Sales: EUR 22.86 billion (2001)
Stock Exchanges: Euronext Paris
Ticker Symbol: RAL
NAIC: 445110 Supermarkets and Other Grocery (Except Convenience) Stores; 448150 Clothing Accessories Stores; 451110 Sporting Goods Stores; 551112 Offices of Other Holding Companies; 721110 Hotels (Except Casino Hotels) and Motels; 722110 Full-Service Restaurants
Rallye SA is one of France’s—and the world’s—top retail groups. The company owns a 50.6 percent stake (and 64 percent of voting rights) in the Casino Guichard-Perrachon supermarket group, which generates nearly EUR 22 billion in sales through a worldwide network of supermarkets, hypermarkets, convenience stores, and cafeterias. The majority of Casino’s stores are located in France, operating under the names Géant (hypermarkets), Casino (supermarkets), Leaderprice/Franprix (deep discount), and Monoprix (supermarkets), as well as the convenience store formats Eco Service, Petit Casino, Spar, and Vival. Casino also operates under these and other names internationally, including the Smart & Final chain in the United States; Liberatad, éxito, Extra, ABC, and others in South America; and Big C in Asia. Rallye also holds two other important retail chains: Go Sport, which is principally active in France via its Go Sport, Courir, and Moviesport sporting goods and athletic footwear and clothing chains, held at 69 percent (77.8 percent of voting rights); and Athlete’s Foot, the worldwide leader in the specialty athletic shoe market, held at 99.9 percent by Rallye. France, where Rallye is the fourth largest retail group, represents approximately three-quarters of the group’s sales; North America contributes nearly 11 percent; and South America and Asia add more than 10 percent combined to the company’s sales. Publicly listed on the Euronext Paris stock exchange, Rallye itself is controlled at 65 percent by financial investment group Euris, led by Jean-Charles Naouri. Yet Naouri, who controls Euris as well, has proven himself to be more than a financier, taking a hands-on role in the direction of Rallye’s major holdings and especially the Casino retail group.
Merging Supermarket Groups in the 1990s
Rallye’s origins date back to the 1920s, when it was founded as a grocery business by Jean Cam in Brest in 1924. That year marked the origin of another important part of the later Rallye, with the opening of the first Genty grocery in Grenoble. Both Rallye and Genty (which was named after founding family Genty-Cathiard in 1959), were to grow into prominent, if midsized supermarket groups by the 1980s.
Both Rallye and Genty-Cathiard also had begun diversifying their retail operations in the 1980s. Rally’s interest turned to sporting goods, with the purchase of Athletic Attic, a sporting goods chain with 11 stores in France, in 1981. Also that year, Rallye bought a 49 percent stake in The Athlete’s Foot, the fast-growing chain of athletic shoe stores founded by Robert and David Lando in Pittsburgh, Pennsylvania, in 1971. Rallye bought out the remainder of Athlete’s Foot in 1984, giving it control of a network of more than 100 company-owned and 450 franchised stores. Athlete’s Foot also had successfully negotiated the beginnings of its international expansion, setting up franchise networks in Australia, France, and Guam, as well as in the United States.
Genty-Cathiard, too, had looked toward expansion in the sporting goods area, notably with the acquisition of a controlling stake in the publicly listed Go Sport retail chain, founded in 1976, which rose to become France’s second largest sporting goods chain behind Auchan’s Decathlon. In 1987, the company’s sporting goods stores merged with the Sparty store chain, launched by appliance group Darty, in a new, larger Go Sport. Genty-Cathiard’s sporting goods interests increased in 1988, when the company acquired the Courir retail chain, which specialized in athletic shoe sales, and another sports-related retail network, Team 5.
By the end of the 1980s, however, competition for France’s supermarket sector became a race for scale among the industry’s largest retail groups. Rallye had by then captured a strong position in France’s eastern region, with 26 hypermarkets and 70 supermarkets combining for sales of FFr 14.5 billion. Rallye, conscious that its relatively small size placed it at a disadvantage, joined the race for scale in the late 1980s, waging a campaign to acquire supermarket group La Ruche Méridional in 1988. Yet Rallye lost out in that bid to CFAO (Compagnie Française de l’Afrique Occidentale, which, under leadership of François Pinault, sold La Ruche to Casino in 1990).
Instead, Rallye acquired the family-owned Disque Bleu retail group, based in Limoges, which had been part of the Euromarché network in 1989. With Disque Bleu’s seven hypermarkets and 60 supermarkets, located principally in central and southwestern France, Rallye added FFr 4.5 billion to its annual sales, boosting it to eighth place in the French retail sector. The Disque Bleu purchase also helped the group, by then under the leadership of Albert Cam, who took over after his father Jean Cam’s death, to extend its geographical coverage, particularly through the addition of Disque Bleu’s Limoges distribution center.
Rallye continued to seek new acquisition targets and in 1990 the company captured a larger prize, that of publicly listed Genty-Cathiard. The merger of the two groups, which cost Rallye FFr 2.2 billion, created France’s fifth largest supermarket group, with sales of some FFr 24 billion (approximately $4.5 billion) from a chain of 50 hypermarkets, 215 supermarkets, and 500 convenience stores. Rallye also represented an international sporting goods operation, under the Athlete’s Foot, Go Sport, Team 5, and Courir banners, which contributed an additional FFr 5 billion to the group’s revenues. Rallye, which had gained an opening onto the French bourse through its new Go Sport subsidiary, was also able to claim the leading share of France’s southeast region—a favorite hunting ground of rival group Casino Guichard Perrachon.
Financial Magnate Turned Hands-on Manager in the 1990s
Yet Rallye’s drive for size had given it a monstrous debt load at a time when the French retail scene was shrinking. Battered by intensifying competition among the major retail groups, which became all the more intense with the entry into the French market of a number of hard discount formats—such as Lidl and Aldi from Germany, and Leader Price, owned by Beatrice Foods—Rallye found itself on the verge of bankruptcy. At the same time, the company was suffering from internal dissension among the founding family members. That dissension led to Albert Cam leaving the company after he had attempted to take Rallye public. In order to pay down some of its debt, Rallye then shed a number of cash-and-carry stores inherited with the acquisitions of Disque Bleu and Genty-Cathiard.
In 1991, as Rallye reeled toward the brink of bankruptcy, with a crippling debt load of FFr 4.5 billion, Cam turned toward outside help. In that year, Rallye sold 50 percent of the Cam family’s holding company, Soficam, to investment group Euris, led by Jean-Charles Naouri, for some FFr 700 million. Euris—and Naouri—quickly gained control of Rallye itself, after arranging a FFr 4.5 billion bailout of Rallye’s debt load. In 1992, Naouri created a stir in the French retail sector by selling Rallye’s hypermarkets and supermarkets to Casino Guichard Perrachon, in exchange for a 30 percent share in that group.
Euris had been set up in 1986 by Naouri, who had formerly held a key position in the French Socialist Party-led government of Pierre Bérégovoy. Naouri represented an outsider to the somewhat closed world of family-dominated French retailing. Born in Algeria to French parents, Naouri had joined investment banker David de Rothschild following the end of Bérégovoy’s mandate. With Rothschild’s assistance, Naouri set up his own investment fund, Euris—and quickly raised some FFr 2 billion in investment capital among a number of French institutions and financial giants, such as Marc Ladreit de Lacherrière. Naouri, who used FFr 250,000 of his own capital to set up Euris, controlled just 1 percent of the fund.
Naouri quickly established himself as an astute investor, acquiring and selling stakes in various corporations. At the same time, Naouri acquired increasing control of Euris, becoming the fund’s major shareholder by the early 1990s. Yet, if Euris had permitted Naouri to sit on the board of directors for a number of companies, his role with these companies remained a passive one.
The business partnership of outsider Naouri and longtime Casino patriarch Antoine Guichard raised a number of eyebrows in the French financial and retail communities. Yet formerly dominant Casino had found itself playing catch-up in the fast consolidating supermarket sector, especially since the acquisition by Carrefour of Euromarché at the beginning of the decade. Perhaps more surprising to observers, however, was the growing friendship between Guichard and Naouri, who for the first time became an active partner rather than a passive investor.
Rallye is present in several segments of the retail industry, in France and in other countries, through majority interests in the following three operating subsidiaries: Casino, one of the leading food retailers, both in France and on the international scene; Groupe Go Sport, a multi-format retailer of sporting goods that encompasses the Go Sport, Courir and Moviesport chains; Athlete’s Foot Inc., a sports footwear specialist present throughout the world via a network of branches and franchises.
In addition to this, Rallye operates a diversified portfolio of financial investments by means of the acquisition of direct holdings or through specialized funds.
Guichard took control of the supermarket wing, including converting the 200 Rallye stores to new signage, while at the same time adopting a new name, Géant, for the group’s portfolio of hypermarkets. Meanwhile, Rallye at this time became the holding company for Euris’s 33 percent stake in Casino, as well as for its Go Sport and other sporting goods holdings. Naouri, who took an active role in the Casino operations by helping to secure funding for the company’s expansion, turned his attention to the Go Sport sporting goods chain, which had sunk into the red in its clash with market dominator Decathlon. At that same time, Rallye moved to streamline its French assets, converting its French Athlete’s Foot stores to the Courir store format. In 1995, Courir acquired another French athletic shoe network, Run Up. During this time, Athlete’s Foot had been growing strongly elsewhere, and by the end of the decade the Athlete’s Foot chain topped 700 stores worldwide.
By the mid-1990s, when Antoine Guichard retired, Naouri took over as effective head of the Casino group, raising Rallye’s stake in the company to more than 50 percent. Naouri proved himself a true hands-on director of Casino—especially in 1997, when Casino found itself the target of a hostile takeover attempt by Promodes. Naouri stepped up as a white knight, offering a counter-bid at a lower price than Promodes’, but which nonetheless received the approval of Antoine Guichard. An important part of the Rallye-led defense was the rush to expand Casino through a new series of acquisitions. In 1997, Casino added 600 Franprix/Leader Price stores (acquired from Beatrice Foods), the Mariault network of convenience stores (adding another 600 locations throughout France), and a 21 percent holding in the Monoprix supermarket chain.
Global Retailing Leader in the 21st Century
By the late 1990s, Rallye had turned its concentration almost entirely to its retail holdings. The Casino group pursued its expansion both in France—notably with the 1999 purchase of the Guyenne et Gascogne group—and internationally, particularly with the entry into the Eastern European and South American markets. Meanwhile, Rallye had successfully restored Go Sport’s growth, as the network neared 120 stores by the beginning of the next decade. Part of that growth had come by exporting the Go Sport formula, and by the late 1990s, Go Sport had successfully entered the Belgian and Polish markets.
By then, Courir had grown rapidly, too, expanding to 157 specialty shoe stores. Rallye listed Courir on the Euronext Paris stock exchange in 1999, selling a 22 percent stake. Rallye stuck to its sports niche for the launch of another store format, Moviesport, which emphasized clothing and athletic shoes geared to the youth market. The early success of the format led Rallye quickly to roll it out into a network of nine stores by the end of 2002. In 2000, Rallye merged both Courir and Moviesport into Go Sport, which then changed its name to become Groupe Go Sport. The move helped solidify Go Sport’s status as the second largest sports-oriented retailer in France.
In 2000, Rallye branched out, buying, through Casino, majority control of the online retailer CDdiscount.com, which was on its way to becoming a market leader in France. The company also strengthened its stake in Monoprix that year. The fast growth of Athlete’s Foot had led it into losses at the turn of the century, and in 2001 it began a three-year restructuring program designed to cut out nearly 85 of its poorest performing stores. The restructuring did not, however, hamper Athlete’s Foot from stepping up the expansion of its network—by 2003, the company expected to open some 200 new franchised and company-owned stores worldwide. Groupe Go Sport also was expanding strongly, adding some 20 new stores in 2002 alone. By the beginning of 2003, that operation counted 322 stores—including 131 Go Sport stores, 181 Courir stores, and ten Moviesport stores.
- The Perrachon family opens a grocery store in Saint-Etienne, France, which later becomes the basis of Casino Guichard-Perrachon.
- Jean Cam founds the Rallye grocery store in Brest; that same year, the first Genty store opens in Grenoble.
- Genty changes its name to Genty-Cathiard.
- Athlete’s Foot is founded in Pittsburgh, Pennsylvania.
- Go Sport, which later becomes a publicly listed subsidiary of Genty-Cathiard, is founded.
- Rallye acquires 50 percent of Athlete’s Foot.
- Rallye acquires full control of Athlete’s Foot.
- Jean-Charles Naouri founds Euris, an investment group based in Paris.
- Rallye attempts a takeover of La Ruche Mériodonale, but loses out to CFAO; Genty-Cathiard acquires the Courir retail athletic shoe group.
- Rallye acquires the Disque Bleu supermarket group, based in Limoges.
- Rallye pays FFr 2.2 billion to acquire Genty-Cathiard.
- Euris pays FFr 700 million to acquire 50 percent of the Cam family’s holding in Rallye; Naouri then negotiates a FFr 4.5 billion bailout of Rallye’s debt.
- Naouri leads Rallye in a sellout to Casino; as part of the sale, Rallye takes a 30 percent share in Casino, while maintaining majority control of Go Sport and Courir.
- The Athlete’s Foot stores in France are converted to the Courir format.
- Courir acquires the Run Up retail athletic footwear group.
- Rallye acquires control of the Casino group.
- Rallye lists 22 percent of Courir on the Euronext stock exchange; the Moviesport retail sportswear format is launched.
- Go Sport, Courir, and Moviesport are merged under the new Groupe Go Sport; Casino acquires Cddis count.com.
- Rallye begins the restructuring of Athlete’s Foot.
- Rallye raises its share of Casino to nearly 64 percent of voting rights.
By the end of 2002, Rallye, which had posted revenues of nearly EUR 23 billion the year before, had taken a place among the world’s top 20 retail groups. Rallye continued to increase its holding in Casino, stepping up its control of voting rights to nearly 64 percent by 2002, as the supermarket group now accounted for nearly 75 percent of Rallye’s annual revenues. As the French supermarket scene reached maturity—forced in large part by legislation severely restricting new store openings, Rallye stepped up its international expansion for future growth, more than doubling its foreign sales by the end of 2002. Jean-Charles Naouri had successfully negotiated his transition from financier to retail leader.
Casino SA (50.6%); Groupe Go Sport SA (69.1%); The Athlete’s Foot Inc. (99.9%).
Wal-Mart Stores Inc.; Groupe Carrefour; Royal Ahold N.V.; Metro Holding AG; Randall’s Food and Drugs Inc.; Kroger Co.; Target Stores; Albertson’s Inc.; Kmart Corporation; Ahold USA Inc.; Safeway Inc.; Borman’s Inc.; J. Sainsbury pic; Auchan SA; Ito-Yokado Company Ltd.; Delhaize “Le Lion” SA; Daiei Inc.; SUPERVALU Inc.; Speedway Super America L.L.C.; 7-Eleven Japan Company Ltd.; Mycal Corp.
“Les ’grandes manoeuvres’ dans la distribution,” Le Monde, February 4, 1990.
Jack, Andrew, “Casino Helps Lift Rallye,” Financial Times, January 29, 1998, p. 36.
Jannick, Hervé, “Casino: Grandir ou périr,” L’Expansion, June 18, 1992, p. 25.
Owens, David, “Casino Family Delays Decision on Bid,” Financial Times, October 6, 1997, p. 21.
Peyrani, Béatrice, “Casino: qui refiera la mise?,” L’Expansion, December 19, 1994, p. 56.
Philippon, Thierry, “Casino: la bataille de Naouri contre Promodes,” Nouvel Observateur, September 11, 1997.