But with increasingly tough restrictions on hypermarket developments, and a weakening of the French economy, other formats such as the supermarket, convenience store and discount outlet have recently come into their own, with even the mighty Carrefour seeing double digit growth from these smaller outlets at a time when its hypermarket operations have reported declining turnover.
A recent report from the Institute of Grocery Distribution (IGD) in the UK predicts that the group likely to move most rapidly into the supermarket sector is Auchan as it seeks to increase its store portfolio by an estimated 25 per cent by 2005.
The IGD report suggests that the supermarket format will help Auchan generate growth in its core markets, such as France, Spain and Italy, but that this is unlikely to be achieved through organic growth alone, paving the way for continued acquisitions in Spain and the use of franchising in France and Italy.
Although traditionally a hypermarket operator (they account for 80 per cent of its turnover), Auchan diversified into the supermarket format in 1996 when it acquired Docks de France. At the end of 2002, it operated 600 supermarkets in five markets - France, Spain, Italy, Morocco and Poland. This store network was developed through franchising and acquisitions.
Diversifying into supermarkets was the first step into a multi-format strategy for Auchan and the retailer has developed a number of other store formats. In Spain, its subsidiary Sabeco has launched convenience store concept Siete D, whose stores are open seven days a week and late at night.
Auchan is also looking to take advantage of the popularity of discount stores, which the IGD estimates have gained over 1.4 million customers over the past four years and now account for approximately 11 per cent of the market. Auchan recently opened a number of pilot discount stores to test the concept under the two different fascias.
Les Halles d'Auchan are hard discount hypermarkets which sell value and own label products in a basic environment but which also aim to offer high customer service in contrast to traditional discounters. Au Marché Vrac is Auchan's first standalone discount store, opened in October 2003 in Lille. Prices are 30 per cent lower than in mainstream supermarkets and the range includes most grocery categories apart from fresh produce.
According to Louise Spillard, business manager at the IGD, one of Auchan is expected to operate 739 supermarkets by the end of 2005 (rising from 601 at the end of 2002). "However it is likely that Auchan will need to rely on further acquisitions if it is to achieve its ambitions for the supermarket format and significantly develop the portfolio on an international level," she said.
"The fact that Auchan is also looking at discount and convenience formats indicates that they could become of greater strategic importance in the future, and it is in fact creating a dedicated division this year to manage new store concepts."
As far as potential acquisitions are concerned, Ahold's Superdiplo and other supermarket operations are an obvious choice for Auchan, with the Dutch group actively seeking bidders for the business. Hypermarket growth restrictions in Spain are far tougher than they are in France, and the company's Alcampo business there will find it hard to expand through new store developments.
In France and Italy, the situation is more complicated, with far fewer small chains to be bought out. Thus, the group is expected to adopt the franchise strategy so successfully operated by groups such as Leclerc and Intermarché, which supply independently owned and operated stores with products and POS material.
In Auchan's other markets, such as Poland, the hypermarket format is likely to remain the top priority, however, with the retail sector in this market far less developed and restrictions on large store developments virtually non-existent.
The question then will be whether Auchan - or indeed any of the other major French groups shifting their focus to smaller stores - will look to other markets which they have traditionally scorned because of their focus on large stores.
The UK is the obvious market where hypermarkets have failed to take off but where the supermarket concept is very well established and convenience stores are becoming increasingly important. With all the main UK players effectively banned from any further acquisitions there on competition grounds, chains such as Somerfield or Iceland could become targets for the likes of Auchan, Casino or even Carrefour - although it has to be said that these groups have shown little interest in the British market until now.
While they would certainly struggle to achieve the market presence required to compete with Tesco and Asda unless they went on a major spending spree there (buying both Iceland and Somerfield, for example, along with a few convenience store operations for good measure) but the margins generated in the UK market could certainly be attraction for French companies struggling to make money at home.