TBY talks to Riad Laissaoui, CEO of Retail Holding, on tackling the pandemic, retail gains, and expectations and hopes for the year ahead.

What have been some of the short-term strategies that you have had to take in order to tackle the COVID-19 pandemic? How has this impacted your operations?

I will try to speak in a general manner. As you know, I do not manage the operational side of the subsidiaries. I work for the holding company, meaning I manage the corporate parts, the shareholders, instead. This is why I will touch on your operational questions by giving simple and generic answers. I will not get into the details of the operational parts. Overall, COVID-19 has had two significant impacts. Firstly, it has impacted some developing parts such as Virgin or Kiabi, which are not dedicated to “food distribution.” We are developing Virgin for cultural products, Kiabi for textiles, and Burger King for the fast food part. These three subsidiaries have been stationary for ten days. These days, the turnover is null and these subsidiaries' management of is based on how to cope with the turnover's halt, how to manage the rest of the costs, the treasury, the payrolls, etc. Like many companies in the world, we are experiencing a complete cessation of all activity. On the other hand, our food distribution line embodied by Carrefour is experiencing the opposite situation. We are facing a customer rush. Looking at the last 10 days, our turnover is about 25% to 30% superior to that of last year at the same period despite the restrictions and obstacles we face in the supply chain and the like, as you may guess. These are our two axes.

With regards to stock, are you confident about the smooth running of the supply chain in terms of logistics and of employees. How are you handling this?

Development is at a standstill. That is to say that all the files that were being reviewed these past 6 or 12 or 18 months, partnerships with other countries like South Africa, England, Spain, Portugal, Italy... Today, all these development projects are at a standstill. To be clear, our first axis is about food distribution and Carrefour; the second regards other subsidiaries that are at a standstill; the third one is about our development projects in the making. Let us start with the first axis. Overall, we are trying to overcome three major difficulties. Firstly are sanitary challenges, secondly are HR challenges, and thirdly there is the supply chain element. Let us talk briefly about the sanitary part. As you know, we are a franchise of a large international group. This entails we are within international standards for all matters of protection, be it of customers, of partners or of our employees, at various levels. Especially regarding the people most exposed such as cashiers, supermarket employees, especially specialty workers handling fresh products such as butchers, fishmongers, etc. We have taken a lot of sanitary measures in terms of changing gloves and masks, plexiglass partitions to protect employees from customers. These measures meet international standards and protocols.

So you haven't recorded any case of COVID-19?

No, no cases. Carrefour France has had cases. We, hamdulillah, have not had a case either in Morocco or in Ivory Coast. You should know that there are still almost 11,000 people between Morocco and Côte d'Ivoire. In the latter we manage a food distribution company called CDCI, which is not Carrefour. CDCI represents 150 stores throughout the country and around 2,500 people. The HR difficulties we encounter are psychological difficulties, time management, transport, confinement, mail delays, surveillance, and so on. These are fairly complicated, though we seek to work hand in hand with the local authorities in each city. We must not forget that we serve public interest. The local and national authorities grant us many privileges and support us in keeping the stores running. We have many providers for matters of security, surveillance, cleaning and hygiene, transporters, and so on. The teams of the various service providers who interact with us on the 110 stores that we have today in Morocco add up to our own teams. The third difficulty lies in the supply chain. We have a great deal of stock: the equivalent of several months, though not for all products. We have created a box for products that are stored and other products that are not. Here as well, we are experiencing more or less significant difficulties in terms of local production and imports. Even if our brand keeps receiving imports, importers and exporters from foreign countries are facing a slowdown and hardships related to the crisis. We still receive several deliveries a day in order to face the rush. These are the three main difficulties that we encounter in terms of food distribution.

If this situation continues for longer than expected, do you have any measures in place regarding HR?

There are “positive” problems for Carrefour such as a surplus of work. If things continue this way, we will most likely have to recruit temporary workers. We should be able to keep operating on our current provisions until the end of April but will have to resort to temporary workers if it continues. Development projects are slackening off significantly compared to Carrefour, namely the stores that are opening, the stores in construction, the stores that we are developing, and so on. The pace has slowed down slightly. But we have had an additional turnover of about 20%, which is already enormous. Even during the best years combined with our development efforts, we have never progressed as much within a single year. If it continues this way, it is already significant. We were supposed to open around 20 projects this year, though given the situation, opening a dozen would be an achievement. In any case, 2020 will be largely positive compared to last year.

Considering air traffic is closed and maritime traffic is significantly decreased, do you face difficulties in terms of international logistics to move your products?

Some things are slower. I cannot tell you more since I am not the holding company. What I do know is that international imports in general have slowed down. They have not stopped, but they are slower. We are facing obstacles that did not exist before. Products still circulate internationally, even if it is not as fluid as before.

How are you expanding digitalization and new technologies?

We have two strategic projects underway across the group: a CSR project and a digitalization project. Each subsidiary is now working with its parent company to maximize the digitalization of loyalty products, internet access, sales, and so on. Each subsidiary has its own projects with its own criteria and characteristics; the digitalization of Burger King is different from that of Kiabi. Each city has its area of competence that defines its overall strategic project. All cities prioritize digitalization while making progress on CSR projects.

What opportunities do you see for digitalization in retail? People still like to go to the store; we haven't really seen a change. But we are starting to see some home deliveries. Are there any other opportunities in that area?

We are facing a lot of difficulties. As you know, the containment strategy here in Morocco is quite strict. We tried home deliveries with Burger King at first, but we had to stop because the authorities would not let us. Our delivery men were arrested by the police, etc. It was not fast enough and we were losing more money than we were making. However, Carrefour has just signed an agreement with Jumia for online purchase and home delivery.

What is the strategy of the group for the upcoming year at this point?

We started 2020 really well for all of the subsidiaries, including Burger King, Virgin, Kiabi, and Carrefour. Most likely, Carrefour will come out of it and have a good year. For the others, if the situation improves by the end of April, we still expect a positive year. If it lasts longer, we will have to revise our accounts in order to estimate the losses we will suffer by the end of the year. There are also government aids, deadline extensions, and so on. A great deal of assistance has been put in place for struggling or closed companies. We will try to rely on those to at least balance the accounts of the subsidiaries that are being closed by the end of the year. Carrefour also supports the national effort by contributing MAD50 million to the Moroccan COVID-19 fund.

Can the unusual growth of Carrefour compared to previous years absorb loss from other subsidiaries?

As a holding company, we are not directly impacted by the operational part. It will be a dividend issue. In other words, what dividends can we draw from Label'Vie and possibly re-inject into other struggling subsidiaries? The question will arise in these terms. As I told you, we hope to at least balance other subsidiaries. Ultimately, as a holding company, we hope to draw dividends from Carrefour and Label'Vie without being forced to inject into the other subsidiaries. You have to put into perspective the good year that Carrefour is going to have for the two reasons I mentioned to you. Firstly, this growth relies on a constant perimeter basis, but there is little to no development outside. As I explained to you, the store openings are slackened off. This will compensate for that. The overall growth over the year will not be enormous. Our 50 million dirhams donation will add to the year's results. At Label'Vie level for 2020, we hope to be within our forecasts. If we are within our budgets, we will be very happy.