Belgian retailer Colruyt recorded a 2.8% rise in its revenues in the period from 1st April to 30th September 2019, according to ESM. With turnover reaching €4.7 million, Colruyt now holds almost a third (32.5%) of Belgium’s retail market. The chain operates stores under the Colruyt Lowest Prices, OKay and Spar banners. Its core Colruyt business in Belgium and Luxembourg recorded a 1.4% rise in revenue, thanks to new store openings and store expansions, as well as a focus on the rollout of electronic price labelling. Colruyt’s French operations also saw an increase in revenues, of 11.9%.
In its press release, Colruyt states that the firm does “not anticipate a significant upturn in the economic climate for the consumer in Belgium in the short term. Colruyt Group expects consumer confidence to remain slightly positive in France.”
Colruyt expects increasing attention to health, sustainability and taste in tomatoes, which calls for innovation.
Having started out as a small family grocery shop, today the Colruyt Group has nearly 500 of its own stores and over 540 independent businesses in Belgium and affiliated shops in France. Colruyt not only offers retail store formats but is also active in wholesale, food service, fuel distribution, production of green electricity and printing and document management. Initially, there was only Colruyt Lowest Prices, but today in food there are different store formats, each with its own market position, brand promise and target audience.
Minimal stock for optimum
Within the Colruyt Group, the procurement of fresh produce has been centralised. A team of 10 buyers and 2 department heads is fully responsible from the sourcing to the sale of the range of fresh produce. Stock, quality, purchasing conditions, margins, promotion, assortment and publicity are all aspects of the process that are dealt with by the same person for one or more product categories.
Evidently, logistics have an important role in this process, too. Colruyt works with central warehouses where the stock is kept to a minimum to ensure freshness. This implies fresh deliveries daily.
Packing takes place in Colruyt’s own packing division and is done based on the needs of a single day. For sourcing, there is a preference for Belgian produce. The availability is secure and produce of Belgian origin offers advantages in terms of quality, sustainability and food safety.
For Colruyt, tomatoes are an important segment within the fresh produce category. “Tomatoes are versatile and are widely applicable,” said Jan Schockaert, head of the fruit and vegetable procurement department at Colruyt, during the international conference ‘Tomatoes, trends towards 2020’. “They have a penetration of over 98%.”
Tomatoes also guarantee a large chunk of the turnover, with a share of 6.47% of Colruyt’s turnover generated by fresh produce and 13% of vegetable (excl. potatoes) sales. Volume-wise, this means 3.13% and 4.63% respectively. The long-term average tomato turnover share sits at around 6% and may vary a bit due to price differences (source: 2015 figures supplied by the Colruyt Group).
The division between large and small tomatoes is almost equal: 49% of the tomato turnover comes from large tomatoes and 51% from small ones. Nevertheless, it should be noted that 2015 was the first year when small tomatoes outperformed large ones in terms of turnover.
In contrast, only about a quarter of the shelves was reserved for small tomato varieties: 24.27% in terms of volume, as opposed to three quarters for the large ones: 75.73% of the tomato volume. Although it has been stable for the last 5 years, since 1990 the diversity in the tomato category has expanded a lot.
Whereas Colruyt presented an average range of 7 different tomatoes to the consumer in 1990, there are 13 on average in 2015, with a peak of 18 tomato varieties in the high season. This leads Schockaert to conclude that an increase in SKUs does not generate extra turnover.
“The tomato shelves are considerably oversized and the limits to segmentation have now been reached. If new types are added, then another one must disappear,” he said. “The total assortment is so big that the consumer also has trouble choosing.”
Trend in taste: the case of tomatoes
Schockaert said the small tomato category is growing strongly. “That is where the consumers find more taste in the tomatoes. The consumer is looking for taste.”
But he remains to be convinced that the ‘water bomb’ — the tasteless tomato from the eighties much discussed in the media — has completely disappeared. “A tomato should taste like a tomato,” he said.
Schockaert considers too much attention has been paid to the tomato’s appearance, yield and shelf life. “Innovations are needed in terms of taste.”
He believes people are prepared to pay more for taste. “I think the consumer particularly wants to enjoy eating a tomato.” He encourages growers to focus on taste and work that is market-oriented. In the future, there will be increasing attention on health and sustainability, but the predominant focus should be on taste, he said.
Cru, Colruyt Group’s fresh market format, has just marked its first year with news of another store opening, in Wijnegem, in the Belgian province of Antwerp, in the spring of 2016.
‘Cru’ means ‘raw’, and when launching the concept last year, Colruyt said it symbolises simplicity and pure essence. The first store was opened in a farmhouse in Overijse, in Flanders.
“Cru is a new concept for and by people with a passion for good food, pure flavours, and authentic quality products,” Colruyt said in a press release.
“Cru wishes to connect customers, partners and employees and to offer an exclusive selection of fresh products in a market setting, offering among other things meat, fish, freshly baked bread, vegetables and fruit, as well as cheese, wine, home-roasted coffee, home-made dishes and flowers.”
Colruyt has also said that Cru combines a love for authenticity with convenience and contemporary technology, such as self-scanning, fast check-in and the option for mobile payment. The idea is to “provide the experience of an actual market where the customer has the time and the space to wander around, be surprised, to taste and make contact. The Cru market unifies the vegetables and fruit, bread, meat, packed meat, poultry, fish, cheese and dairy sectors as well as home-made dishes, beverages and flowers.”
“Cru also wishes to offer relevant convenience, from semi-prepared (such as cleaned and blanched vegetables) to ready-to-eat home-made dishes.”
The Cru outlet in Wijnegem, in Axel Vervoordt’s Kanaal Project, is planned for the spring of 2016.
Belgian retail group Colruyt reports that it gained market share in 2014/15 despite tough competition. In Belgium, where the retailer competes with the hard discounters Aldi and Lidl as well as Carrefour and Delhaize, it says its market share rose to 31% based on revenue from its store concepts Colruyt Lowest Prices, Spar and OKay. (The group is to focus its expansion efforts even more on OKay, its proximity store concept.)
Colruyt Group also managed to keep its operating margins stable in 2014/2015, with a gross margin of 24.9% of revenue and EBIT margin of 5.6% of revenue. In what it described in its 2014/15 annual report as a “challenging market environment”, its reported revenue grew 3.1% to €8.9 billion. “Due to the pressure on the sales prices, the volume growth was not fully reflected in revenue growth. Price pressure was brought about by price deflation, competition and the consumer trend towards cheaper products,” it said. The group’s net profit was weighed down to €331 million after recording a fine of €31.6 million imposed by the Belgian Competition Authority.
Wholesale & Foodservice
Colruyt’s wholesale and foodservice segment accounted for 17.1% of its consolidated revenue. Revenue from these activities rose 3.5% on last year to €1.5 billion. The wholesale segment includes deliveries to independent storekeepers in Belgium (Retail Partners Colruyt Group) and France (Coccinelle, CocciMarket and Panier Sympa). Wholesale revenue declined slightly (-0.5%) due to food price deflation.
source: Colruyt Group 2014/2015 annual report
Managing complexity to offer simplicity
“Our stores and wholesale activities in Belgium, France and Luxembourg continue to operate in an environment with fierce price competition and low consumer confidence,” Colruyt said in the report. One of its strategies in light of this is ‘Simplicity in Retail’. “Offering simplicity means, for example, helping consumers to make healthy and sustainable choices. This is why we continue to work on the quality and nutritional value of our own brand products, and on a more sustainable range of fish products and better working conditions at our suppliers and partners in risk countries,” it said.
“In order to be able to offer simplicity, we are also focusing on innovation. This is why we are targeting retail solutions in the e-commerce market and why we are the first Belgian distributor to make mobile payments possible in all of our web shops and stores. We are also pleased with the federal government’s plans to amend the laws governing e-commerce so that we can become a bit more competitive in relation to our neighbouring countries.”
Using audits to improve working conditions
In keeping with its commitment to improve working conditions at its suppliers and partners, Colruyt Group started carrying out regular audits in the food sector in 2013 and reports that they “do really lead to an improvement of the working conditions.” It plans to carry out at least 270 audits this year, representing an investment of over €200,000. “With this, we are well on our way to achieving our targets: all food-processing companies have to be audited at least once by June 2016 and all vegetable and fruit producers have to be audited at least once by June 2018.”
New headquarters for Retail Partners Colruyt Group
Among other highlights in the report, Colruyt said its wholesale division, Retail Partners Colruyt Group (including Spar and Alvo stores, independent Mini Markets and independent storekeepers), finalised its relocation to a new head office in Mechelen (in Antwerp province) at the end of October 2014. Two automations were also implemented in the high-tech distribution centre also located there, one in the empty goods section and another in the collection circuit for vegetables and fruit. The offices and the distribution centre have a combined surface area of 62,100 m2.
Support for Belgian pears and apples
A large-scale campaign was started at the end of August 2014 to promote the sale of Belgian pears. The Belgian pear growers had a surplus of pears due to the Russian import ban on European agricultural products. The group purchased 160 tons of pears of Belgian growers at the fruit auction. Around 550 stores of Colruyt, OKay and Spar offered the pears to their customers.
Similarly, Colruyt and OKay supported Belgian growers of Jonagold apples with a short-term campaign at the start of November last year. “Due to the abundant harvest and export problems with Russia, the Belgian apple growers were faced with a surplus. Colruyt and OKay offered pure pressed apple juice made from 100% Belgian Jonagold apples. The apple juice was sold under the own brand Boni Selection. Each store was supplied with around 500 bottles, which amounted to a total of 165.000 bottles,” according to the group’s 2014/2015 annual report.
Citrus sales at Colruyt
Sales of lemons were up 25%, oranges 12% and grapefruit 6.5% in volume for the first six months of this year, compared to the same period last year according to Colruyt’s product promotion manager Tony De Bock. “In citrus fruit we sell oranges, clementine, grapefruit and lemons,” he said. Over the course of the year, Colruyt offers lemons from Spain and South Africa, and oranges from the following countries: Spain (for eating and juicing), South Africa (for eating and juicing), Italy (“blood” oranges), Morocco (for juicing) and Egypt (for juicing). Clementines are sourced from Spain, Cyprus (mandora), South Africa (the Orri Club has been introduced) and grapefruit comes from the US and South Africa.
Colruyt’s product promotion manager Tony De Bock
Rise in sales of iceberg and multi-colour lettuce
In terms of lettuce sales, De Bock said the sales volume from January to June was up 3.5%, compared to the same period last year, with 75% of the lettuce grown in Belgium. “We import from Spain and Holland, but that is mainly the iceberg lettuce. We see the most positive evolution in iceberg and multi-colour lettuce,” he said.
Produce quality requirements
“Our quality requirements are always the same,” De Bock said. Colruyt requires Global G.A.P. and BRC certification.
Video about Colruyt Group’s 2014/2015 annual report