Auchan

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Auchan

200 rue de la Recherche
59650 Villeneuve d’Ascq Cedex
France
Telephone: ( + 33) 3 20 67 62 22
Fax: ( + 33) 3 20 67 62 55
Web site: http://www.auchan.com

Private Company
Incorporated: 1961
Employees: 116,413
Sales: EUR 22 billion ($18.8 billion) (1999)
NAIC: 445110 Supermarkets and Other Grocery (Except Convenience) Stores

Auchan is one of the world’s top retail and distribution groups with more than EUR 22 billion in revenues each year. Privately owned by the founding Mulliez family—the more than 300 members of which hold 85 percent of the company’s shares—Auchan also has long held a policy of opening its shares to its employees, who own 15 percent of the company (and some of whom have become millionaires through their stockholdings). The Auchan empire is based on the group’s 211 “hypermarkets”—vast stores that combine traditional supermarkets with a department store concept in huge spaces ranging upward to 100,000 square feet—and its smaller supermarkets. The group’s stores trade primarily under the Auchan (hypermarket) and Atac (supermarket) banners in France, where the group posts some 70 percent of sales, but also under other names on the international scene, primarily in Spain, Portugal, and Italy. In the late 1990s, the group has extended its interests to include South America, Central Europe, and the Far East, particularly Thailand and China. The company is less present in the United States, operating a sole hypermarket in Houston, Texas. The Auchan group also acts as an umbrella for a number of other Mulliez family-owned retail operations, including the Leroy Merlin DIY (do-it-yourself) chain, the second largest in the French market; the restaurant group Flunch; clothing, under the Kiabi store banner; appliances, electronics, and computers through 50 Boulanger stores; the Tapis-St. Maclou chain of flooring and carpets; as well as the original Mulliez family company, the Phildar chain of clothing, textiles, and sewing and knitting supplies. Auchan is led by Christophe Dubrulle, cousin to founder Gerard Mulliez—who, after building his home next to the company’s northern France headquarters, remains active in planning the group’s strategy.

Inheriting the Retail Gene in the 1960s

The Mulliez family founded its first company, Phildar, in 1903. At first a manufacturer of textiles, Phildar turned to the retail sector in 1946, when it trademarked the company name and began to develop its Phildar brand name of textiles and knitting and sewing supplies. The company turned toward franchising to expand its distribution network, licensing the first Phildar franchise store in 1956. Phildar grew to become one of the largest textiles distributors in the world—by the end of the 20th century the company’s network included 1,500 stores.

Yet Phildar also was manufacturing another product: Gerard Mulliez, one of French retailing’s major retailing figures in the 20th century. A self-proclaimed autodidact, Mulliez never completed high school, but instead went to work, at first in manufac-turing, becoming a foreman in the family’s textile dye shop before managing the company’s knitting factory. At the start of the 1960s, Mulliez decided to go into business for himself. In 1961, Mulliez, then 29 years old, opened his first store, a grocery, in Roubaix, in a neighborhood known as the “haut champs” (or high fields). Pronounced “oh-cham,” this first retail location soon gave its name to what was to become the Auchan retail empire.

Mulliez’s first store failed, however. Yet, rescued by his family, Mulliez determined to stay in retailing. Taking his inspiration from Edouard Leclerc, the former priest turned founder of the E. Leclerc retail chain, Mulliez—himself a devout Catholic— adopted Leclerc’s discount, self-service supermarket formula. Cutting prices throughout his store, Mulliez soon began to attract a new clientele. By the mid-1960s, the company was ready to expand, taking French retailing to an entirely new level.

In 1967, Mulliez opened the first of a new retailing concept—the so-called “hypermarket.” Combining the product assortment of a typical supermarket with the range of goods found in department stores—everything from musical recordings to furniture, household appliances, and automobile parts— the hypermarket format was quickly emulated throughout France, growing to mammoth stores of up to 100,000 square feet, as large as several football playing fields. The first Auchan hypermarket opened near the Mulliez family’s base, in Tourcoing/Roncq in 1967.

The Auchan format was an instant success—in its first year the company posted sales of FFr 70 million and profits of some FFr 300,000. Mulliez quickly began building the Auchan name into one of the country’s top retailers. In this, he was helped by a number of factors, from economic to political. The collapse of the long postwar economic boom in France, as the country slipped into the recession brought on by the Arab Oil Embargo, encouraged consumers to seek out Auchan’s discount formula. The introduction of a variety of company-owned brands—some 200 in all—which were priced significantly lower than competing national and international brand name products, helped drive store sales as well. Consumers were also attracted to the modern appeal of these large self-service stores, to the detriment of the country’s large class of small boutique shops.

Politicians of the time also greeted the rise of the hypermarket as a way to fight the rampant inflation that was cutting deeply into the country’s economy in the 1970s. The large-scale purchasing power of Auchan and rivals such as E. Leclerc, Carrefour, Docks de France, and Casino enabled these stores to maintain relatively low prices. In the 1980s, the transfer of a great deal of planning authority from the national level to the local and regional levels made it possible for communities to clear away a number of planning codes and other obstacles that had prevented the growth of the hypermarket formula. Eager to reap the benefits of the tax revenues and employment opportunities offered by the new huge commercial centers, communities welcomed the new hypermarkets. By the mid-1970s, Auchan’s annual sales had topped FFr 2 billion.

Mulliez, who had at first clung to his family’s northern France base, launched a new strategy toward the end of the 1970s to transform Auchan into one of the country’s top national retailers. In 1977, Auchan began to extend its network of hypermarkets across the country. Yet Mulliez avoided raising capital on the public market; instead, the company, like its competitors, was able to take advantage of the staggered payment structure (up to three months for paying suppliers), using its huge cash flow to finance its expansion. At the same time Auchan began offering stock to its employees, thereby giving them a share of the company. While criticism aimed at the company pointed to the low wages earned by many of its employees, a number of Auchan’s employees nonetheless became quite wealthy, as the average share price (agreed upon each year by the extended Mulliez family) increased from a starting point of just FFr 12 francs to more than FFr 500 francs by the late 1990s.

National and International Growth in the 1980s

With the encouragement of local authorities, France’s retailing landscape turned more and more toward the construction of large commercial centers located on the outskirts of the country’s cities and towns. Auchan joined this trend, expanding its number of hypermarkets across the country. At the same time, the company was developing other store formats, including standard supermarkets and smaller grocers, which were located in the country’s smaller communities or in urban locations. By the mid-1980s, Auchan had grown to annual sales of more than FFr 20 billion.

By then, the Mulliez family had becoming something of a retail empire in France. While Gerard Mulliez built the Auchan chain, other family members were encouraged to explore their own retail initiatives. The flooring and carpeting company, founded by cousin Gonzague Mulliez in 1963, had risen to become France’s leading specialist in this category, with 160 large-format stores at the end of the 1990s. Another retail concept, launched by Patrick Mulliez in 1978, was the discount clothing chain Kiabi, which grew to a fashion giant, posting FFr 7.8 billion in sales through more than 170 stores across Europe. Another success story was the company’s acquisition of DIY and home decoration chain Leroy Merlin, founded in 1923. After acquiring half of Leroy Merlin in 1979, the Auchan group took full control by 1981 and built up its network to more than 100 stores across France and Europe. Meanwhile, the company was enjoying huge success with its Decathlon sporting goods chain, created by family member Michel Leclerc, restaurant group Flunch, and then the electronics and home appliance chain Boulanger, acquired in 1986.

Company Perspectives:

“Our mission is striving to be entrepreneurial.” This phrase summarizes our company’s credence. Auchan’s striving for customer satisfaction is the core of its philosophy. Low prices, large product selection, innovative and efficient services all contribute to increased buying power and bettered quality of life. Auchan is continually active in the job market, creating several thousand additional jobs in 1997, including 4000 long-term positions in France. With small- and medium-sized companies, the agricultural sector and the transportation sector, Auchan has developed new kinds of partnerships. With environmental issues becoming increasingly important, Auchan is multiplying its local and national initiatives. The company values are sharing knowledge, sharing authority and sharing the results.

Nevertheless, the Auchan chain continued to drive the family’s fortunes, as Auchan began to expand onto the international market in the 1980s. The company opened its first store in Saragosse, Spain—under the Alcampo banner—in 1981, building up that chain to nearly 40 hypermarkets and 90 supermarkets by the end of the 1990s. At the end of the 1980s, Auchan looked toward another southern European market, Italy, where it initiated a partnership with that country’s IFIL. Auchan also joined the rush into retailing’s Mecca—the vast United States market. The company opened several hypermarkets, but by the end of the 1990s remained with only one in operation, in Houston, Texas—the American consumer had proven reluctant to adopt the huge hypermarket format, which often required a mile of walking for a single shopping trip.

Consolidating in the 1990s

Auchan was facing constraints at home, too. Faced with dwindling sales as the result of the deep economic recession that gripped France during much of the 1990s, Auchan was confronted with a growing backlash against its core hypermarket format. In the early 1990s, more and more voices were calling for limits on the rate of hypermarket expansion, and, by the mid-1990s, legislation had been passed that effectively stopped the building of new hypermarkets in France. Similar legislation began to appear in Spain and other countries as well.

Auchan, which had built up an empire of 80 hypermarkets, for annual sales worth FFr 64 billion, had taken a position as France’s sixth largest distribution group. Yet Auchan’s internal expansion in its home market was now severely limited. Only a handful of permits for new hypermarket construction were being granted each year. In addition, the company was under pressure from its larger competitors, particularly Carrefour, Casino, and market leader Leclerc, which enjoyed greater economies of scale. As a result, Auchan felt it had no choice but to make the “defensive” move of launching a hostile takeover of close competitor, and publicly listed, Docks de France, with its chain of Mammouth hypermarkets and Atac supermarkets, as well as 500 U.S.-based Lil’Champ convenience stores. This last chain, heavily in debt, was sold off in 1997.

The highly publicized takeover battle, a rarity in the French business world, sent Docks de France seeking a “white knight” in England—an even greater rarity in France. At last, however, Auchan had managed to gain majority control of Docks de France and, in 1997, completed its takeover. The takeover enabled Auchan to double in size, securing its position among France’s top retailers. Despite the company’s assurances that it would maintain the integrity of Docks de France, Auchan quickly began to dismantle the Docks de France organization, converting its Mammouth signage to Auchan, and then reorganized the entire company along format segments, keeping for the time being the Atac supermarket chain.

The integration of the Docks de France organization took nearly two years to complete and resulted in a new Auchan weighing in at more than FFr 147 billion in sales per year. The company’s new size enabled it to pursue continued international expansion—soon after the Docks de France takeover, the company performed a similar takeover of Portugal’s Pao de A9ucar, giving it a new leading position in that market. In the late 1990s, the company targeted new strategic growth areas: in Central Europe, starting in Poland in 1996; in Italy, where in 1998 it strengthened its partnership agreement and launched a new phase of Gruppo Auchan openings; in the vast Asian market, beginning with the opening of stores in Thailand in 1997 and China in 1999; and the Latin American market, including the launch of Auchan stores in Argentina and Mexico. Back home, Auchan was refining its hypermarket concept in line with new consumer trends. The company abandoned its more than 200 brand names—which had ceased to be identified with Auchan by its shoppers—in favor of a single discount Auchan brand. The company similarly launched a new in-house clothing label, replacing its former multilabel offering.

Gerard Mulliez retired from day-to-day control of the empire he had founded in 1996. But the Mulliez family remained in full control of its group of companies—taking Mulliez’s spot was cousin Christophe Dubrulle. Like the rest of the Mulliez family, Dubrulle had worked his way up through the family-owned ranks, beginning with a simple laborer’s job before succeeding to positions as department head, store manager, and, finally, director of the Leroy Merlin chain, before being brought into Auchan as Mulliez’s heir apparent. Gerard Mulliez nonetheless pledged to remain active in charting his family’s empire’s growth into the new century. Indeed, Mulliez had retired to the home he built for himself—right next door to the Auchan headquarters.

Principal Subsidiaries

Leroy Merlin; Boulanger; Decathlon; Kiabi; Phildar; Flunch; Tapis Saint-Maclou.

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.

Key Dates:

1961:: Gerard Mulliez opens first Auchan store.
1967:: First Auchan hypermarket is established.
1977:: Company begins employee stock distribution program; launches national expansion.
1981:: First international store opens in Spain.
1989:: First store in Italy is opened, and a hypermarket in Houston, Texas, opens for business.
1996:: Company initiates hostile takeover of Docks de France, as well as of Pao de Agucar (Portugal); opens first Poland store.
1997:: Auchan enters Mexico, Thailand, and Argentina.
1998:: Company enters Hungary.
1999:: Company launches new Auchan brand name product range.