Casino Lowers Prices, Fuels French Price War

The following is the fourth in a series of guest posts from the latest issue of Global Retail Brands. Throughout the week we will feature one article a day from the new publication – please take a few minutes and click-through to the site – read the entire article and see what the rest of the world is up to.

Casino frontCasino Lowers Prices, Adding Fuel to the French Price War Fire

By Gildas Aitamer, Associate Analyst, and Magali Dubreil, Retail Analyst, Planet Retail

French retailer Casino, which has, for several quarters, strived to distance itself from fierce price competition in its domestic market, is now stepping into the fray with serious intent. While its initial efforts focused on private labels, with comparative shopping basket promotions illustrating a price-cutting campaign on 1,500 private label SKUs, Casino has now decided to widen its strategy to encompass national brands. It is currently running a marketing campaign headlined as ‘The lowest prices on 3,000 products’, featuring some 500 manufacturer brands.

Casino let its prices drift for several quarters in France, but slipping results over 2012 forced the retailer to commit body and soul to the price war.

When French retailers embark on a price war
Since LME (Loi de Modernisation de l’Economie) in 2008, which introduced the principle of freely negotiable prices between retailers and suppliers, hypermarket and supermarket operators – including Leclerc – have been at liberty to drastically reduce prices on national brands. On the top of this, any battle for price leadership in consumers’ mind must be fought over comparable goods and therefore, centred on the leading manufacturer brands. Increased price-aggression from mainstream operators, coupled with promotional deflation on national brands were key factors in explaining discount retailer and private label market shares stagnating in France.

Independent retailers stand out from the crowd
In 2012, all French independent retailers have produced strong financial showings, with all of them recording these performances on the back of aggressive pricing strategies. For 2013, the independent retailers are not willing to relinquish their efforts in price investment. In a sluggish food market, most retailers see further investment into pricing as a necessary evil in order to grow market share.

Système U has been heavily pushing comparative price advertising of late. The independent, which aspires to sales of EUR20 billion (USD25 billion) by 2015, believes it will be able to make more price cuts by achieving productivity gains in logistics and IT. It also hopes to be better placed to negotiate with suppliers if it gains an increased market share. “Our first argument is our continued growth. To negotiate effectively, we must assess growth,” said President Serge Papin.

Competitor Intermarché has announced that “in 2013, we will continue to pursue an uncompromising pricing strategy.” The independent operator claims to be benefiting from stiffening price competition in the market. Jean-Pierre Meunier, President of the Société Civile des Mousquetaires, recently declared: “Despite our efforts on prices, our profitability has not suffered in 2012. We are targeting a 4-5% sales growth in 2013.” Meunier continued: “Those good results are strong positive signs, which confirm our strategic choice on our basics: price and convenience.” By dint of its pricing strategy, Intermarché was able to post a like-for-like sales increase of 4% in 2012. Today, Intermarché’s private labels comprise around 36% of sales and 50% of volumes.

Casino launched a major price cut across its supermarkets and hypermarkets, overwhelming shoppers with price drop tags.

Read the entire story.



Facebooktwittergoogle_plusredditpinterestlinkedinmail