Etablissements Franz Colruyt N.V.

Wilgenveld, Edingensesteenweg 19
Halle B-1500
Belgium
Telephone: ( +32) 2 360 10 40
Fax: ( +32) 2 360 02 07
Web site: http://www.colruyt.be

Public Company
Incorporated: 1925
Employees: 11,906
Sales: EUR 3.85 billion ($4.79 billion) (2004)
Stock Exchanges: Euronext Brussels
Ticker Symbol: COLR
NAIC: 445299 All Other Specialty Food Stores; 323119 Other Commercial Printing; 541512 Computer Systems Design Services; 551112 Offices of Other Holding Companies

Etablissements Franz Colruyt NV is one of Belgium's top three supermarket and retail companies. The company's flagship network of large-surface, deep discount Colruyt stores offers a broad range of food and non-food items. The more than 170 stores in the Colruyt network are characterized by their no-frills appearance. Items are displayed on metal shelves, the lighting is dimmed, and the company does not provide shopping bags to customers. These and other cost-cutting measures allow the company to guarantee its customers prices lower by seven to 15 percent than its competitors. The company also grinds and roasts its own coffee, under the Graindor brand. In addition to its supermarket chain, Colruyt has been building a network of convenience stores under the Okay format and is also a supplier to the Spar supermarket group in Belgium. Since the 1990s, Colruyt has diversified its retail operations, adding the DreamLand chain of toys and seasonal items, and its offshoot, DreamBaby, specializing in products for infants. Colruyt launched its organic food supermarket concept, Bioplanet, in 2001. The company has also entered France, extending into that country's cash-and-carry and catering supply markets through a series of acquisitions in the early 2000s. Colruyt is also developing plans to enter the Dutch market. In addition to its distribution activities, Colruyt controls publicly listed information technology company Dolmen and printing and packaging subsidiary Druco. Listed on the Euronext Brussels Stock Exchange, Colruyt remains controlled by the founding Colruyt family, including chairman Jef Colruyt.

Bakery to Wholesale in the 1920s

Franz Colruyt began his career as a baker in Lembeek, near the city of Halle in Belgium. In the 1920s, Colruyt recognized the potential for developing a new line of business supplying wholesale goods to local grocers. Colruyt began importing goods such as coffee, sugar, and spices, and by the mid-1920s had expanded his clientele base to include the larger Brussels area as well. In 1925, Colruyt incorporated his wholesale operation as Etablissement Franz Colruyt.

Over the next decades, Colruyt continued expanding its range of goods and emerged as one of the region's prominent wholesale groups. By the early 1960s, the company already counted some 800 independent grocers among its clientele. Coffee became a prominent Colruyt product; in 1937, Franz Colruyt established the company's own roasting house and began offering blends under its own brand, Graindor. Also during this period, Colruyt began sourcing grape varieties for bottling and selling under his own wine labels. Colruyt gained a reputation for two other product groups packaged under the company's name, sliced cheese and oils and vinegars.

Franz Colruyt was joined by his sons, one of whom, Jo Colruyt, emerged as head of the company in the mid-1960s. The younger generation led the extension of the family business into the supermarket and cash-and-carry sectors. In 1964, Colruyt began developing its store concepts under the names Super Boni, a small format store which adopted the self-service concept just then being introduced to the Belgian market.

Colruyt's focus quickly turned to exploring the larger potential of the cash-and-carry concept. Where traditional grocery stores and the new supermarkets required substantial investment in design, layout, and interior furnishing, cash-and-carry stores tended to be sparsely furnished and undecorated. Colruyt recognized that it could exploit this feature within the retail sphere as well. By 1965, Colruyt had extended its cash-and-carry format into the creation of a new "discount" supermarket open to the public.

The cost-savings generated from the stripped down format—with products displayed on metal shelves, wiring and plumbing fixtures left exposed, and customers required to supply their own shopping bags—were passed onto customers. Colruyt was able to guarantee lower prices than its competitors, with savings as high as 15 percent. In order to ensure this, the company put together a dedicated team whose job was to make the round of local grocers and report back on prices. Colruyt then adjusted its own prices accordingly; in the event that the company was unable to offer a significant discount, it often chose simply to drop the product.

Computer technology became a central part of the company's cost-saving efforts. Colruyt became one of the first supermarket groups in the world to incorporate computer technology as part of its cashier checkout process, with an IBM 360-20 in its headquarters linked to a tabulating machine in its store. Information technology was placed at the heart of the group's retail operation, enabling inventory tracking and unit pricing some 20 years and more ahead of most of its competitors. It also allowed the company to avoid the expensive retrofitting process that its competitors were later required to undertake.

Colruyt's computer department grew along with its supermarket chain, which began adding stores through the 1960s and into the 1970s. By 1976, the company had converted all of its discount retail stores to the Colruyt name. The following year, Colruyt went public on the Brussels Stock Exchange. Control of the company nevertheless remained within the Colruyt family.

The public offering encouraged Colruyt to reorganize parts of its operations. In 1979, the company regrouped its printing operations into a dedicated subsidiary, Druco. The computer department, meanwhile, had gained sufficient scale to begin providing its services to other businesses. By 1982, the computer department's scale enabled it to be reformed as a separate subsidiary, Dolmen NV. Dolmen was later spun off in a public offering in 1997.

Diversification in the 1990s

Developing its discount network remained a priority for Colruyt throughout the 1980s. The company began an ambitious expansion program to build up a national network. In 1987, Colruyt became the first retailer in Belgium to convert its stores to new bar code systems, allowing the company to achieve full automation of its restocking, ordering, and warehousing systems.

Colruyt's expansion left it in a weak financial position as recession hit Belgium at the end of the decade. The company found itself clawing its way back from near collapse, and the period encouraged the company to adopt a more cautious expansion strategy. As Jef Colruyt, who took over as company chairman from his father Jo in 1994, told Trends: "We have learned the lesson that it's dangerous to grow rapidly if your financial base is weak. Since then, our strategy has been to grow step by step."

One step in that strategy was to diversify the company's operations retail holdings beyond the supermarket sector. In 1994, the company moved into toys and seasonal goods with the acquisition of Droomland, a chain of five stores founded in 1979. Droomland featured a year-round assortment of toys, school and offices supplies, infant needs, and gifts, as well as a constantly revolving assortment of items linked to the different seasons and holidays.

Droomland originally focused on the Flemish-speaking region of Belgium. Under Colruyt, the operation extended into the French-speaking Walloon region, adopting the name Dreamworld. By 2002, with 14 Droomland stores and four Dreamworld stores in operation, the company decided to simplify the chain, converting all stores to the single DreamLand format. At the same time, the company launched an offshoot of the DreamLand concept, the infant and toddler-oriented DreamBaby. The new store format specialized in baby care articles, including nursery furnishings, car seats, clothing, and strollers.

Returning its focus to its grocery operations, Colruyt launched a number of new initiatives at the turn of the 21st century. In 1998, the company created a new subsidiary, Collect & Go, that offered Internet-based grocery shopping. Accompanying that launch was the creation of home delivery service, Collivery. Yet Collect & Go's main focus was on the development of collection sites permitting customers to pick up their own order. Starting with two sites in 1999, the company extended its network, with some 70 sites by 2002.

International Ambitions in the 2000s

Colruyt had also begun testing a new retail format, a small convenience store format under the Okay name. These stores featured just 400 square meters of selling space, with locations close to town and city centers. By the end of 2004, the company had already opened 15 Okay stores, with plans to expand the network to 150 and more through the rest of the decade.

At the same time, Colruyt began testing another supermarket format, Bioplanet, focusing on the fast-growing organic foods and alternative health products market. Featuring a large-scale supermarket format, the first Bioplanet opened in Kortrijk in 2001.

By the mid-2000s, Colruyt had gained a position as the third-largest retail distribution group in Belgium, with a respectable 17 percent share of the market. The company's strategy called for it to increase its market share to as much as 25 percent in the near future.

Company Perspectives:

Colruyt is a Belgian family company that has become one of the major players in the Belgian retail network, with a unique sales strategy. With more than 170 shops throughout the country, Colruyt's aim is to enable clients to shop efficiently, at the Lowest Prices.

Belgium's small size, however, led Colruyt to begin eyeing the international market. Colruyt turned first to France, buying up Ripotot, based in Dole in the Dijon region, in 1996. That purchase brought a network of 30 Coccinelle groceries in France's eastern region, as well as the ten-store Codi cash-and-carry chain. Ripotot also gave the company a strong business serving the group and institutional sector. The company then began converting the larger Coccinelle stores to the Colruyt format.

Colruyt expanded its French holdings again in 2000, acquiring Doumenge Group. That company focused on supplying the group and institutional sector in the south of France, including the regions centering on Toulouse, Perpignan, and Marseilles. Moving north, the company next purchased Etablissements BLIN, based in Renne, in the Brittany region. The addition of BLIN enabled Colruyt to position itself as a nationally operating food services provider in France.

Back in Belgium, Colruyt's took a major step closer to its market share goals when it agreed to purchase the Belgian operations of the Netherlands' Laurus in 2003. That agreement brought Colruyt 21 new supermarkets under the Battard name, five new cash-and-carry stores, and a supplier commitment to 350 Spar supermarkets in Belgium. The addition boosted Colruyt's annual sales by some 16 percent; by 2004, the company sales had topped EUR 3.8 billion ($4.79 billion).

While formulating plans to enter the Netherlands in the mid-2000s, Colruyt continued to build its French presence. In 2004, the company acquired Group SA Mallet, a wholesale supplier of dry foods and fresh food products. That purchase was followed soon after by the October 2004 acquisition of Galland, based in Gap, in the Haute-Alpes region, which operated as a food distributor and retailer. By the end of 2004, international sales represented eight percent of Colruyt's total sales. While still a tiny player among such European retail giants as Carrefour, Ahold, and Delhaize, Colruyt had built a solid base for further growth in its discount supermarket and wholesale supplier operations.

Principal Subsidiaries

Ceatech Engineering; Colruyt Export; Dolmen NV; Dreambaby; Dreamland; Druco; Infoco NV; Okay; Ripotot (France).

Principal Competitors

Carrefour SA; Ahold NV; Delhaize NV.

Key Dates:

1925:

Franz Colruyt, a baker, launches an import business for coffee, spices, and other products.

1937:

The company begins coffee roasting, wine bottling, cheese slicing, and oil and vinegar bottling operations.

1950:

The company enters the wholesaling sector.

1964:

The company's first supermarket opens.

1965:

A discount cash-and-carry supermarket format is used by the company.

1976:

The cash-and-carry stores are converted to the Colruyt name.

1977:

Colruyt lists stock on the Brussels Stock Exchange.

1982:

The company spins off its information technology subsidiary, Dolmen.

1987:

Bar coding in stores is rolled.

1994:

The Droomland store chain is acquired.

1996:

Ripotot, in France, is acquired.

1997:

Dolmen goes public.

1998:

Collect & Go Internet shopping service is launched.

2000:

Doumenge, in the south of France, is acquired.

2001:

Colruyt acquires BLIN, in the Brittany region of France.

2002:

The company renames its Droomland and Dreamworld stores as DreamLand and launches DreamBaby.

2003:

Colruyt acquires Laurus supermarket and its cash-and-carry holdings in Belgium.

2004:

The company acquires France-based Galland and Mallet.

Further Reading

Bilefsky, Dan, "Making the Cuts," Wall Street Journal, September 22, 2003.

Killemaes, Daan, "Colruyt: the Art of the Simple," Trends, vol. 58.

Osborn, Andrew, "Belgian Supermarket Starts Car Sales," Guardian, January 22, 2002, p. 22.

—M.L. Cohen