France Country Profile

Market Overview:

With a US$2.7 trillion Gross Domestic Product (GDP) on a Purchasing Power Parity basis, (PPP) 2016 estimate, France remains the world’s 10th largest individual economy, and the 3nd largest in the European Union, (EU). The French population of 66.8 million has a per capita income of US$42,400 in 2016, according to the Central Intelligence Agency (CIA) World Factbook.

Euromonitor reports that the French economy will see only feeble gains in 2017. Though growth is sluggish, the French economy should remain on track. Real Gross Domestic Product (GDP) should increase by 0.8% in 2017 after growth of 1.3% in 2016. Private consumption is weakening although government consumption will be steady and exports should pick up. France’s failure to address its lack of competitiveness is a major problem. Britain’s exit from the European Union (EU) or “Brexit” accentuates the degree of uncertainty. Real GDP is expected to grow at an average rate of about 1.5% per year in 2018-2020. However, there are a number of challenges such as the influx of refugees, problems in Ukraine, Greece and terrorism.

The real value of private final consumption rose by 1.4% in 2016 and growth of 0.7% is anticipated in 2017. Tax cuts and a mild acceleration in wages underpin consumer spending. However, unemployment as well as strikes in the transport sector has hurt private final consumption. Unemployment was 10.1% in 2016 and it will only fall to 10% in 2017. Public sector employment is being reduced. Youth unemployment is nearly 25% -– much higher than the EU average. Paris is implementing a €2 billion plan to create a large number of vocational training schemes, boost subsidies for small companies and introduce a program of apprenticeships.

USDA’s Office of Agricultural Affairs, OAA, in Paris, hereinafter referred to as “Post” advises us that socio-economic and demographic changes continue to alter food trends in France. French consumers desire innovative and more convenient foods offering a quality image, better taste, and increased health benefits. France offers market opportunities for U.S. suppliers in a number of areas, such as seafood, processed fruits and vegetables (including fruit juices), beverages (including wine and spirits), dried fruits and nuts, but also confectionery products, organic products, kosher and halal foods.

U.S. exports of agricultural products to France increased 1% in 2016 to US$590.8 million. France now ranks 7th out of the EU-28 as an export market from the U.S. for agricultural products. Of that amount nearly 45% were of the consumer ready variety amounting to US$263.7 million, which represented an increase of 3%. France ranks 5th out of the EU-28 as a processed food export market from the U.S. totaling US$313.5 million in 2016, an increase of 11% from 2015. Top 2016 exports of processed products included distilled spirits, prepared/preserved seafood, beer and wine, food preparations, snack foods, fats and oils, processed vegetables and pulses and condiments and sauces.

There are some distinct advantages that U.S. exporters of food products enjoy with the French market. There is a rapid population shift from rural to urban regions is boosting demand for international foods. The French per capita income is near that of the United States. The tourism industry increases demand for hotel, restaurant, and institutional products. U.S. fast food chains, theme restaurants, and the food processing industry occasionally demand American food ingredients. There are modern and efficient domestic distribution systems. American food and food products remain quite popular. There is a U.S.-EU organics equivalency agreement in place in 2012 will supposedly increase the organic trade.

However such an important market does not come without its challenges. Food scares and other food safety issues cause concern among French consumers. French consumers are exacting when it comes to quality and innovation and price competition is fierce. Certain food ingredients are banned or restricted in the French markets that are acceptable in the U.S. Marketing costs to increase consumer awareness are high. There has been an appreciation of the U.S. dollar vis-a-vis the Euro which might help U.S. suppliers marketing budgets in country but make their products more expensive. Mandatory customs duties, sanitary inspections and labeling requirements can be onerous. The EU biotech labelling requirement of 0.9% excludes many U.S. processed products. Most processed products are subject to additional import charges based on sugar, milk fat, milk protein, and starch content, making it difficult to determine the tariff treatment from secondary sources. 

Retail Sector:

According to Euromonitor, France is the 2nd largest packaged food market in Europe and the 5th largest in the world. Retail sales in the packaged food market in France had been estimated to reach US$84.2 billion in 2016. That also represents a growth rate of 4.9% or US$3.9 billion since 2012. By the year 2021, the retail sales in the packaged food market in France is expected to reach US$96.4 billion, a growth rate of 11.9%, or US$10.2 billion. High growth categories in the forecast include rice pasta and noodles, savory snacks, processed meat and seafood, ice cream and frozen desserts, baked goods, dairy and confectionery.  

Euromonitor reports that while 2014 was a year to forget for store-based retailers in France, grocery retailers witnessed signs of improvement in 2015 and 2016, according to most experts. Firstly, slightly stronger GDP growth in 2015 and 2016, the warm summer weather and the Rugby World Cup in 2015 and the European Football Championships and Olympic Games in 2016 served to support general consumption, notably of drinks and chilled processed food. Next, the end of a decline in sales through discounters was good news for grocery retailers as a whole. Nevertheless, according to some marketers, the general performance of modern grocery retailers was so modest over the 2011-2016 period that operators are now satisfied with sluggish growth and the channel is accustomed to poor progression.

What is surprising is that French consumers were ready to pay a premium for better quality, food safety and convenience in 2016, while previously they always looked for cheaper products. This was illustrated by the ongoing cannibalization of private label by A-brands. More innovative and reassuring than private label, the companies behind these A-brands became so aggressive in terms of price reductions between 2013 and 2015 that the value proposition of private label became much less significant. With current value growth of 9%, other grocery retailers forged ahead in 2016, notably thanks to the double-digit growth being recorded by organic shops and superstores, which dominate this channel in France. Lastly, the need for greater convenience also contributed to the ongoing impressive growth of click-and-drive/internet retailing over 2015/2016, which is not included in this channel.

With a 17% value share, Carrefour remained the leading player in grocery retailing in 2016. The company’s strong position stems from the progressive remodeling of outlets under its ageing chain of 8 à Huit convenience stores and the revamp of Carrefour City and Carrefour Express convenience stores. In supermarkets, the company also continued to convert its Shopi outlets into Carrefour Market and Carrefour Contact stores. Finally, Carrefour supermarkets and hypermarkets seem to be enjoying a better image in terms of low prices. However, Carrefour’s sales growth slowed in 2016 due to a weaker performance in the hypermarket channel and the negative “Dia effect”. After being sold by Carrefour to Distribuidora Internacional de Alimentación (Dia), the ED and Dia discounter chains never really made their mark in France and were thus returned to Carrefour in 2014. In 2015, the leading French grocery retailer had begun to transform some of these outlets into small supermarkets instead of retaining them under the discounter format, with disparate results in 2016.

The most dynamic retailers over 2015/2016 were undoubtedly the aforementioned chains of organic shops and superstores, namely biocoop, Naturalia, La Vie Claire, Les Comptoirs de la Bio, Bio C’Bon and NaturéO, which profited from rising demand for organic products generally in France. Within modern grocery retailing, two retailers clearly emerged from all the others, namely Lidl and Galec - Centre Distributeur Edouard Leclerc. Leclerc hypermarkets and supermarkets enjoyed many victories over 2015/2016, for example best actual value progression, strongest increase in penetration in French households, best image among modern grocery retailers, etc. Leclerc remained fairly aggressive in terms of its communications strategy in 2016, using direct comparisons between itself and its competitors to highlight its lower prices.

Lidl recorded double-digit value sales growth in both 2015 and 2016 to capture a value share of 51% in the discounter channel in 2016. Lidl’s willingness to draw a line under its previous hard discounter strategy by opening refurbished outlets and offering more A-brands appeared to bear fruit over 2015/2016. This policy was communicated via a strong multimedia campaign, with Lidl being the heaviest spender among grocery retailers in France in terms of television and internet advertising. This performance was in stark contrast with Lidl’s struggles between 2010 and 2013; when the German discounter was forced to close some of its outlets in France, mainly in rural areas and neighborhoods in which consumers have weak purchasing power.

Merger and acquisition activity continued to impact the competitive landscape. In response to the ongoing price war, the main trend was towards joint purchasing agreements over 2015/2016, mainly the creation of mega central purchasing blocs, specifically the alliances between Auchan France and Système U Centrale Nationale on the one hand and ITM Entreprises and Casino Guichard-Perrachon on the other. The purchasing alliance between Auchan France and Système U Centrale Nationale, which had to be approved by the local competition authority, was finally abandoned in the summer of 2016.

One of the most innovative strategies in 2016 was a focus on the “phygital” model, or the merging of physical and digital spaces. In May 2016, the hypermarket Carrefour EuraLille in Lille benefited from a new shopping concept called Promo C-Où, which means “where are the promotions/discounts?” Promo C-Où was initially a mobile application for the iPhone which tells customers where the best bargains and promotional offers are in a store. For those without an iPhone, Carrefour decided to introduce special trolleys with dedicated tablets featuring the same app. Customers can then immediately see where the 200-300 current promotional offers are in the store, prioritize them, make a shopping list and thus save time and money.

Best Product Prospects:
Post advises there are significant market opportunities for consumer food/edible fishery products in a number of areas, i.e., fruit juices and soft drinks (including flavored spring waters), dried fruits and nuts, fresh fruits and vegetables (particularly tropical and exotic), frozen foods (both ready-to-eat meals and specialty products), snack foods, tree nuts, “ethnic” products, seafood (particularly salmon and surimi), innovative dietetic and health products, organic products, soups, breakfast cereals, and pet foods. In addition, niche markets exist for candies, chocolate bars, wild rice, kosher and halal foods.

Food Service Sector:

According to Euromonitor French consumer food service posted a weaker performance in 2015 compared to the previous few years. The number of outlets decreased at a rapid rate while the speed of decline in current value sales also increased. The French economy continues to underperform, characterized by high unemployment and weakening purchasing power, all of which is having a negative impact on consumer spending and impacting the frequency of visits to consumer food service establishments. Chained operators have also had difficulties recruiting franchisees and in maintaining their expansion plans.

The development of specific concepts, such as specialist coffee shops, and the penetration of food which is by tradition more usual in Anglo-Saxon countries, would indicate that French consumers are becoming increasingly influenced by Anglo-Saxon trends. Muffins and cookies, for example, are increasingly available in some consumer food service establishments. This trend is also illustrated by the success of emergent North American full-service restaurant chains.

Another category of consumer food service which profited from this trend in 2015 was chained North American full-service restaurants. Small chains, such as Memphis Coffee and Tommy’s Diner, continued to expand and to attract consumers in the country. Both have a retro feel and are themed in the style of America in the 1950s. They provide a friendly atmosphere for families and friends and enable consumers to try authentic American recipes.

This trend also reflects the greater appetite for burgers and the desire for services previously more common in the U.K and the U.S., such as takeaway. According to trade sources, a higher number of French consumers purchase breakfast and coffee to eat at the office in the morning, while by tradition; French consumers are used to eating breakfast at home. In cafés/bars, takeaway represented only 5% of total value sales, but thanks to breakfast, the share doubled since the beginning of the review period.

In 2015, Groupe Bertrand CHR, the owner of Burger King, started negotiations to acquire Quick Restaurants. In December 2015, this acquisition was approved by competition authorities. However, the negotiation is still subject to the approval of bondholders, as well as consultation with employee representative bodies. Groupe Bertrand CHR is one of the players expected to see the most significant growth over the forecast period. Quick Restaurants, of which there are around 400 operating in France, will be rebranded as Burger King.

Euromonitor predicts that the number of outlets and transactions are expected to grow at a faster pace over the next five years compared to the last five.  As the economic context is expected to improve slightly between 2015 and 2020, chained operators are likely to maintain their dynamic expansion strategies. However, consumer food service is set to post a negative compound annual growth rate (CAGR) in value sales at constant 2015 prices over the forecast period. Consumers are expected to remain mindful of their spending and are likely to reduce their spending in food service establishments, due to low confidence in the future, choosing to save rather than spend. Consumer food service players are also likely to use low-priced menus more often to stimulate visits to their outlets at lunch time. In order to compete for sales, more players are also likely to extend the level of service they offer consumers, by adding features, such as home delivery, takeaway and online ordering, in order to improve consumer experience and reinforce loyalty.

Best Product Prospects:
Post advises Best prospects for U.S. suppliers targeting the HRI sector are fish and seafood, dried fruits, fruit juices and sodas, hormone-free high quality beef, frozen foods including desserts, quality wines, salad dressings, sauces, and spices. Other opportunities for U.S. suppliers include:  fruit juices and soft drinks (including flavored spring waters), dried fruits and nuts, fresh fruits including grapefruits and exotic fruits, vegetables, snack foods, tree nuts and ethnic products

Food-Processing Sector:

Progress in food technology, marketing innovations, and exports of finished food products have all contributed to France’s increasing demand for food ingredients. Key market drivers include an increasing interest in healthy and functional foods, an aging population, and health conscious consumers that have pushed innovation in product personalization and product convenience. The major imported ingredients for processing are meat products, fish and seafood, fruits and vegetables based products, beverages, wine and alcohols, milk and dairy products, and cereal based products. Food ingredients, in general, are imported freely by the private sector into France, but some face phytosanitary and other food safety restrictions at the EU level.

In France the food industry is the leading industrial sector both for sales and employment. In 2015, the 16,218 companies (98% being small- to medium-sized companies) of the sector generated total sales of US$189 billion and employed 440,926 persons in France. The food industry has a key role in France in the regional dynamism and development as it processes 70% of the French agricultural production. The food industry sector also contributes to the commercial balance of the country and generated a US$10.4 billion surplus in 2015 thanks to wine and spirits and fresh products.

Innovative products, low fat, organic, and healthy products are in high demand. The food processing industry works consistently to improve the healthiness of French food products, an example of which is a 19% decrease of salt content in foods between 2000 and 2014. Also, nutritional information is increasingly visible and detailed on product labels. Per EU Regulation, all food products sold in France will need to have a nutritional labeling by December 2016. French consumers are also very sensitive to food safety and quality, and the food processing industry is quick to remove ingredients from products that have been associated with safety issues.  

Due to the food processing sector’s need for inputs, France has become a net importer of agricultural products. The EU remains France’s most important trading partner with the top five suppliers being Spain, Belgium, Germany, The Netherlands, and Italy. Outside the EU, the United States is France’s fourth largest supplier after Switzerland, Brazil, and Morocco. U.S. exports to France represented only 1.8% of all imported value in 2015. Major products imported from the U.S. are fish and seafood, including prepared, grapefruits, dried fruits and nuts, pulses, canned and prepared meat, beverages, including wine and spirits and grains.

Most French processors buy their food ingredients through brokers and local wholesalers. Some of the larger companies have direct relationships with larger foreign suppliers. Food processors supply France’s retail and food service industries, which account for roughly 70% and 30% respectively, of the sector’s overall sales. The most common entry strategy for small- and medium-sized U.S. companies is dealing either directly with a local wholesaler or broker or indirectly through an export agent or consolidator.

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