PICARD, French gastronomy everyday for everyone!
Picard is the most famous success story in French food retail. I could eat Picard everyday!
Picard is the most famous success story in French food retail. I could eat Picard everyday!
BUSINESS MODEL
Picard is a retail store chain selling ONLY FROZEN food products, which are very high quality, very easy to cook at home, and taste as good as fresh products cooked in restaurants.
Picard offers high variety of products with more than 1,200 SKUs. That includes sophisticated appetizers, vegetables, meat, seafood, fruits, bakeries, desserts, festive products, local specialties, and high-end prepared meals (French, international cuisines, Indian, Italian, Mexican, pizza, Chinese, etc.).
Picard has the highest brand recognition in food, and more than 40% market share in frozen food.
Picard has developed a dense network of 1,000 stores in France, mostly well located in city centers (proximity stores), and opens 40 new stores per year, including Italy, Belgium, and Switzerland.
Finally, the business generates 20% margin, which is exceptionally high for any food retail chains (usually below 5%).
OPERATING MODEL
Picard has created over time a successful innovative operating model that is fully aligned with its business model and differentiating against the competition.
A Full Vertical Integration:
In order to keep full control from product conception to customer interaction, Picard has developed a vertically integrated model, which is extremely rare in the food chain industry. In fact, Picard develops its own products and receipts, produces most of its products in close partnerships with selected manufacturers, controls its brand under which all the products are sold, distributes its products across the country, and finally operates its own stores.
“Frozen Supply Chain” and Just-In-Time:
Given the constraints of constantly maintaining the frozen products under a certain temperature, Picard had to invest in a complex supply chain without any freezing interruption.
Also, the stores are often located in expensive city areas, so the store size, and in particular the storage capacity within the store (the “cold room”) is very limited. Therefore, the company needs to deliver its stores “just in time”, which is unusual for food retail chains. Picard has developed a sophisticated system to track stocks and demands within stores, and to optimize the deliveries from different distribution platforms and group them between stores. As a result, stores are delivered everyday and sometimes twice a day!
Product Innovation NEVER Stops:
In order to stay appealing to changing consumers’ tastes, and to follow the seasons, Picard is every year creating 200 new products and modifying 200 existing products, representing about 30% of its total offering, which is huge! Picard has retained a team of 30 highly talents Michelin chefs to create new products both delicious and easy to cook at home for anyone.
“Obsessional” Quality Control:
Because Picard has developed an image of premium high quality products, the company is obsessed with quality controls at every stage of the supply chain. The company avoids taking any risk of diseases, bad press or food scandals. Before releasing any new product, Picard’s scientists take on many tests in laboratories. As a result, it takes 10-12 months between the chef’s ideas and the store distribution.
In-store organization:
Picard has designed a smart concept for store. The environment is clean, clear and familiar. In order to save space, all the stock is disposed in the freezers (the storage cold room is very small). In order to maximize the sales, every customer has to follow a precise route in the store, and can’t cut alleys like in other retail stores. As a result, customers will pass by every single freezer and product on his way to the cashier. And the freezers are disposed in a very specific and thoughtful order: at the beginning are presented the new products and promotions, then appetizers, entrées, vegetables, prepared meals, meat, seafood, desserts, and ice creams.
Decentralized system:
The store manager has a lot of freedom and responsibility in the store, because he needs to choose about 400 SKUs among 1,200 SKUs (because there is limited space in the store). The manager is also in charge of passing the delivery orders. The rationale is that in-store employees are the ones who know the best what the customers want.
Customer experience:
Finally, the store is operated by 3-4 employees who dress like chefs, and are trained to provide detailed information on the products and give cooking advice to the customers. This helps create strong relationships and loyalty with the customers. In addition, the Picard warranty states that if a customer is no satisfied with a product, he can claim full reimbursement.
JC, I really like this concept. It seems that the product must be pretty good to be accepted so broadly, and particularly in France, where food is held in such a high regard. I wonder if if think that this model, or company, could expand to the US? Or has it expanded already outside of France? Clearly distribution and other aspects would be difficult, but there clearly seems to be a market for it in major cities where cooking extensive meals is a challenge.
Picard has developed a very compelling business that is clearly very successful in France. Its focus on frozen foods is a huge operational advantage vis a vis traditional supermarkets as frozen foods have longer shelf life, thus, Picard must have much lower waste, which is a huge cost burden for traditional supermarkets that stock fresh produce.
One of the key points that you highlighted in your post was Picard’s focus on product innovation. In France, Picard has clearly been successful in creating products that suit the tastes of France. However, I would be interested to see if Picard would be successful in expanding to other countries given the different tastes in those countries. Would Picard have to develop local R&D hubs in each country it enters to create a more appropriate catalog of products that are specific to that country?
JC, I was extremely interested in the business and operational model of Picard. It seems like they have strong control of the supply chain, which creates a strong competitive advantage for growth and development of new branches.
One question that I had while reading is if this business would be scalable to have products be sold in third-party grocery stores. There are many restaurants and consumer brands that sell their products to supermarkets under their brand, which is a great way to both grow the brand recognition and sales footprint.
Given they wouldn’t have full control of the supply chain when selling to third-party vendors, do you think this could be an avenue they would be willing to explore/be part of? If so, how would they tackle the challenges of expanding their business model?
This is a really clever model. It reminds me of the grocery / meal delivery services in the US like Hello Fresh and Blue Apron, except frozen. Trader Joes in the US also has a very strong presence in high quality frozen foods & specialties. Also, that store layout sounds much like Ikea. I wonder how many “spontaneous” purchases are generated by this forced flow?
J’adore Picard ! Great pick for this assignment. I remember when I was younger how excited I was to go to Picard with my mom and look at all the delicious looking pictures of food and just picking meals that I thought looked good. I guess you can’t play-down in the in-store experience, I’d never thought about it, but they’ve created quite a neat shopping experience. Without realizing it, I think the organization and clear and clean environment already played to my OCD at a young age!
Would love to see them expand outside of France as I guess they’ve started doing. they are keeping it modest with neighbooring countries because I imagine the supply chain logistics and appealing “innovative” meals will be very country specific.
A few thoughts:
1) The store layout is smart and reminds me of IKEA.
2) SKU selection: I wonder if it really is based on store employees’ choice. If I were managing Picard, I’d use historical data and market surveys to determine what to stock in each store.
3) Overall really impressed by this company. Frozen foods in America is currently synonymous with low quality – there may be a market for Picard here!
Really want to try their food now… think we need to do a trek. Thanks for sharing!
Picard sounds really delicious, and reading this post made me want to have something like this in the US. In line with Charles’s and Richie’s comments, I wonder if there are markets outside of France that Picard could expand to or if other firms would be able to replicate this model in different countries.
Since the margins are so high, I am guessing that Picard charges a premium relative to other grocery stores. It may be difficult to charge premium pricing in other markets if consumers do not care as much about having Michelin chef-inspired food products or associate frozen items with lower quality. NYC really stands out as a location where I think this business model could work, as grocery shopping in NYC is an incredibly painful process, grocery prices are very high, and shoppers have high standards for food quality.
Thanks for sharing! This sort of decentralized system where store managers select inventory based on local preferences reminds me of Zara’s model. For a business like this where inventory management is so important due to a limited shelf life and limited store space, providing that autonomy to individual stores to forecast demand and predict preferences is both very intelligent and somewhat risky. I assume they would need to tie the store manager’s compensation to his/her ability to manage inventory.