Picard: France’s Leading Frozen Food Retailer

leading home delivery channel established in 6 countries through online and telephone orders. Therefore, it is concluded that the UK is an attractive proposition for Picard.

INTRODUCTION

In these tough economic times, the frozen food sector is experiencing growth as consumers realize two main benefits: it offers value for money and helps reduce food waste.

According to a report by Kantar Worldpanel in 2010, the frozen food market in the UK is valued at around ?5.1 billion annually, accounting for 8% of the UK Grocery Industry. Although it remained steady in 2010, there has been a substantial growth of 11.3% in value from 2007 to 2010, with indications of further growth this year. Seth and Randall (2011) mention that convenience is driving global sales in the frozen market as consumers look for healthier and time-saving meal options. This presents a challenge for major brands as private label products continue to gain traction and consistently increase their market share.

Source: Kantar Worldpanel, September 2010 [pic]

As the UK entered a recession, the frozen food chain Iceland experienced a significant increase in sales. Another supermarket, Waitrose, also saw impressive growth in its freezer aisles. This demonstrates the contrasting market positioning of these two retailers. Chart 1 shows the frozen market share of manufacturers, while Chart 2 depicts the market share of retailers. The data presented is from Kantar Worldpanel and is current up to June 12th, 2011. Given the growth in the frozen food market, the success of private label products, and the increasing demand for convenience, this research will primarily focus on the analysis of Picard, a premium French frozen food retailer. The objective is to assess its potential for international

expansion into the UK.

Picard is a leading frozen food retailer in France and Italy. In France, it offers over 1,100 SKUs in nine categories, while in Italy, it focuses on selling frozen raw products with a portfolio of 700 SKUs. Owned by Lion Capital, Picard prioritizes proximity, quality, and service. As the market continues to grow, the company plans to open more stores and expand its geographical reach. In 1999, Picard acquired Gel 2000 to enter the Italian market, following an internationalization through acquisition strategy. The company's overall price strategy is positioned as premium.

Picard, a retailer known for its excellent quality and services, has established itself as a high-end player in the market. Offering a wide range of products, including premium options like sashimi, foie gras, and rooster with truffle shavings, as well as more common frozen items such as pizza and fries. To promote their brand's value image and encourage customers to try new items, Picard discounts around seventy products each month by up to 15%.

PEST ANALYSIS

This section will analyze the challenges facing Picard using the PEST analysis method. The analysis focuses on evaluating Political, Economic, Social, and Technological factors that impact Picard's operations. The assessment primarily concentrates on its domestic market in France and other countries where it operates.

Political: Since President Nicolas Sarkozy's liberalisation of the retail sector in June 2008 (Hall, FT. om, 2008), the convenience sector in France has presented advantageous opportunities for retailers. The aim of this liberalisation was to eliminate barriers to entry and abolish price regulation, thus allowing German discounters like Aldi and Lidl to enter the market. This has intensified price competition, necessitating Picard to effectively communicate

their unique selling points to attract consumers in the convenience sector.

The labour regulations in France are numerous, with a strong focus on worker well-being. French society values quality time spent with family and follows the principle of "work to live." The French labour code (Code du Travail) is designed to protect the workforce rather than prioritize the interests of enterprises (Global Politics, 2009). Despite this, civil unrest and a prevailing sense of economic hopelessness among the population have impacted Picard. The company currently faces pressure from labor unions regarding wage levels.

According to the latest IGD France country presentation in June 2011, it is projected that France's GDP will gradually increase to a rate of 2% by 2012. This growth will be driven by business investment and exports. Although unemployment has peaked, it is expected to slightly decrease. Price pressures are expected to remain low, with underlying inflation at about 1% annually. For Picard, the economic downturn presented an opportunity for growth and now the challenge is maintaining momentum during a potential economic recovery.

Picard operates in European Union member countries that function as both a free trade area and customs union. This means trade is unrestricted and does not incur customs duties. The distribution network is easily accessible to countries like Italy, Luxembourg, Belgium, and Spain where home delivery service is available. However, consumer confidence and inflation rates vary significantly among these countries. Picard does not adjust product prices based on each country's economic factors.

Consumer demand for goods and services is influenced by their social conditioning which shapes attitudes and beliefs. In Europe, consumers' attitudes towards food are constantly changing as they become more health-conscious and

concerned about sustainable production methods (Lancaster & Reynolds, 2005).

However, only 38.2% of adults view frozen foods as equally beneficial as fresh food, which is a challenge for Picard. This percentage has risen from 28.7% in 2005 (Mintel, September 2010).

The demographic shifts, such as an aging population, pose discouragement for food retailers. Older individuals tend to consume less, have a stricter budget for groceries, and are less likely to frequent stores regularly.

To address this issue, Picard offers appropriately portioned products to meet consumer needs. They also provide a home delivery service, available not only through the internet but also via telephone orders. These services account for a total of 2.5% of Picard's sales across all operating countries (Picard.fr, 2011).

The supply chain, operations, and processes of grocery and food retailers have been significantly impacted by technology. The availability of broadband internet access has necessitated adjustments in how retailers offer their products and services. For example, Picard now provides a website where customers can order groceries with delivery within 48 hours, which accounts for 20% of their total sales. However, the current website only supports French and Italian languages, limiting accessibility for non-French or Italian speaking customers.

Alongside technology, loyalty cards have become crucial in the grocery retail market as a means for retailers to differentiate themselves from competitors. While many French retailers have already implemented loyalty card programs, Picard has yet to introduce one.

Nowadays, being an important element in the wider promotional mix, competition is a disadvantage for Picard in the UK market. The analysis of entering the UK market using Porter's Five Forces Model (1980) helps determine the level of competition and attractiveness of the

industry. These forces directly affect Picard's ability to serve customers and generate profit. In the UK industry, Picard faces a combination of competitive forces: [pic] Figure 1: Porter's Five Forces. The intensity of competitive rivalry for Picard in the UK frozen food retail sector is medium, with constant battles between firms vying for customer share (IGD, 2011).

In the UK supermarket industry, there are several notable firms. Among them, Tesco, Asda, Iceland, Morrisons, and Sainsbury’s dominate the frozen food sector. This market is highly competitive and has seen rapid development. As a result, Picard, a company in this industry, must be innovative to gain market share. Picard’s strategy focuses on quality and innovation. Its main competitor in this regard is Waitrose, which has been increasing its number of convenience stores in the UK. According to Seth and Randall (2011), grocery trading margins in the UK are significantly higher than in Europe. Currently, they are three times higher than those in France on average. UK consumers have been willing to pay for this difference in quality and the shopping experience offered by the best superstores in the UK.

Picard premium frozen food has an advantage over its strong competitors, such as Iceland and Tesco, who focus on value and volume drivers. However, there are numerous barriers and challenges for Picard to enter the UK frozen retail industry, making it difficult to compete against existing players. According to Ritz (2005), the grocery market has undergone a transformation in the past 30 years, becoming dominated by supermarkets. The power of these large chains comes from their operating efficiency, one-stop shopping, and significant marketing expenditure. This creates a strong barrier for

new entrants, putting Picard at a disadvantage in establishing a brand name in the UK.

It is challenging for Picard, as a private company, to raise enough capital due to large fixed costs and necessary marketing communications in order to establish the brand's success. The cultural barrier is another disadvantage of entering the UK market, as French cuisine differs greatly from what is expected by the UK market. This makes it difficult for Picard to charge a higher price for their frozen products, which have typically been associated with discount and value. In terms of substitutes, the threat in the specific frozen retail market is relatively low to medium. As consumer trends shift towards more home-cooked meals and a desire for reduced waste and better value for money in the UK, Picard's wide range of sophisticated products aligns well with the trend of dinner parties. Additionally, these products have a long shelf-life and offer an alternative to dining out at restaurants.

Picard faces competition from convenience stores in local towns and city centres in the food retail market, which poses a challenge for the company's market entry and success. However, Picard's unique store format and high-quality frozen products give it a competitive advantage over other retailers in the UK. Supermarket chains are also increasing their focus on premium own label products, but they still lack the variety of raw products and innovative dishes offered by Picard. In terms of suppliers, Picard's strategy of vertical integration in its supply chain gives the company significant bargaining power, ensuring consistent quality and reduced supply disruption risks (Scott, 2011).

However, while reducing operational flexibility and limiting access to the best suppliers, the

current supplier network of over 200 suppliers is a significant advantage for Picard's expansion in the UK. About 70% of these suppliers are French and are used to manufacture Picard's own label range, which makes up 98% of products sold in stores. The geographical location and continuing service of these suppliers offer benefits in terms of meeting strict quality standards and being able to meet increased demand, thus achieving economies of scale and gaining greater margins. This ultimately enables Picard to offer more competitive prices to consumers.

The bargaining power of customers is moderate, which can lead to lower prices (Porter, 1980). If chips are overpriced at Picard, customers have the ability to switch to Iceland. However, Picard offers a unique premium range that is not available in other UK retailers. Therefore, customers will not be able to find high-quality frozen Japanese dinner party sets or similar products elsewhere.

Picard has the advantage of controlling and retaining a customer base by customizing its service with better and innovative choices. In the UK, shoppers are increasingly using a variety of formats to meet their grocery shopping needs, with convenience being the top performer in the market (IGD, 2011). This is advantageous for Picard because its target audience is primarily urban areas, particularly city centers within walking distance. Despite this advantage, Picard is unable to compete with larger stores in the UK that offer a wide range of products, including chilled and non-food items, allowing shoppers to satisfy all their shopping needs in one trip. However, online shopping presents another channel for Picard to meet various aspects of shopper demand for a more convenient shopping solution.

According to

IGD, the online channel in the UK is expected to grow by 14.4% from 2010 to 2015 and reach 5.2% of the total grocery market. Comparatively, Picard already benefits from a 20% share of total sales in countries where it currently operates, suggesting an advantage over the UK market.

CONCLUSION

Based on the analysis above, it can be concluded that Picard has the potential to expand into the UK due to its efficient operations, successful business model, and unique approach.

The UK frozen food market would be revitalized by the innovative gastronomy concept of "hit-and-run" and will pose a strong challenge to the convenience sector. However, for Picard to achieve success, it is imperative to make significant investments in opening dedicated stores in urban areas and in advertising efforts to build brand awareness.