Leader Price/Franprix

Franprix-Leaderprice:
Accelerating expansion
nalyst
ay
09
J.M. Duhamel
1
A business model based on a dual structure
100%
Wholesaling
Retailing
>50%
Integrated stores
40% FP/ 50% LP
Franchise stores (1)
60% FP/ 50% LP
Fully-consolidated
(1) Accounted for by the equity method if over 20%-owned
nalyst
ay
09
2
0 - 50%
Outline
Franprix
Overview
Key figures
The new concept
Expansion
Leader Price
nalyst
ay
09
3
Franprix: “The shop around the corner”
Marché Franprix
The “shop around the corner” for people who shop
every day, for all occasions
Stores designed to optimise shopping time
Flexible opening hours
Broad assortment meeting customers’ everyday shopping needs
A process of continuous renewal (innovation, services, etc.)
nalyst
ay
09
4
Strengths of the Franprix model
A model well-aligned with customers’ needs
Prime city-centre locations
Deep market coverage, primarily in Paris and its suburbs
A redesigned concept aligned with customer expectations
A balanced mix of leading national brands and competitively priced Leader
Price products
An efficient business model
High margins for our franchisees: Franprix was ranked N°1 in the most
recent Coface/Linéaires 2009 survey
A system driven by the franchisees’ entrepreneurial spirit: market
development, localised offering, operational responsiveness, etc.
nalyst
ay
09
5
Franprix :
An efficient supply chain organisation
Deliveries to stores in
the Paris region
Montsoult
Chelles
Two dry goods warehouses:
Franprix
• Chennevières: proprietary fleet
Paris
region
• Chelles: whole pallets only
+ Béziers (LP warehouse) for delivery to FP stores in
Southeastern France
Chennevières
Orly
Tigery
1 FP/LP fresh products warehouse:
• Montsoult (FP/LP): serving the whole of France
Montsoult
Deliveries to stores
in Southeastern
France
Orly
Chennevières
2 FP/LP fruit and vegetable warehouses:
• Tigery, for Franprix stores in the Paris region
• Noves, for Franprix stores in Southeastern France
1 FP/LP frozen foods warehouse in Orly
• Serving the whole of France
Noves
Béziers
Strengths of
Franprix’s
supply chain
organisation
Few warehouses lower fixed costs
Dense store network in the Paris region served by local warehouses lower
freight costs (distance, optimised delivery rounds)
Control over freight costs thanks to proprietary fleet operating out of Chennevières
nalyst
ay
09
6
6
Franprix: 2009e key figures
Banner store
base
Banner revenue,
incl. VAT
Average retail
area
Revenue per
sq.m. incl. VAT
787
€2.1bn
~440 sq.m.
~ €6,000/sq.m.
Integrated stores: 316 (40%)
Franchise stores: 471 (60%)
nalyst
ay
09
7
The new Franprix concept:
A concept tailored to customers’ needs
First store: Caulaincourt, Paris end-2008
A bright and open store front, offering a clear view of the entire store
A warmer, more contemporary atmosphere
A more convenient, welcoming check-out area with basket check-out systems
Consistent, simple and informative point-of-sale advertising and signage
Revised floorplan
More space devoted to fresh products
Fruit and vegetables located as customers walk in the door
A short-cut between the snack section and the checkout
End-of-aisle displays dedicated to promotional offers
Specific furniture for certain sections, such as bakery products, wrapped fresh
produce and wine
nalyst
ay
09
8
The new Franprix concept:
The contemporary corner shop (1/2)
A bright and open store front
A spacious entrance area
An enhanced fruit and vegetable
section
nalyst
ay
09
9
The new Franprix concept:
The contemporary corner shop (2/2)
A dedicated snacks section
An enhanced traditional
fresh product offering
Clear, precise messages
nalyst
ay
09
10
The new Franprix concept :
An offer tailored to each type of catchment area
A balanced mix (50/50) between Leader Price and national
Offer
concept
brands
A common line-up of products available in all stores
LP organic products in all catchment areas
Offer
tailoring
Offer
management
Assortment tailored to catchment area and store size
Low-income area stores: more affordable prices, more LP products
City-centre stores: larger fresh produce and delicatessen sections,
more snack products, more products sold individually
Residential area stores: more family-oriented products and pack sizes
Regular inclusion of new products:
900 new products in 2010
nalyst
ay
09
11
The new Franprix concept:
Promising results
15% average increase in sales at renovated stores
Positive customer satisfaction surveys, with high scores for:
Store design
The speed and appeal of the shopping experience
Staff friendliness and helpfulness
The quality of the fruit and vegetable offer
nalyst
ay
09
12
Deployment of the new Franprix concept
Three drivers of store base modernisation
New stores
The new concept will be deployed in all new stores
Existing stores
Comprehensive upgrades
By the end of 2009, around 50 stores will have been upgraded
Alignment with the new banner identity = banner, store window stickers, LCD screens,
paintwork in the checkout area, in-store signage, etc.
By the end of 2009, 70 stores will have been converted to the new banner identity
End-2012 TARGET:
All stores will at least have been aligned with the new banner
identity (420 stores) or upgraded (310 stores)
nalyst
ay
09
13
Expansion: 2012 targets confirmed
Number of Franprix stores
1,000
702
2008
787
887
2009e
2010e
nalyst
ay
09
14
Early
2012
Priority expansion areas
95% of the store base is currently located in Paris and the Paris
region
95%
Paris & Paris
region
The priority expansion areas
are:
Paris and the Paris region
Lyon and the Mediterranean
coast
Lyon region
East Mediterranean Coast
nalyst
ay
09
15
Faster expansion since 2008
Sustained rate of future store openings
Annual store openings [1990-2012e]
100 openings/year
nalyst
ay
09
16
An expansion program supported by
master franchisees
The franchisees will continue to drive Franprix growth
Percentage of franchise stores
60%
61%
~50%
2009e store
base
2009e
2010e
Openings
nalyst
ay
09
17
Outline
Franprix
Leader Price
Overview
Key figures
Expansion
nalyst
ay
09
18
The Leader Price concept
Neighbourhood discount stores
Mainly outside the Paris region
Bright stores offering an easy, efficient
shopping experience
A comprehensive assortment covering a family’s day-to-day needs
Competitive prices, actively managed
Efficient supply chain
nalyst
ay
09
19
The Leader Price supply chain organisation
Three dry goods warehouses:
Gretz, Boufféré and Béziers: full truck-load
deliveries
Montsoult
Etampes
Orly
Gretz
Tigery
Three fresh products warehouses
• Montsoult (FP/LP)
• 2 LP warehouses :Etampes and Narbonne
Boufféré
Two FP/LP fruit and vegetable warehouses:
Tigery and Noves
Noves
1 FP/LP frozen foods warehouse at Orly
Serving the whole of France
Béziers
Narbonne
Few warehouses lower fixed costs
Strengths of
Leader Price’s
supply chain
organisation
Limited number of SKUs higher volumes
High warehouse productivity
Order-based approach to keep costs down (full truck-loads for dry
goods, complete pallets, etc.)
nalyst
ay
09
20
The Leader Price concept
The three pillars of the Leader Price concept:
A concept based on
low costs,
discount prices and
a single brand/banner
nalyst
ay
09
21
An assortment covering a family’s everyday needs
A broad assortment: some 4,200 SKUs covering a typical family’s
everyday needs
Specific offers
Other
(e.g. restricted
brands, fruit &
vegetables)
~3060*
~420
~200
~520
Extended fresh produce and frozen food sections:
fruit and vegetables, meat, charcuterie, delicatessen, etc.
Selected regional products, based on local demand
* Standard Leader Price products including Fine Ligne
nalyst
ay
09
22
Actively managed pricing and assortment
Price repositioning on the most price-sensitive
cut-backs in the
line
products and
Assortment regularly adjusted, to pull the least performing items
Revamped packaging conveying the quality and
contemporary nature of the products and ranges
Revived innovation process
nalyst
ay
09
23
Leader Price: 2009e key figures
Banner store
base
Banner
revenue, incl.
VAT
Average retail
area
Revenue per
sq.m. incl. VAT
582
€3.1bn
910 sq.m.
~
€5,850/sq.m.
Integrated stores
Franchise stores
nalyst
ay
09
24
: 289 (50%)
: 293 (50%)
2009: Decline in purchasing power in particular in lowincome households
The purchasing power of French consumers has declined because of the crisis…
Trends in income, prices and purchasing power in France
6%
Income
5%
Prices
4%
Purchasing power
on the rise
3%
Purchasing power
declining
2%
1%
0%
2003
2004
2005
2006
2007
2008
2009
Source: Observatoire Cetelem 2009
… and low-income households were the first to be affected and the worst hit
nalyst
ay
09
25
In low-income households, the food budget is the first
item to be cut
Low-income households are over-represented in Leader Price’s customer
base
60% of Leader Price’s customers are households with low or lower-middle incomes
Nearly 40% of Leader Price’s customers are households with three or more people, whose
budget constraints are greater than others
In low-income households, food is the first expense to be reduced
They experience a greater percentage decrease in disposable income (due to a greater
risk of unemployment, less diversified income base, etc.)
Food accounts for a greater proportion of their total budget
nalyst
ay
09
26
The main way to cut back on food expenses is to buy
less
Households behaviour regarding food
consumption
When the lowest-income
households (in the first quintile) cut
their budgets, 4/5ths comes from
buying less versus 1/5th from
buying cheaper products
change
Price effect
Lower
income
Volume effect
Higher
income
Source: Insee’s family budget surveys
nalyst
ay
09
27
Market outlook
In this challenging environment, the discount segment should benefit
from several favourable factors:
An underlying shift in spending towards the discount segment, whose market
share in France is still only 14.0%
The French LME Act is favourable to the segment, and particularly to discount
convenience stores with a retail area of less than 1,000 sq.m
nalyst
ay
09
28
In this market environment, Leader Price has maintained
its market share…
Leader Price has maintained its market share since 2007
Market share in euros
12 months to 1 Nov. of each year
2.7%
2007
2.7%
2008
© Worldpanel™, TNS 2009
Products = FMCG + self-service refrigerated foods
Scope: GMS = HM + SM + HD + Superettes
Probable market share, based on survey data
nalyst
ay
09
29
2.7%
2009
… and continue to deploy its differentiation strategy
A 3 pronged-strategy
Increasing shopper appeal
Pricing – assortments – merchandising
Marketing action plan, focusing on:
• Promotions
• Local marketing initiatives tailored to each store’s competitive environment
• Brand communication : advertising campaign with JP. Coffe
Cost savings plan
Pooling LP, Casino and Monoprix private label purchases
Optimising warehousing costs and freight costs both to the warehouse and from the
warehouse to the store
Reducing shelf-stacking costs through palletization and shelf-ready packaging
Achieving operational excellence, thanks to optimised and aligned store practices
(best practices, consistent execution)
Accelerating expansion
nalyst
ay
09
30
30
Expansion: a key success driver for the discount segment
In the discount segment in Europe, market share is closely linked to the number
of store openings
Number of stores
Market share
© 2009 The Nielsen Company
nalyst
ay
09
31
Expansion: 2013 target confirmed
Number of Leaderprice stores
1,000
530
582
682
2008 2009e 2010e
nalyst
ay
09
32
2013
Faster expansion since 2008
Sustained rate of future store openings
Annual store openings [1990-2012e]
~100
openings /
year
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
120
100
80
60
40
20
0
nalyst
ay
09
33
An expansion supported by
the master franchisees
Franchisees continue to follow and invest in the Leader Price model
Percentage of franchise stores
50%
48%
2009e store
base
2009e
~50%
2010e
Openings
nalyst
ay
09
34
Leader Price: a profitable business model
Leader Price remains the second most profitable franchise model,
behind Franprix
Net margin of independent franchisees
in France
2008
Franprix
2.33%
Leader Price
1.73%
Ecomarché
1.43%
Marché Plus
1.09%
Marché U
1.05%
Netto
0.81%
Shopi
0.53%
Source: Coface/Linéaires 2009
nalyst
ay
09
35
Appendices
nalyst
ay
09
36
A much talked about communication campaign,…
JP. Coffe, an effective spokesman
JPC fulfils his role of increasing the banners’ impact and visibility
JPC is a man you either love or hate - and most people love him
JPC is a recognised food expert who inspires confidence
Agree
Generally agree
Jean-Pierre Coffe gives good advice to how to
eat well on a limited budget
18%
Jean-Pierre Coffe inspires confidence
Thanks to Jean-Pierre Coffe I am confident
in the quality of Leader Price products
18%
13%
nalyst
ay
09
37
69%
51%
59%
41%
35%
48%
…, which strengthens Leader Price’s image for quality
at competitive prices
The campaign shows that…
… Leader Price has products for everyone
16%
54%
69%
... you can eat well by shopping at Leader Price
15%
53%
69%
… Leader Price has the same commitment
to quality as to price
... Leader Price offers good quality products
... Leader Price is a discount store unlike any other
... makes me want to shop at Leader Price
14%
51%
65%
15%
49%
64%
15%
11%
10%
nalyst
09
71%
53%
… Leader Price has low prices
... Leader Price is a banner you can trust
ay
19%
38
59%
45%
42%
38%
52%
48%