, via an eventual partnership with a large bank, to its existing roster of products, such as insurance, which Carrefour stores already sell.
Carrefour would also bring its travel agency online in addition to entertainment services. There could also be product sites, such as one dedicated to international wines or gardening.
In addition to these services, Carrefour plans to expand its Ooshop online grocer, which will launch in Paris on April 25, to three other major French cities and ultimately in other markets. This grocer will offer delivery at the customer’s appointed hour, a revolutionary idea in France, where home delivery from supermarkets or other stores, such as Carrefour-owned Picard frozen food chain, is done within given time-frames, but never at a specific time.
In 2001, the portal will be available in eight countries, home delivery in three countries and banking services in four countries. By 2003, the portal will be available in 15 countries, home delivery in seven and financial services in eight.
This news follows the group’s move in February to launch GlobalNetXchange with Sears and Oracle. This B-to-B platform was joined last week by U.K. retailer Sainsbury and Germany’s Metro, while the U.S.’s Kroger signed on earlier this week.
It is estimated that GNX can represent a volume of $175 billion, and there are plans to take GNX public within the next 18 months, Bernard said, without disclosing the potential stock exchange or estimated valuation.
Currently, Carrefour holds a 30 percent stake in GNX, but that share should decline to no lower than 15 percent as other investors join.
Not only will Carrefour benefit from the operational efficiencies generated by GNX, but also the group expects to enjoy the profits of an initial public offering in its position as a “significant shareholder,” Bernard said.
Bernard underlined that the GNX partnership, launched with two formidable U.S. partners, does not signal Carrefour’s entry into the U.S. market.
“The U.S., the U.K. and Germany are very important markets where we are not present,” Bernard acknowledged. “We need to find the best moment and opportunity to enter, and that most likely would be by acquisition.”
While its plans for the Internet are lofty, that area is today a tiny dot on the Carrefour worldwide map. Last year, the company counted 1,699 stores, ranging from 178 hypermarkets to 34 local grocers. France represented 62 percent of pretax sales; Europe accounted for 22 percent of pretax sales; South America garnered 11 percent of sales, while Asia generated 5 percent.
Last year, Carrefour began the integration of the acquired Comptoirs Modernes supermarket chain and started the process of logistically integrating the Promodes group, while digesting other acquisitions. Bernard noted that with Comptoirs, the group has effectively become a supermarket player and that the transitional period with Promodes is going smoothly.
By September, all the Promodes hypermarkets will be under the Carrefour banner, and by yearend, the Promodes hypermarkets will be under the Champion moniker. The group conceived the slogan “One plus one: Together to win the worldwide battle for business.”
This year has already seen Carrefour take full control of Italy’s GS, making Carrefour Italy’s number-two distributor. Carrefour also created a joint-venture with Marinopoulos in Greece, whereby Carrefour manages the retail chain and becomes Greece’s number-one player. Also this year, Carrefour will increase its stake in Argentina’s Norte chain from 49 percent to 51 percent and become that market’s leader.
Acquisitions aside, the Carrefour group will grow through aggressive store openings. This year, one Dia store should open each day; one Champion supermarket should open every three days, and one Carrefour hypermarket should open roughly every week. This translates into 15 hypermarket openings in Europe concentrating on Eastern Europe, Turkey and Greece and 20 hypermarket openings slated for South Korea, China, Indonesia and Japan, a new market for the group.
In the Americas, where sales and operating profits were hurt last year because of local currency devaluations and weak local economies, 10 hypermarkets are set to open.
These plans are expected to help operating profits grow 35 percent this year on a sales base that should rise 20 percent, the company said.

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