Has the report of the French on food really changed?
Yes, the relationship to food is changing in France. We see it every day in our stores, we are seeing a decline in volume and an incredible increase in organic or regional products better valued. The consumer referee and, for some, the price element, so far true differentiating element, does not play as much as before. Even the offer of "first price" products is down, by -14% in the total market or by -20% in supermarkets. Simply being the cheapest can no longer serve as a growth strategy. We, which grew from almost 13% in 2011 to almost 15% market share today, are selling growth to our suppliers. But we also sell them our ability to highlight their innovations: it is a way to respond to changes in consumption and to re-create value for the entire chain.
How to explain this trend?
Today, 60% of French people look at the label before buying a product. Food has never been so safe but the consumer inquires about his health. The slightest health scandal has profound consequences to the point where the consumer reaches zero tolerance. Conversely, pedagogy, whether on the organic, or through the Nutriscore where Intermarché was precursor, has an impact that is bearing fruit. The organic segment is up 21% year on year at national level and 28% in our Intermarché. In my store, in Issy-les-Moulineaux, the organic segment now represents 8% of my turnover.
A distributor can not progress if his bio radius does not progress. This is what pulls the market today and it will grow
A distributor can not progress if his bio radius does not progress. That's what's driving the market today and it's going to get bigger. First, because the product offer is constantly expanding and more and more consumers are choosing organic products. Then, the value effect will continue and the segment will be democratized. A not insignificant share of the innovations of the agribusiness industrialists are concentrated in the bio or the naturalness. They allow them to gain market share and pull prices up.
Is it a parisian or truly national phenomenon?
If urban consumers are often the ones who are drawing trends, there is a profound change in demand. A gap still persists between urbanized areas, in which organic food already accounts for 7 to 8% of sales, and the province where volumes are more than 3 to 4%. But let's not forget that in the regions, the consumer also has easier access to fruits and vegetables in short circuit. Our strategy is to make the inaccessible accessible. We did it in the 80's or 90's with lobster or foie gras. Our mission today is to democratize access to "better eating". This is why a good part of price cuts, concentrated until then on promotions, will be more and more allocated to organic. For 50 years, our fight has been "to bring the best to the greatest number".
If organic prices decline, this will not improve the situation of French farmers?
All the challenge of the States General Food is that each link in the chain helps to improve the situation for the agricultural world. I do not believe in the miracle of spontaneous runoff in farmers' pockets, I believe rather that it is possible to work for a better world. I do not say it will be easy. But French agriculture is rather well structured to cope with this evolution of demand. We have more farms on a human scale than gigantic industrial farms. On the other hand, becoming organic takes time. Manufacturers, distributors and banks must allow agriculture to invest and wait for a return on investment. It's our interest to everyone.
Do you worry about a decrease in purchasing power?
In the rural areas we know well, the feeling of a territorial divide is emerging. In particular, Mousquetaires business leaders perceive, often by their teams, concerns about the purchasing power of retirees. We know that 20% of French people find it hard to make ends meet every month. Not to mention the movement of Yellow Vests, we will be very attentive to the succession of events to come: withholding tax, raising the threshold of resale at a loss and limitation of promotions. If all these measures came into effect on January 1, we will have a purchasing power shock on February 1. However, I recognize that the government breathes new momentum, and I think this is the moment or not to support its reforms – because we must first create wealth before thinking of redistributing it.
Will your strategy remain aggressive on prices?
Of course, promotions will continue to exist, but in other forms. The "promo" is a prerequisite in our sector and many products, both in physical stores and online, are only sold at bargain prices. Intermarché will continue, of course, to make the promo and meet the expectations on the price of consumers. We have room for maneuver. On the Super format, Intermarché realizes 17% of its sales in promo. The limit will be set at 25% of volumes, the level of turnover achieved by a hyper format. A distributor creates preference by being differentiated in part by price. Our trade of discounter, Intermarché assumes it! But it's up to us to set the slider respectfully for our entire ecosystem. If raising the resale threshold at a loss allows us to generate better margins on so-called "psychological" products such as colas or spreads, this will give us flexibility to, on the one hand, better pay some manufacturers who work directly with the farming community – as long as they reduce these increases to farmers; and, on the other hand, lower prices for consumers on other foods.
Our trade of discounter, Intermarché assumes it! But it's up to us to set the slider respectfully for our entire ecosystem
This is in any case our commitment: buy more expensive products with a strong agricultural component, but by organizing the "runoff". And this is the instruction given to our buyers during this period of commercial negotiations. But everyone needs to play the game. If prices rise modestly for consumer products, we need to be sure that manufacturers are actually redistributing this value creation to producers. The advertised "runoff" must occur. Intermarché will better treat the manufacturers / processors who will make commitments in this direction, and who will hold them seriously. In order to better follow the process with respect to the agricultural world, Intermarché and Leclerc must also enter the inter-professions.
Why does French retail now seem so difficult? Will it be the next steel industry?
Everyone does not go wrong. Intermarché is growing market share: we reach 15%, which makes us the leading brand in growth and the third player in the distribution behind Leclerc and Carrefour. That said, this sector is much less concentrated in France than in other countries. In an economic context that is not always favorable and faced with the rise of Internet distribution, newcomers, such as Grand Frais, join the many players already present. All this weighs on the profitability of some and it would not be surprising that we would, in the coming years, be in a form of consolidation.
It would not be surprising if, in the coming years, we witnessed a form of consolidation
Will you continue to open many stores?
At Intermarché, we are not in a rush to grow sqm in a context where, in some areas, the supply of businesses is too important and yields per square meter are falling. Amongst the food retailers in the market, some shops have had to close while, until now, the sector was protected, if only by population growth. We can also wonder if it was not a political mistake not to tighten the regulation of commercial planning in the Alur law or the Food law.
Our growth strategy is to expand and renovate our existing supermarket fleet
In our self-employed model, we welcome about a hundred new members every year. Essentially, it is on the occasion of occasions of existing stores. Our growth strategy is to expand and renovate our existing supermarket fleet. At the same time, we are opening some new points of sale, mainly in urban areas where we are less present. When we arrive in town, we come with our image of distributor-producer, our innovations but there is also a form of benevolence. We are a leading brand of proximity, because very present in regions where some city dwellers spent their childhood or family holidays. And then, we're about 15% to 20% cheaper than downtown brands like Monoprix.
How will the trade change in ten years?
With the structural changes that large retailers are going through, it is difficult to look forward to ten years. Obviously, the stores will not be the same. Experts estimate that within 5 years, e-commerce will take another 6 billion euros of turnover in food. A good part will go to the drives, format in which Intermarché still has a margin of progress. The real unknown is home delivery, even if Amazon is primarily a threat to Parisian distributors. The last mile has a high cost that consumers today do not pay.
With our sales outlets every 17 kilometers – for many in the rural areas – we believe in the future of the store as a social place
To continue to exist in 10 years, food businesses will have to lead a revolution in the processing of fresh produce. The services will be even more developed, going as far as catering delivered at home. We are thinking about the possibility of pooling the preparation of orders between several stores. But will the margin be there? With a basket of 150 euros, we absorb the cost of delivery of 15 euros. Not with a basket at 30 euros. With our sales outlets every 17 kilometers – for many in rural areas – we believe in the future of the store as a social place. If some imagine a business without hostesses or cashiers, I do not believe in the dehumanization of trade: it will always need preparers, cooks, butchers, fishmongers and deliverymen …
Does delivery of meals at home not compete with the distribution?
This is the other issue of the trade of tomorrow. Consumers will not only want products, even if culinary shows have given new flavor to the preparation of raw ingredients, which are otherwise considered healthier because they are not processed industrially. Customers will want to buy a "meal solution". Out of home catering will continue to grow. Our challenge is to transform our points of sale, to create restaurants and preparation laboratories because of course it will only work if the dishes are prepared on site. A pilot store will be set up in this direction in Divonne-les-Bains, near the Swiss border, in 2019.
How can your industrial tool help you through these changes?
Our "Producers & Traders" model is unique in Europe. Agromousquetaires is the 4th largest food group in France, with more than 4 billion turnover, 10 sectors and 62 plants. Our founder Jean-Pierre Le Roch wanted to ensure our supplies. The agri-food cluster has grown according to opportunities. He makes our own brands. We can guarantee their quality. We have sector agreements with farmers – more than 20,000! – which allow to maintain this quality as to help the conversion to bio. For example, we have signed 12-year agreements with hog producers who go organic. We also pay productions in the conversion phase at the price of organic. With 23 vessels, we have France's first fresh fishing vessel, which is a unique asset for ensuring sustainable fishing.
Our challenge today is to define the future Producer-Trader scheme in each of our sectors and to adapt the industrial tool to the new modes of consumption in order to bring a real benefit to the consumers. This redefinition is a reflection that we are currently conducting in close collaboration with the Agromousquetaires teams.
David Barroux and Philippe Bertrand