Casino Guichard Perrachon S.A. Business Information, Profile, and History

Company Perspectives:

Now a century old, the Casino Group that Geoffroy Guichard founded remains true to the values that have underpinned its success: quality, local service, social responsibility, respect. The Group is proud of its values, and aims to found its future development on ten priority commitments towards its employees, its customers, its shareholders and all who have a stake in the Group.

History of Casino Guichard Perrachon S.A.

Casino Guichard-Perrachon S.A., or Groupe Casino, is one of France's largest retailers--battling it out with Carrefour and Auchan for the country's top spot--with an international network of more than 8,400 stores. France remains Casino's primary market, accounting for 77 percent of its 2002 sales of nearly EUR 23 billion. The company's French retail operations are separated into three primary categories: Hypermarkets, under the Géant name, with 286 stores in operation in 2003; Supermarkets, under the Casino, Leader Price, Franprix, Monoprix, and other names, with nearly 2,500 stores; Convenience stores, counting brands Petit Casino, Spar, Vival, Eco Service, and others; and Restaurants, primarily through the 240 Casino cafeterias. With further expansion limited in the mature and highly regulated French retail market, Casino has been making a push internationally. Present in the United States since the mid-1980s with the Smart & Final chain, Casino has expanded into South America, with operations in Argentina, Venezuela, Brazil, Mexico, and Colombia. The company is also present in Thailand, Taiwan, Vietnam, and Madagascar. In Europe, the company has built up a network of 11 hypermarkets in Poland, and, since 2002, has entered the Netherlands through its purchase of Laurus. Together, the company's international operations combine to produce 23 percent of the company's sales. Casino is majority controlled by Rallye SA, headed by Jean-Charles Naouri, which also controls the Go Sport, Athlete's Foot, and other retail chains. Rallye's share of Casino stands at nearly 51 percent, although its voting rights reach more than 63 percent.

Founding a Retail Empire in the 1860s

Casino's origins dated back to about 1860, when a grocery store was opened in Saint-Etienne, a city about 30 miles south of Lyon. It was named for the nearby Casino Lyrique, which had been closed in 1858 by the city fathers for "licentious spectacles." In 1864 the founder of Casino, a Monsieur Brechard, took as a partner Jean-Claude Perrachon, and the business became a general store. Perrachon's nephew Geoffroy Guichard later became partner of what became the Etablissements Guichard-Perrachon. In 1898 Guichard created the Société des Magasins du Casino and opened a second store in Veauche, about 12 miles to the south. To stock the stores it was necessary to build a warehouse in Saint-Etienne.

The father of eight children, Guichard was a paternalistic employer, and the company continues to give out scholarships to the descendants of his workers. Guichard also sponsored the city's museum of modern art and its soccer team, traditions the company maintains. In addition, Casino became manager of Saint-Etienne's museum of arts and industry in 1967.

Casino became a joint-stock company in 1900. Armed with an infusion of funds, it grew rapidly from this point. By the outbreak of World War I there were 215 branches, of which 56 were in Saint-Etienne alone. In 1919 a new factory replaced the existing facilities for making chocolate, confectioneries, and preserves. By 1922 warehouses also were located in Clermont-Ferrand, Lyon, Roanne, and Beaucaire, the latter to store wine. A soap factory and oil works were built in Marseille, and a perfume plant was opened in Saint-Etienne in 1922. Two more warehouses, at Chalon-sur-Saone and Avignon, opened in 1923. In 1934 a vast warehouse was established in Marseille to serve the entire southeast of France.

Post-World War II Expansion

On the eve of World War II Casino was by far the biggest holding company in southeastern France. Yet its greatest period of expansion was not to begin until 1960, when it opened its first supermarket in Grenoble. A warehouse for fresh produce was opened in Rhone a Grigny the following year. Its first cafeteria was introduced in Saint-Etienne in 1967. Casino entered the Paris region in 1970 by creating a subsidiary with the acronym SOMACA to operate the supermarkets of Saint-Denis and Bagneux. In the same year it absorbed a similar business in southwestern France, l'Epargne, into a new subsidiary named SABIM Sable.

Hypermarkets under the name Géant Casino were established during the early 1970s, first in Marseille, then in Saint-Etienne, Frejus, Montpellier, Bordeaux, and Nantes. The one in Saint-Etienne covered 10,842 square meters (116,702 square feet). In the early 1980s it had 45 different departments, 2,000 parking places, and a staff of 470, and was accompanied by an auto service station, a cafeteria, and a gallery of shops. Casino entered a new field in 1977 with the creation of S.A. CARFUEL, a subsidiary for the distribution of petroleum products. Between 1978 and 1980 Casino established SOMABRI, in collaboration with the Belgian group G.B., to operate hobby-and-garden centers. The one opened in Saint-Etienne in 1980 was offering 27,000 products two years later.

By 1981 Casino also had established the restaurant chains SARL, Stefany, and Caf'Casino and had taken a half interest in another, France Quick. SABIM operated slaughterhouses in Sable and Saint-Maixent. The industrial complex of Pont-de-l'Ane produced chocolates, confectioneries, and preserves, 85 percent for Casino's retail needs. There was a meatpacking plant at Saint-Priest and one for roasting meat at Marseille that not only satisfied Casino's needs but also exported products overseas. Three great bottling plants were located in Beaucaire, Lyon, and Clermont-Ferrand, and Casino began exporting two million bottles of wine a year to other European Community countries. SAIC was a building society managing thousands of dwellings. Finally, a fleet of trucks transported goods from Casino's 11 great warehouses.

Groupe Casino's presence in the United States dates from 1975, when it created Casino USA Inc. as a California-based subsidiary. By 1984 it was operating four Petit Casino retail stores and eight Café Casino French restaurants. In March 1984 Casino USA bought a controlling interest in Thriftimart Inc., owner of 86 Smart & Final Iris Co. cash-and-carry warehouses, for more than $15 million worth of Class B stock. Casino intended to use Thriftimart outlets to distribute its lines of jelly, jam, and bottled water. At the time of the deal, Smart & Final Iris specialized in discount volume sales of food and hardware for bulk buyers and restaurants. Eventually, the deal had to be sweetened to avoid a lawsuit, so in the end Casino paid $116.7 million to acquire the company's Class A nonvoting shares of common stock as well.

The French parent saw a 10 percent increase in turnover in 1983 to FFr 157.9 million ($17.5 million), but this was accompanied by a decline of 2 percent in consolidated profits. However, Casino continued pursuing an aggressive acquisition program and in 1985 bought an 88 percent share of CEDIS, owner of hypermarkets, supermarkets, and smaller grocery stores. The transaction supplemented Casino's already strong presence in southern France and the Paris metropolitan area with CEDIS's base in eastern France, and added CEDIS's FFr 9 billion (about $977 million) in annual sales to Casino's FFr 23.5 billion (about $2.55 billion). Later in the year Casino entered into a joint venture with a subsidiary of the giant French oil company ELF-Aquitaine to create service stations, supermarkets, and fast-food outlets.

In 1986 Casino expanded further by acquiring a 46 percent interest in Paridoc and Giant supermarkets and a 99 percent interest in Etablissements Deloche, a wholesaler. In that year Groupe Casino was France's third largest food-distribution company, behind LeClerc and Carrefour. Its holdings in France consisted of 42 hypermarkets (16 under the Mammouth name of CEDIS) and 187 supermarkets, under the Casino, Suma, and Ravi names. In addition, there were 92 Smart & Final warehouses in the United States.

The company's activities in 1986 also included processed foods (12 percent of total sales) and restaurants and cafeterias (6 percent). The latter sector consisted of the restaurant chain Hippopotamus and the cafeteria chains O'Kitch and Quick, making Casino the largest food chain in France in number of meals served. Casino then sold Quick in 1993. American operations constituted another 6 percent of the company's volume, with food distribution accounting for the other 76 percent. Food processing declined to only 3 percent of revenues by 1993, while American revenues increased to nearly 8 percent of the total.

Merging Giants in the 1990s

Casino's acquisitions were part of the consolidation of the food industry taking place throughout France. The American-style hypermarket first made its appearance in France in 1963. By 1986 there were 645 of these giant stores, accounting for one-fourth of food revenues. Hypermarkets also saw a 10 percent annual gain in sales volume, compared to 2 percent for the industry as a whole. The big distributors expanded vertically as well as horizontally by absorbing suppliers.

In 1989 Casino stock reached a price level it would not attain again during the next four difficult years. Antoine Guichard announced in July 1990 that company employment would be cut by 1,450 before the end of 1992. Guichard explained that the company was being undercut by independent rivals offering lower prices because of their lower operating costs. He said the company would respond by renovating and remodeling its stores, and reorganizing the hypermarkets, supermarkets, and smaller food stores into separate and autonomous divisions. A new marketing division would be concerned with consumer relations, price, and the purchase and securing of provisions.

To cut its costs Casino sold its 172 service stations in December 1990 to Shell France and Agip France for FFr 660 million (about $131 million). However, Casino would continue to manage the stations under a 30-year contract. This transaction apparently was made to enable Casino to reduce its debt, which had grown to FFr 4.2 billion (about $840 million) after it had acquired La Ruche Meridionale, a supermarket company, earlier in the year.

In May 1989 Casino signed initial cooperation accords with Argyll Group PLC, owner of Safeway food stores in Great Britain, and Koninklijke Ahold N.V. of the Netherlands to form a combine. The accord called for the three food retailers to issue new shares that would give Argyll a 3.8 percent share in Ahold and a 3.4 percent stake in Casino, with Ahold and Casino in turn acquiring 1.5 percent of Argyll. The result was the European Retail Alliance (ERA), on which Antoine Guichard planned to base the company's future growth strategy. Looking toward the European Economic Union of 1993, Casino also bought 39 percent of an important Italian retailer, La Rinascente, in 1989.

Casino moved into second place among French food distributors by acquiring struggling rival Rallye S.A. in 1992, in exchange for new Casino shares representing more than 30 percent of the new ensemble. In so doing it acquired Rallye's 44 hypermarkets and 196 supermarkets--it also brought in financial wizard Jean-Charles Naouri.

Casino's expanded operations enabled it to increase sales to FFr 61.6 billion ($11.25 billion) in 1992 from FFr 40.6 billion in 1991, but profits fell from FFr 484 million to FFr 438 million ($80 million). Like other retailers, Casino was affected by stagnant consumer spending during a national economic recession that year. Rallye appeared to be a drag on the parent organization, its hypermarket sales falling 6 percent during the first four months of 1994 (while Casino's rose by 4.7 percent) and its supermarket sales dropping by 8 to 9 percent (while Casino's rose by 1 percent).

Through its subsidiary Casino USA, Groupe Casino had majority control of Smart & Final Inc., which operated 136 Smart & Final warehouse stores in the United States at the end of 1993. The number was scheduled to reach 149 by the end of 1994. More than half were leased from Casino Realty, with most of the rest subleased from Casino Realty or Casino USA. Among Smart & Final subsidiaries were Casino Frozen Foods Inc. and Casino American Food Services Inc. Under a joint venture with the Mexican retailer Central Detallista it was also to operate a chain of supermarkets in the southwestern United States and in Tijuana, Mexico, using the name Smart & Final. Two had opened by mid-1994, with a third scheduled for opening by the end of the year.

In order to accumulate money to remodel its French stores, Casino put Smart & Final Inc. up for sale in July 1993. Its Casino USA subsidiary held a 50.3 percent stake in the food chain, with a market value of about $178 million. The parent concern decided later that year not to sell, however, because in the words of Smart & Final's chairman, "Groupe Casino is convinced the long-term value ... is far in excess of the amount it might realize in the current weak market." During the first four months of 1994 Smart & Final's sales rose by 14 percent. Back at home, in 1995, Casino took a 65 percent share in the creation of a new group, Spar France, joining with IPAG, the owner of Spar International and French distribution group Mariault, to introduce the Spar convenience store format to France.

International Expansion for the New Century

The marriage of retailer Antoine Guichard and financier Jean-Charles Naouri had sparked skepticism by a number of observers. Yet the pair quickly developed a strong friendship and a complementary business relationship. Naouri, who, through investment vehicle Euris, had previously kept out of the actual operational end, soon developed an interest in Casino's day-to-day operations. When Guichard retired, Naouri took over as head of the Casino group, raising Rallye's stake in the company to 50 percent.

Naouri's financial background was crucial for Casino when the company found itself the target of a hostile takeover from rival retail group Promodes in 1997. Instead, Naouri and Rallye launched a friendly counteroffer, which was accepted by the Guichard family. Naouri also set in place a new expansion drive for Casino in order to boost the company's value and thwart the Promodes offer. In 1997, Casino acquired French retail chains Franprix and Leader Price, then acquired Société Mariault, which operated a 600-store network of Spar, Vival, and Coccinelle convenience stores. By the end of the year, Rallye had successfully fought off Promodes to become Casino's majority shareholder. Promodes, licking its wounds, then hooked up with Carrefour, becoming the country's leading retailer--and one of the largest retail groups in the world.

Casino too had set its sights on further international expansion. In 1996, the company made its latest effort to expand beyond France, opening a first store in Poland. By 2003, the company had raised its total hypermarkets in Poland to 15. The company also introduced the Leader Price brand in Poland, starting with a first store in 2000. The deep discount supermarket chain grew especially strongly, topping 53 stores at the end of 2002, representing 20 percent of Casino's total sales in Poland.

Casino targeted growth in Asia as well, setting up a 50/50 partnership in 1996 with Taiwan's Dairy Farm International, in order to introduce the company's hypermarkets into that country. The partnership's first store opened in Taichung in 1998. The following year, Casino bought 66 percent of Thailand's Big C hypermarket group. Under Casino, Big C expanded rapidly, building a network of 20 hypermarkets by the end of 2002.

South America became another important expansion market for the company at the turn of the century, starting with a franchise agreement with Uruguay's Disco retail group. By 1999, Casino had acquired 50 percent of Disco, which opened its first Géant hypermarket in Montevideo in 1999. The company next partnered with Colombia's Exito group, acquiring 25 percent of that company in 2000 in order to participate in its expansion throughout Colombia, Venezuela, Equator, Bolivia, and Peru. Next, Casino turned to Brazil, reaching a similar partnership agreement with the CBD group (Companhia Brasileira de Distribuiçao), and its Extra, Pai de Açucar, Barateiro, and Eletro retail stores. With that agreement, Casino's direct and indirect holdings made it South America's second largest retail group.

In the United States, Casino had boosted its Smart & Final network with an agreement to acquire the cash and carry operations of United Grocers in 1998. That agreement added 39 new cash and carry stores on the West Coast. Back at home, the company merged its Auto Service operation into the Feu Vert chain, an agreement that gave Casino a 38 percent stake in Feu Vert. In 2001, Casino extended its French retail network with the purchase of a 100-strong chain of Proxi convenience stores. The company also attempted to extend to the Internet, with the e-commerce site C-mes-courses. That service proved unprofitable, however, and was shut down by 2002.

By 2003, Casino had boosted its international sales share to 23 percent of its total revenues. Sales had neared EUR 23 billion, despite the difficult economic climate and a consumer spending slowdown in its core French market. The company remained one of the top French retail groups--fighting for the title among rivals Carrefour, LeClerc, and Auchan. It had also begun its assault on the global market, with plans to position itself among the world's major retail groups in the new century.

Principal Subsidiaries: Anfilco (50%); Asinco; Banque Groupe Casino (51%); Boidis; Casino Cafétéria; Casino Entreprise; Casino Service; Casino USA Inc.; Comacas; Dechrist Holding; Easydis; Feu Vert (38%); Géant Argentina; Gelase (Belgium); Immobilière Groupe Casino; Maruschka (Netherlands); Monoprix (49.35%); Nérée; Pachidis; Paglop; Plésia; Ségisor; Smilodon; Tevir; Tplm; Vindémia (33.34%).

Principal Competitors: Carrefour SA; Etab. E. LeClerc SA; Auchan SA; Intermarche SA.

Chronology

• Key Dates:
• 1860: Grocery store opens in Saint-Etienne, near Lyon, taking its name for a closed casino.
• 1864: Jean-Claude Perrachon becomes partner in Casino store, later bringing in nephew Geoffroy Guichard as partner.
• 1898: Guichard founds Société des Magasins du Casino, and opens second store, and a warehouse.
• 1919: Company builds factory to make preserves, chocolates, and other confections.
• 1967: Company opens first Cafeteria in Saint-Etienne.
• 1970: Company enters Paris region through subsidiary SOMACA.
• 1970: Casino launches Géant hypermarket format.
• 1975: Company establishes Casino USA subsidiary.
• 1984: Company acquires Thriftimart, which controls Smart & Final stores.
• 1985: CEDIS hypermarket group is purchased.
• 1986: Casino acquires Etablissements Deloche, a wholesaler.
• 1990: Company sells its service stations to Shell France and Agip France; acquires La Ruche Meridionale.
• 1992: Rallye SA is acquired in exchange for 30 percent of Casino.
• 1996: Casino enters Poland with opening of first hypermarket.
• 1997: Rallye, with a friendly counteroffer, rescues Casino following hostile takeover bid by Promodes.
• 1998: Casino opens first Taiwan hypermarket; acquires cash and carry operation of US Grocers.
• 1999: Casino acquires 50 percent of Uruguay's Disco retail group and opens first Géant hypermarket in Montevideo.
• 2000: Company forms partnerships with Colombia's Exito and Brazil's CBM.
• 2001: Company acquires 100 Proxi convenience stores in France.
• 2003: Casino's total retail network tops 8,400 stores.