Carrefour Group has announced a significant transformation plan with EUR2 billion in cost savings including voluntary redundancies and closing of 273 ex DIA stores. It will also invest EUR5 billion for expansion of organic sales and food e-commerce followed with a potential strategic investment by Chinese internet giant Tencent and Chinese hypermarket retailer Yonghui in Carrefour China.
Carrefour Group said late January it would also develop new partnerships, along the lines of recent agreements with Fnac-Darty and Showroomprivé, including a preliminary agreement with leading Chinese internet services group Tencent in China.
To improve productivity and price competitiveness, Carrefour will allocate investments of EUR2 billion per year, invest in the competitiveness and development of Carrefour-branded products; make cost savings of EUR 2bn by 2020 on a full-year basis; and reduce the number of ex-DIA stores by 273.
The Group aims to become the leader in food e-commerce and leverage the power of its brand by the opening of 2,000 city convenience stores in the next five years. It also aims to accelerate the Cash & Carry format with 20 new Atacadão stores per year in Brazil, convert 16 hypermarkets to Maxi in Argentina, and expand Promocash in France.
Carrefour said this includes: "Massive investments of EUR2.8bn in digital by 2022 and the 2018 launch of a single platform in France, Carrefour.fr."
Carrefour's ambition is to provide much higher fresh food sales growth and one-third of turnover through Carrefour-branded products by 2022.
"Intensive production methods have reached their limits. Consumers have never been so concerned about what they eat. They rightly want more information, quality, and transparency across the entire food chain," Alexandre Bompard, Carrefour’s chairman, and CEO said.
Mr. Bompard said the ambition includes acting for the democratization of organic products, to strengthen the fight against food waste, to improve the sustainability of packaging and to ensure food safety.
In January, Carrefour Group reported slowing sales momentum in 2017 with +1.6 percent (like-for-like) same-store sales in the full year vs. +3.0 percent in 2016. However, fourth quarter- like-for-like growth was 1.9 percent, a sharp improvement over the previous quarter (+0.5% in Q3) in line with the first half (+2.1% in H1), Carrefour said.
On Carrefour's investment by Tencent and Yonghui in Carrefour China, Carrefour Group said the potential investment would leverage Carrefour’s global retail knowledge with Tencent’s technological excellence and Yonghui’s operational know-how and its in-depth understanding of fresh products. Upon completion of this investment, Carrefour will remain the largest shareholder of Carrefour China.
Carrefour and Tencent's preliminary agreement is strategic business cooperation in China to bring together Carrefour’s longstanding retail knowledge and Tencent’s digital expertise and innovation capabilities that includes collaboration on data, smart retail, mobile payment, in-store experience and data analysis to boost Carrefour China’s customer traffic.
"Thanks to this partnership, Carrefour will improve its online visibility, increase the traffic of its offline and online retail activities and benefit from Tencent’s advanced digital and technological expertise to develop new smart retail initiatives," Carrefour said.
"Tencent will further develop the retail services offered on its social platforms and promote the use of Weixin as well as Weixin Pay, cloud computing and other services within the Carrefour ecosystem."
Carrefour operates around 320 stores in China, while Yonghui has approximately 580 stores plus supermarket franchises.
In December Tencent Holdings agreed to buy a 5 percent stake in Yonghui Superstores Co. for about 4.22 billion yuan ($639 million). It followed rival Alibaba Group Holding's USD2.9 billion purchase of a 36 percent stake in Chinese grocery retailer Sun Art Retail Group Ltd.