Mass distribution: in the price war, the Leclerc tank crushes the competition

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Not far from 2 billion euros in additional turnover, nearly 600,000 new customers… This steamroller is putting pressure on a sector already shaken by food inflation of 21% over two years. Even the German discounter Lidl, long its competitor in winning new customers, is seeing its growth slow down.

In November, Leclerc gained 1.8 points of market share (23.7%). Never seen. The Lidl distance brand, for a long time its competitor in winning over new customers.

Unbeatable in negotiations

In the midst of a purchasing power crisis, the recipe for the group of independents lies in its unbeatable prices. In November, the A3distrib firm and Editions Dauvers estimated that shopping online at Leclerc was 9% less expensive than at its competitors.

“The margin is never an objective”, summarizes the Breton heir. A strategy not always easy to follow. There was a “moment of doubt” about an increase in shelf labels, when stores’ energy costs were soaring, says a store manager. But the brand held on, including its young members, these bosses who were in debt for fifteen years as part of the acquisition of their hypermarket.

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“When a young person thinks about raising prices to improve his performance, his elders remind him that, to generate momentum, they must be lowered,” explains Thomas Pocher, owner of a Leclerc in Templeuve (North). In its specifications, a Leclerc must be at least 4% below its local competitors.

Leclerc’s secret to staying the least expensive? It comes down to the slogan of founder Edouard Leclerc, already half a century ago: “Buy cheaper to sell cheaper.” Since then, the brand has become unbeatable in the art of negotiations with manufacturers. And this is thanks to the hard work of its purchasing centers divided into four levels: in Brussels, in France, in the region and in the stores.

Eco+ victim of its success

Faced with its rivals, Leclerc has a major advantage: its structure as a group of independents, without a parent company or shareholders. “The only profit center is the store,” recalls Michel-Edouard Leclerc. Margins can be reinvested in prices.

For a year and a half, the brand has been delaying the on-shelf repercussions of the increases requested by its suppliers by three months. An effort which allowed it to widen the gap with its competitors. “Store owners are directly concerned by their results,” adds consultant Rodolphe Bonnasse, CEO of Aristid Retail Technology. “This strengthens their involvement and their adaptation to local specificities.” Result: the stores are better maintained than many of their competitors, with Leclerc taking all the places in the top 10 hypermarkets best rated by their customers, according to a study by PMP Strategy for Editions Dauvers. “We talk a lot about Leclerc prices, explains Walter Ceglia, CEO of HMY, a company that manufactures furniture for many Leclercs. But their strength is also that you can find local people in their hypermarkets. At Leclerc de Pont l’Abbé, fruits and vegetables are purchased from local producers.”

Unlike Carrefour, which is banking on reducing the number of references in its hypermarkets, Leclerc has in fact retained its range of 40,000 products. “There is Leclerc’s own brand, regional products and even major national brands,” the founder’s son still boasts. And above all Eco+, its first-price range, whose volumes have increased by 37% since the start of the year, sometimes even a victim of its success in listening to this Breton dairy producer: “I was producing an Eco+ reference, but I had to stop this year because the demand was too high and was disrupting my entire organization.”

Another advantage of the leader: its wide range of references allows it to pass on increases in certain products to others, where Lidl struggles to maneuver. “Now, Leclerc is catching up with Lidl in terms of price image,” observes Gaëlle Le Floch, expert for Kantar.

A “risk of oligopoly”

There remains one area where the king of tight costs does not restrict his spending: communication. With the eternal message of defending purchasing power. “Their hammer has been driving the same nail for fifty years,” smiles Rodolphe Bonnasse. Advertising investments by the second largest French advertiser increased by 23% in the first half. In this system, off-road spokesperson Michel-Edouard Leclerc plays a key role and annoys his rivals. “He’s the Robin Hood of the French,” laughs Michel Biero, Lidl’s number two in France.

They drink up his words. Leclerc is not really the cheapest, but scores points on perception.” The one who will take the helm of Lidl France in January elaborates: “The brand is fighting on 2,000 references, but lets the price of the other 38,000 rise! “

Read alsoFood: Each brand has its own anti-inflation strategy

Another competitor torpedoes: “Leclerc had said that he would make gasoline at cost price, but does not do so. As for his comparative ads where he presents himself as the cheapest, it is he who chooses the products, it ‘It’s too easy!’

The tide could well turn. Suppliers are concerned about the growing weight of the brand. “Leclerc accounts for almost a quarter of the market, the balance of power is unbalanced, notes a heavyweight in the dairy industry. This weakens the most weakened competitors, who could eventually disappear. There is a risk of oligopoly .” Michel Biero, from Lidl, dreams of better days: “Their efforts on prices have a cost. And they lose a lot on non-food.” Not enough to shake the Breton rock, who dodges: “We don’t walk on water, but let’s say that we swim very well.”

Casino under pressure

While Leclerc laughs, the Casino group cries. A parent company that is over-indebted and devouring cash, prices that are too high and a market share that is collapsing: nothing is going well in Saint-Etienne.

In great financial difficulty, the group signed an agreement this summer to be taken over in the first quarter of 2024 by Daniel Kretinsky. But the situation has since deteriorated. Casino forecasts a negative gross operating surplus of around 100 million euros for 2023.

In the third quarter, sales in hypermarkets and supermarkets fell by 14.4%, despite prices inflated by inflation. Put under pressure by its future buyer, Casino must offload all of its large stores in free fall, to concentrate on its gems, Franprix and Monoprix.

“We have to go faster to cut off the sources of loss if they want the deal with Kretinsky to go through to the end,” points out a very good expert on the matter. “They are looking for money, and they have asked everyone,” confirms a competitor. A hard blow for CEO Jean-Charles Naouri, who recently explained that he had only one battle: to avoid the dismantling of Casino.