Electra Consumer CEO on the transaction with Carrefour: “Big bang in the food industry”

Zvika Schwimmer said that Carrefour products will arrive at Yenot Bitan and Mega branches already this year: “There is here an ability to bring attractive products at attractive prices not seen in Israel”. Schwimmer also said that the chain’s branches will remain closed on Saturday, set a goal of NIS 6 billion within five years and challenged Shufersal: “We strive to be the leading online player in Israel”.

Orna Yefet

14:11, 06.03.22

Zvika Schwimmer, CEO of Electra Consumer, announced this morning (Sunday) the entry to Israel of the international supermarket chain Carrefour and defined the move as a “bang”. In a conversation he held with investors to publish the company’s financial results for 2021, Schwimmr promised that the prices at which Carefour will sell in Israel will be attractive to the consumer and that Electra will reach a turnover of NIS 6 billion in the food sector within five years.

“Why is Carrefour a big bang? This is a company with an annual sales turnover of 82 billion euro, while the entire food market in the country is estimated at 12 billion earos” explained Schwimmer. “This is the largest private brand in Europe. The chain executes 2 billion transactions every year. It is the largest food retail chain in Europe, with 13 thousand stores, when in Israel there will be 152 stores. It employs 320 thousand employees, and Electra will be the 11 franchisee of this chain”.

Zvika Schwimmer, CEO of Electra Consumer Products (Photo: Orel Cohen)

“There is here an ability to bring attractive products at attractive prices not seen in Israel”, added Scwimmer. “We will increase our sales line and maintain our gross profitability. We will be able to see the big change as early as 2022 with Carrefour products that will be sold in Yenot Bitan and Mega”.

Electra Consumer will convert Yenot Bitan and Mega stores to the international brand Carrefour. In the investors’ conversation Schwimmer said the investment in converting the branches will be about NIS 400 million in the first five years.

According to Schwimmer, “During this year we have acquired control of the Yenot Bitan Group at an attractive price and we knew that the potential there was to increase the total revenue, which was low in relation to the industry. The revenue per square meter in Yenot Bitan is NIS 25,000, which is lower than the average revenue in the food industry, which is NIS 40,000 per square meter. Therefore, there is a potential for an increase in the sales turnover. We believe that within five years we will reach a turnover of NIS 6 billion in the food sector”.

Already in the coming weeks, Electra Consumer will introduce a variety of Carrefour products, among others Carrefour’s private brand, which will be sold at Yenot Bitan branches without it having to pay royalties on the sales. Later, when Yenot Bitan branches are converted to Carrefour, Electra will pay royalties to the international chain according to the volume of sales. The company refused to disclose the cost of using the Carrefour brand, but said it would pay royalties in stores that were renovated and converted to the Carrefour brand. “We are renovating 20 stores under the brand in the coming year and if the sales are good and the store doubles or triples itself, then we will run and renovate stores much faster. The move is currently planned for four years, but it will be in line with the development of the revenue. We will not pay royalties on Carrefour products that will be sold in Mega and Yenot Bitan”, said Schwimmer.

Carrefout’s branch in France (François GOGLINS, Wikipedia)

Although Carrefour is an international chain, in Israel the branches will be closed on Saturday. “Yenot Bitan is not open on Saturday, nor will Carrefour”, said Schwimmer.

Schwimmer tried to reassure the local suppliers, whom the current move is likely to hurt: “I estimate that in the first stage up to 20% of the product basket will be under the brands of Carrefour. This is an opportunity also for the local suppliers to manufacture products under the Carrefour brand and sell them to all the other Carrefour branches around the world.

Challenging Shufersal

Schwimmer also referred to the agreement with the Japanese-American retail chain 7-eleven and said that there was potential for opening more than 400 convenient stores , which would increase the company’s ability to grow. They compete with McDonalds and Starbucks as well as with convenience stores”, said Schqimmer. “ We will have the opportunity to be a unique player in the field of convenience stores and also open 10,000 square meters stores in the food industry”.

Schwimmer challenges Shufersal, the larges food retailer in Israel and the leading player in online sales: “Carrefour allows us to bring an enormous basket of food and non-food products and a variety that has not existed to date in Israel. This will enable us to extend online sales. We mark ourselves as a second player in the field of online sales in the first phase, however later we aspire to be the leading online player in Israel”.

Electra is planning to launch a customer club in cooperation with a credit card company, but has not yet announces who will be its financial partner. “As part of the new club, we will provide non-bank credit and launch purchase vouchers”, Schwimmer announced. “This will increase the shopping frequency and the shopping basket in the group stores by a huge product. The next phase after launching the club will be entry to the field of financial credit  - in the second half of the year we will link-up with a financial partner and we will soon announce who it is. These moves will positively affect the balance sheet”.