Association Des Centres Distributeurs E. Leclerc Business Information, Profile, and History

History of Association Des Centres Distributeurs E. Leclerc

Retailing powerhouse Association des Centres Distributeurs E. Leclerc, France's second-largest distribution group (after the Carrefour-Promodes merger of August 2000), is a private cooperative grouping nearly 500 members and their 358 'hypermarkets' (vast warehouses selling everything from traditional grocery items to car parts, home appliances and other department store-style goods) and 143 supermarkets. The Leclerc group also oversees a network of 472 gas stations; 200 jewelry stores (the Manège à Bijoux, France's largest seller of gold jewelry); nearly 140 cafeterias; nearly 100 travel agencies; some 70 automobile service centers; more than 60 stores dedicated to hardware and/or gardening supplies; and some 50 'Cultural Centers' featuring books, videos and DVDs, compact discs, and computers and computer supplies and equipment. Many of these specialty shops are located under the same roof or within the same park complex as the group's hypermarkets. However, the Leclerc banner is also featured on a number of smaller independent specialty stores, primarily clothing stores, but also furniture and perfume stores. Despite its dominance of the French market, Leclerc is barely present internationally, with under 15 stores across Spain, Portugual, and Poland, and plans to open stores in Italy. In order to counter the increasing consolidation of the French retail market, Leclerc has entered a cooperation agreement with fellow cooperative distribution group Système U, which primarily operates supermarkets. The company is led by founder's son Edouard-Michel Leclerc, while the founder himself, Edouard Leclerc, remains active in planning group strategy.

Getting the Retail Religion in the 1950s

Edouard Leclerc abandoned his studies for the catholic priesthood in 1949 and opened a small grocery store in Landerneau, in the north of France. From the start, Leclerc's vision of retailing included something of a social component, offering consumers wholesale-level prices in an era when the word discount had not yet entered the French shopping vocabulary. Leclerc's pricing policies quickly brought him into conflict with other local merchants-both grocers and department stores&mdash well as their industrial suppliers. As Leclerc's retail competitors launched a 'dumping' campaign, selling products below costs, while setting higher prices for Leclerc himself, they encouraged their suppliers either to refuse to deliver goods to Leclerc's store or to force him to charge fixed prices for their goods.

Leclerc fought back, however, showing a battling spirit that would characterize the company particularly in the 1980s; in 1953, he succeeded in seeing the passage of new legislation, the so-called Pinay Law, which prohibited the singling out of individual retailers and the setting of fixed prices. With the commercial battleground leveled, Leclerc set about building his retail empire.

Among the features of Leclerc's early organization was his commitment to the advancement of his employees. Leclerc employees were encouraged to rise through the ranks and then were given help to raise financing needed to leave and found their own Leclerc-branded stores. Leclerc himself--and later, other Leclerc store owners&mdashted as 'godparent' to the new store, providing financial guarantees for the new owner. The willingness to fund the growth of new business, rather than solely expand one's own holdings, was to become a prominent feature of the Leclerc group, where no single store owner--including Edouard Leclerc himself--was allowed to own more than two stores.

By 1958, the Leclerc name was found on more than 50 stores. In that year, a group of managers from a local company joined together to open a Leclerc store in Grenoble. The following year, Leclerc opened its first store in the Paris region, in Issy-les-Moulineaux, later to become the site of the Leclerc headquarters. Meanwhile, Leclerc continued to push for changes in the French retail and distribution market. In 1960, the group launched a campaign to circumvent the distribution monopolies then in place, organizing protests by farmers in Paris to demand the right to sell directly to Leclerc, without having to go through a third-party. The Leclerc initiative once again brought about new legislation. This in turn led to the creation in 1962 of a group-purchasing association among Leclerc store owners, the forerunner to the reorganization of the group as a cooperative at the end of the decade.

The growth of the supermarket concept in the mid-1960s led to a distinctly French creation: the hypermarket. Grouping traditional supermarket fare under the same roof as items normally found in department stores, the hypermarket quickly caught on among French consumers. Edouard Leclerc was the first in the Leclerc group to explore this new territory, expanding his Landerneau store into the first Leclerc hypermarket. It was only fitting for Leclerc to extend its product assortment, as the group continued to pressure the various distribution monopolies for the right to enter previously restricted territory. The group's next target was the dairy industry, long controlled by a number of dairy cooperatives. In the early 1960s, the Leclerc association joined together with several of France's dairy farmers in a drive to set up direct purchasing organizations for the farmer's milk and dairy products.

The number of Leclerc stores grew quickly in the 1960s. However, dissension was growing among the ranks of store owners. The disagreements came to a head in 1969, when a group of 95 Leclerc store owner-operators, led by Jean-Pierre Le Roch, left the Leclerc group and set up a new supermarket cooperative--ITM Entreprises--which grew to become one of France's largest distribution groups under the Intermarché and Bricomarché banners. Where the Le Roch group pursued a separate supermarket and specialty store concept, the Leclerc group focused instead on building its single-brand Leclerc hypermarkets and supermarkets. In 1970, the remaining Leclerc store owners reorganized their association as the cooperative Groupement d'Achat des Centres E. Leclerc, or GALEC.

Monopoly Buster in the 1970s and 1980s

In 1972, the first legislation designed to restrict the growth of the hypermarket trend in France--inspired in an attempt to protect the small merchant as the larger retail groups captured a greater and greater share of the retail market--threatened the growth of the Leclerc cooperative. The legislation required that all proposed new retail surfaces be granted authorization and agree to a number of conditions, such as funding unrelated infrastructure constructions (municipal swimming pools and the like) in the communities they sought to enter. The Leclerc group fought back, decrying the new system's discrimination against, ironically, the small merchant, who was required to take on an even greater financial burden in order to build a new store. Existing merchants were also able to use the new legislation to protect their retail territory. Yet a number of Leclerc's members proceeded to flout the new legislation, building new hypermarkets without waiting for the required authorization, often with the support of local consumer groups and unions.

Leclerc's battling spirit continued throughout the 1970s. In the mid-1970s, Leclerc turned its attention to new fronts. The first, the monopoly on fish distribution, which saw all of the nation's fish processed through a central facility at Rungis, in Paris, and took a high margin on sales to distributors. In 1975, Leclerc began organizing its own direct-purchasing facilities in cooperation with a number of independent fishing groups.

Meanwhile, with gas and oil prices soaring in the wake of the Arab Oil Embargo, Leclerc attacked a new monopoly, that of the gasoline market controlled by Total and Elf in France. In 1976, Leclerc began opening its own gasoline stations, making purchases from independent oil companies outside of France, and cutting the price on a liter of gas. The company's imposition on this market helped force down the exorbitant price of gasoline in France.

In the late 1970s, Leclerc continued to look for ways to gain its independence from the country's distribution monopolies. In 1978 the group bought up a slaughtering facility in Brittany, then built a pork processing facility, France's largest, while also opening a salted meats plant to supply up to one-third of the cooperatives needs. During this period, a growing number of the Leclerc cooperatives' members were converting their stores to the hypermarket concept; by the early 1980s, the Leclerc name included more than 100 hypermarkets across France.

Joining the company in 1979 was Leclerc's son, Edouard-Michel, who became co-chairman in 1982. The younger Leclerc helped energize Leclerc's battling spirit, taking the cooperative head-to-head with still more distribution monopolies in the 1980s. Among the protected retail segments attacked by Leclerc during the decade were those of clothing, sporting goods, perfume, and cosmetics and other 'para-pharmacy' goods, such as vitamins. The cooperative also gained entry into the gold jewelry market by creating the gold jewelry manufacturing company DEVINLEC, offering the group's own designs in its Manèges à Bijoux boutiques (usually located in the hypermarket shopping center) at prices up to 60 percent lower than those of its competition. Similarly, the group was able to enter the hitherto protected travel agency market by forming a joint-venture with Groupe Bolloré, known as Leclerc Voyages. Leclerc's legal battles--and successes--helped break up a number of retail monopolies, lowering prices on a wide variety of products. The company also circumvented the monopoly governing the nation's credit card system by installing its own server network to handle credit card transactions. The company also added its own network of automobile service centers to its hypermarket complexes, growing to 150 centers in the early 1990s.

Recapturing Momentum for the 21st Century

The recession of the early 1990s brought a new competitor to the French retailing scene; deep discounters, such as Germany's Lidl and Aldi, began invading the French market, slashing prices with a range of generic goods. Leclerc was forced to respond, introducing its own range of deep-discounted items. The company also created its own brand of clothing, Tissaia, in 1991. By then, the company had turned to a new sector, opening its first automotive service center along the French autoroute system, previously controlled entirely by the big multinational oil companies.

If the company's French network continued to grow, its moves into the international front were less successful. Hampering the company's international growth was the cooperative formula that had built its success in France; opening a new store in another country required that a current cooperative member install himself in that country and train management staff capable of expanding the Leclerc name into the rest of the country. Nonetheless, the group opened its first stores in Poland and Portugal in 1995. Meanwhile, one member's attempt to bring the Leclerc format to the United States, opening a hypermarket in Baltimore, failed, going bankrupt after only three years.

More alarming for the company was the tightening of the 'anti-hypermarket' regulations, resulting in a near-ban on all new hypermarket construction in the country in the mid-1990s. The new laws, which reduced the authorization requirement to include all stores of 300 square meters or more, effectively ended the possibility for Leclerc to continue its internal growth in France. Yet its weakness on the international front left it in a delicate position, particularly compared to its integrated competitors, such as Carrefour, Promodes, Casino, and others.

Leclerc continued to maintain its leadership of the French market through most of the decade, in part because of the successful launch of its Cultural Centers, which sold books, videos and compact discs, and computers and computer equipment and supplies. Its position was also secured, moreover, by the continued success of its jewelry sales, which captured the leadership in gold sales in France by mid-decade.

However, in the late 1990s, Leclerc had to fight to recapture the leading edge in retailing. In 1997, it launched its own label, the Marque Repere, countering the private labels introduced by its competitors. By the end of the decade, the Marque Repere range of some 800 items accounted for more than 20 percent of store sales. The company also continued its slow international growth, opening four more stores in Portugal, Spain and Poland.

Yet a number of new difficulties confronted the group as it turned toward the new century. The takeover of Carrefour by rival retailer Promodes sent Leclerc plunging to the number two position in the country and placed it at a distinct disadvantage, both in terms of purchasing power and marketing and advertising clout, as it settled into the shadows of the new global retailing behemoth. Unable to increase its number of French hypermarkets, the cooperative instead was faced with a growing number of members who, looking forward to retiring, became tempted to sell their locations to Leclerc's capital-ready competitors. The group was able to circumvent--at least temporarily--this danger by insisting that all members sign a pact giving the Leclerc company the first right of purchase.

Meanwhile, a new law introduced on the French retail scene effectively ended one of Leclerc's favorite practices by prohibiting stores from taking losses on some of their items. Yet the company, approaching its 50th anniversary, was able to perform an end-run around this new restriction, by offering rebates on purchases of certain items. This promotion enabled the company to boost its market share for the first time in several years. At the same time, the company moved to shore up its negotiating position by forming a cooperation agreement with another northern France independent cooperative group, Système U. The two cooperatives agreed to jointly form a buying center, Lucie, in 1999.

As it entered the 21st century, Leclerc remained a primary force on the French retail scene. Yet its position as only number 22 among the world's top retailers left it vulnerable in an increasingly global economy. In 2000, the company began to eye new means of encouraging its international expansion. Adopting a licensing approach, the company looked for international partnerships to open new Leclerc franchises. A first such agreement was made in Portugal, with the purchasing cooperative Elos. A similar agreement was being pursued in Italy. After 50 years of bringing lower prices to the French consumer, Leclerc hoped to be able to do the same for the rest of the world.

Principal Divisions: Scapnor; Scadif; Scapest; Scarmor; Scaouest; Socamaine; Scachap; Scaso; Scalandes; Socamil; Lecasud; Socara; Scacentre; Scanormande; Scapalsace; Scapartois; Kermene; DEVINLEC; Cefilec; E.Leclerc Voyages; Edel Banque; Siplec; Scapauto; Unilec; Sofilec.

Principal Competitors: Carrefour S.A; Casino Guichard S.A.; Castorama S.A.; E.Leclerc; Guyenne et Gascogne S.A.; Lidl & Schwarz Stiftung; METRO AG; Pinault-Printemps-Redoute S.A.; Royal Ahold N.V.

Chronology

• Key Dates:

• 1949: Edouard Leclerc opens his first store.
• 1953: Legislation is passed prohibiting fixed pricing practices.
• 1958: Leclerc tops 50 stores.
• 1959: Company opens its first Paris-area store.
• 1962: An association among Leclerc store owners is formed.
• 1964: Company opens its first hypermarket.
• 1970: Company forms the Galec cooperative association.
• 1987: Leclerc establishes the DEVINLEC gold jewelry production subsidiary, as well as the E.Leclerc Voyages joint-venture.
• 1991: Leclerc begins 'deep-discounting' and opens a hypermarket in Baltimore, Maryland.
• 1992: The first Leclerc in Spain is opened.
• 1996: Company opens its first Leclercs in Poland and Portugal.
• 1999: Agreement is reached with another French cooperative, Système U, to enhance buying power.