Carrefour: slowly making its presence felt

Carrefour is set to challenge Swiss stalwarts, Migros and Coop's leading market position Keystone

Competition in the supermarket sector is set to heat up as Carrefour, Europe's largest food retailer, sets its sights on Swiss consumers.

This content was published on September 17, 2002 - 16:36

The French chain announced on Tuesday that it will build ten new hypermarkets in Switzerland, as well as convert 11 Jumbo warehouses.

The move has sparked fears of a price war, and Switzerland's big three supermarket chains - Migros, Coop and Denner - are understood to be watching developments closely.

Coop spokesman Jörg Birnstiel said the store was taking the Carrefour threat seriously. However, he added that Coop was well-placed to defend its market position.

Switzerland's retail food sector, with prices well above the European average, has until recently been the exclusive preserve of Swiss firms.

However, Carrefour, which has annual revenues of SFr100 billion ($66 billion), believes it can open up the restricted Swiss retail market by offering consumers more choice at a discount.

"We are able to offer a larger range of articles at competitive prices," Jean-Claude Burtin, general director of Carrefour Switzerland, told swissinfo.

"In Switzerland prices are higher than in the rest of Europe and our goal is to offer customers competitive prices at the European level," he added.

Grocery tourists

Swiss consumers regularly indulge in "grocery tourism", crossing borders to save money on everything from diapers to hamburger meat.

Swiss retailers lose around SFr6 billion annually in sales as a result, and Carrefour hopes to tap in to the Swiss appetite for a bargain.

However, customers will be disappointed if they are expecting to find the same wide variety of goods lining the shelves in a Swiss outlet of the French retail giant.

The Swiss Carrefour stores will only be half as large (6,000 square metres of floor space) as those in France.

Market share

The Carrefour chain, which is a market leader in nine of the 30 countries where it has a presence, admits that increasing its market share in Switzerland will be an uphill battle.

"It is harder to expand Carrefour in Switzerland because it is difficult to obtain administrative authorization ... and it will be difficult to gain more market share since the first two competitors [Migros and Coop] are very strong," said Burtin.

"But we are hoping for the opportunity to overtake our competitors."

Analysts say that Carrefour will be able to undercut many imported products offered by Migros and Coop by between five and 35 per cent.

However, it will have to live with the same purchasing conditions for fresh produce, which accounts for 40 per cent of a Swiss supermarket's turnover.

Two billion customers

Carrefour, with two billion customers shopping in its 9,000 branches, gained a foothold in the Swiss market back in January 2001.

The French firm launched a joint venture with Frères Maus (60 per cent held by Maus and 40 per cent by Carrefour) to operate Jumbo discount stores in Switzerland.

Observers remain divided on how the situation is likely to pan out in the future. The French-language "Le Temps" newspaper sees Carrefour's move as a "discrete continuation" of its business strategy.

While the German-language business magazine, "Cash", insists the threat to Migros and Coop is minimal. "The expansion into Switzerland will not make headway," it states.

Retail analysts at the Zurich Cantonal Bank, however, see Carrefour's in a different light. They believe its presence could breath new life into the "cemented Swiss retail sector."

Bernhard Loeb of Retail Vision, a Zurich-based consulting firm, echoes this view. "This is fresh air for the Swiss retail market," he said.

Others have come before

While Carrefour is the first foreign player in the Swiss supermarket sector, foreign companies have paved the way in other areas of the retail industry.

The German eyewear firm, Fielmann, entered Switzerland in 1995 pushing down prices in the Swiss market.

Ikea, the Swedish home furnishing company, entered Switzerland close to 20 years ago.

Although Switzerland's Möbel Pfister remains the market leader, Ikea's blue and yellow warehouses provide stiff competition in six cities making it the price leader.

Metro Ag's discounted electronics outlet, Media-Markt, entered Switzerland in 1994.

The company has grown into the second largest consumer electronics firm in Switzerland with an annual turnover of SFr773 million.


Key facts

Carrefour has worldwide sales of over SFr100 billion.
Migros has sales of SFr20 billion.
Carrefour first came to Switzerland 11 years ago.

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