"Prices in Israel will be 10-20% higher than Europe"

Carrefour CEO Alexandre Bompard  credit: Rami Zarnegar
Carrefour CEO Alexandre Bompard credit: Rami Zarnegar

Carrefour CEO Alexandre Bompard tells "Globes" that prices will be much lower than those of the lowest-priced competitors in the Israeli market.

After brothers Daniel and Michael Zalkind, owners of Electra Consumer Products (TASE: ECP), acquired control of failed food retail chain Yeinot Bitan (Bitan Wines) from founder Nahum Bitan, they sought a way not only to revive the supermarkets but also to create something completely new. "The opportunity presented itself and we met with them," says French retail giant Carrefour CEO Alexandre Bompard. "They wanted to bring in an international partner and develop the activity in Israel, and we decided to take the project on ourselves."

Why did you choose to grant a franchise to Electra, instead of entering here yourself?

"We are expanding around the world through the franchise model. There are about 10 countries where we operate ourselves, but most of the time we choose to award franchises to local partners who know their country well. We did this recently in Greece, for example, and that is the choice we made in Israel as well.

"We had the opportunity to enter Israel together with Electra, a company that knows the territory well. Together with us, they are leading the format and development of activity."

The announcement that an agreement had been signed between Electra Consumers and Carrefour was published a little over a year ago, in March 2022. The media rejoiced, the government was quick to welcome the move and urged more international chains to come to Israel, while rival retail chains both mocked and prepared for the upcoming competition.

Public reaction, too, was divided between those familiar with the chain in Europe who wondered whether Israel would be positively affected with an advanced French-accented shopping experience and revolutionary price reductions, while others argued that the local Carrefour branches would not be much different than Bitan or Mega, including the prices.

The choice of an international chain the size of Carrefour to open operations in a relatively small country saturated with competition, regulation, kosher and import barriers, should not be taken for granted. But skepticism was cast aside at the launch event which took place last week at the Ra'anana hypermarket branch. Bompard toured the renovated 3,000 square meter outlet together with Minister of Economy and Industry Nir Barkat, Carrefour Israel CEO Uri Kilstein, Carrefour Group executives and Electra executives, inspecting shelves full of Carrefour-brand products alongside domestic brands like Strauss, Osem, and Tnuva.

As befits a man who oversees 15,000 stores in 50 countries worldwide, Bompard maintained a professional appearance, but occasionally his excitement shone through. "Israel is a unique country," he explained in an exclusive interview with Globes a few hours after the launch.

"We see there are expectations of us, from the state and from consumers, and we have faith that we can succeed and bring something different. The experience we have with our private label supports this. We have a lot of motivation, we are full of excitement about the challenge, and believe in the huge potential here."

You promise a revolution in prices. How can you keep this promise given the cost of launching, imports, training, rising prices of raw materials, effects of the war in Ukraine, inflation, and recession, all while your franchisee Electra also needs to make a profit?

"The idea is to bring to Israel what we are, which is a unique variety of store formats, from convenience stores to hypermarkets (giant stores covering over 2,500-4,000 square meters). To bring technological development and e-commerce, and a wide variety of Carrefour brand products at affordable prices We have already brought over 1,000 products, and the idea is to offer quality food at fair prices.

"We know that we are able to bring this model to the Israeli economy, although the prices are of course set by our partners. We are not responsible for the final price, but we believe that we are bringing competition, as you have probably already seen with some Carrefour products, which are 35%, 40% and even 50% lower in price than some of the cheapest products on the market."

So, the ones who set the prices in the end are Electra, and you don't have anything to do with that?

"The responsibility for setting the price rests with Electra. We, of course, try to be as competitive as possible for them, so that they can be competitive themselves. We see that they want to succeed in this challenge, and give Israeli customers the best price."

500 kosher products

In recent years, the Ministry of Economy and Industry, and the Ministry of Finance have expressed great interest in bringing international chains to Israel. But simultaneous to the planning and execution of reforms and easements in all things regarding import procedures and increased competition, the regulatory requirements unique to Israel succeeded in driving away quite a few interested parties. Until Carrefour arrived.

Bompard indeed demonstrates restraint and even smiles when he discusses dealing with these hurdles, but it is evident that even for a global executive who knows the intricacies of the field in 49 other countries, they are a challenge.

The Israeli government erects quite a few obstacles regarding imports. Have you encountered this? Are you in continuous contact with the finance and economy ministries?

"I think it has been a challenging journey for us. The regulation on the import of our products to Israel is complex. At times we thought things could have happened more quickly, but we think it will improve. The arrival of the Minister of Economy to the launch of the Ra’anana branch is a sign of this. We hope that as we continue to advance in Israel, our ability to bring and develop new products, both in the fresh and non-perishable sectors, and in the non-food sector, will improve, month after month."

Did you ever have a moment of crisis?

"No, we knew it was a complex process. But there was tremendous commitment from my team at Carrefour to succeed. We wanted to present a large amount of our products on the launch day, and we have already managed to bring 500 kosher products, which is a very good rate considering the complexity."

Will the prices in Israel be the same as the prices in France?

"Due to import taxes and additional costs, there will be differences between 10% and 20%, but still our prices will be much lower than those of the lowest-priced competitors in the market," Bompard declares with confidence.

We are in the middle of a wave of price increases. Have you also been forced to raise prices, or will you soon be?

"Our field is greatly affected by inflation, global supply chains, the difficulties arising from the Russia-Ukraine war, and other factors. There is great pressure on food prices; in France, inflation on food prices is 15% per year. But we have noticed that in Israel there is a demand for good products at low prices, which is why there were such high expectations for Carrefour’s entry. We are definitely able to meet them."

"We are used to competition "

The Israeli market is saturated with Shufersal bringing SPAR to Israel, Rami Levy, Yochananof, Victory, and other chains. How do you view the competition here?

"We are used to competition. I always respect all my rivals, but our ability to bring low-priced products, thanks to our enormous purchasing power, is of great importance. We want to offer Israeli customers an ecosystem of convenience stores, hypermarkets and e-commerce. We feel that, despite the strong competition, there is room for all of these."

What challenges do you face when entering a new market?

"First of all, it’s about entering a country where we are unknown. But there are countries where we are the leading player, such as France or Brazil where we also dominate 30% of the market. We are up for a challenge, and that is always a good thing.

"In Israel, along with the complexity of importing the products and the kosher issue, we know that consumers appreciate innovation, quality products and good food, and cheap prices for non-food, all of which are central to us."

How do you intend to deal with the more challenging categories like meat, fish, and dairy products?

"Kosher issues will require us to find local solutions through local producers. It will take time, but it will happen. These are very important categories for consumers, and we will have a way to offer them in the future."

"We created a buzz"

Brand loyalty is deeply rooted in Israel, as it is throughout the world. As consumers, we are used to our branch of cornflakes, snacks, and dairy products. It is not easy for us to go to the supermarket and reach for an unfamiliar product. However, in recent years the popularity of private labels products has soared worldwide, due to rising costs of living, global recession, Covid, and more.

Israelis are very loyal to brands they know. Will you be able to change decades of consumer habits?

"Definitely. The positive buzz created before the opening in Israel proved there are great expectations on the part of Israelis for something different. I know that this is a huge challenge, and we will try to do the best we can to be a strong player in the market, and earn the loyalty of our customers.

"Since our products entered Bitan Wines branches last summer, sales have far exceeded our expectations. We started selling our chocolate last July. Later we introduced products in other categories such as breakfast cereals and olive oil. In certain categories, such as chocolate, consumer loyalty has changed. People who were once Elite brand chocolate buyers, today come to the stores and look for our brand.

"So, it's true that there is high brand loyalty, but when a price gap is wide, people will want to experiment. When they experiment and find out that the product tastes good - because we perform a lot of taste tests against the other brands - they decide to switch their loyalty to us.

"We see this in quite a few other countries, that when we open branches, the market share of the major brand is 80%, and our brand is only 20%, and in a short time it reaches 35%, and it never goes back to the local brands. This is exactly what we want to do in Israel."

Meetings with entrepreneurs

It is clear to Bompard that each country is different in its characteristics - market, consumers, and competition - but that there are also similarities. "All customers want to get better quality from retailers who are committed to values like the environment, plastic, packaging, cruelty-free to animals, and all at good prices despite rising inflation. The combination between physical stores and e-commerce is also important to them, as well as innovation. "

What surprised you the most in the Israeli market?

"In the 36 hours I spent here with my teams, I was exposed to the technology being developed in Israel, and I was thrilled. The advanced retail tech in the local ecosystem, the variety of Israeli startups, is something very important to us.

"Carrefour is moving towards a revolution of innovation. We have invested €600 million in digitalizing our e-commerce, improving supply chains and physical stores, and we expect that the ‘innovation nation’ will advance us in matters of data, AI, and automation of processes.

"We met with very interesting startups that we are considering collaborating with not only in Israel but all over the world, on solar energy, process automation, and AI. We have already decided to move forward with a relatively early stage startup in Israel, and bring it to work with us in Europe.

"E-commerce is a top priority for us. We are the leaders in Europe in retail media, and we definitely want Israel to be a part of that. We have offered our partners here many of the services we have developed, and we hope to develop together with them in these areas.

"We see that thanks to digitization, all our systems in the next 5-10 years will change, so that we can offer a better shopping experience, do more personalization that will offer customers the things most suited to them, and make deliveries wherever they want. These are huge changes compared to what was five years ago years".

What would you consider a success in Israel?

"Reaching the hearts of Israelis. If we succeed in being excellent in operating the chain - with quality products in combination with low prices, innovative formats, and e-commerce activity bringing more and more loyal customers - that will be a success, and will encourage us to continue investing in Israel."

Published by Globes, Israel business news - en.globes.co.il - on May 14, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.

Carrefour CEO Alexandre Bompard  credit: Rami Zarnegar
Carrefour CEO Alexandre Bompard credit: Rami Zarnegar
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