French President Emmanuel Macron’s knack for top-down statist dirigisme hasn’t been very visible when it comes to rolling out Covid-19 vaccines, with the country’s immunization campaign among the slowest in the world. But it’s now on full display in the supermarket sector.
Finance Minister Bruno Le Maire took to the airwaves to pour scorn on a potential $20 billion bid for national champion Carrefour SA from Canada’s Alimentation Couche-Tard Inc. Any deal would be seen as a potential threat to national security and France’s “food sovereignty,” he said late Wednesday, conjuring up images of empty store shelves and panic-buying of pasta during the first wave of the pandemic.
The French state has no investment in Carrefour, whose shareholders include France’s richest man, Bernard Arnault. But it does have the power to screen and block foreign investments like this one. Le Maire made clear that, “on the face of it,” he opposed a deal. The stock fell 7% in early trading on Thursday.
This is bluster in more ways than one. Carrefour is not an unbreakable link in the chain of agricultural self-reliance, but rather a classic example of a French-headquartered firm with global reach in a competitive industry. Its operations stretch from Taiwan to Brazil, and in its home market, even with a 19% market share, it’s one player among many. What French officials really value is the ability to exert influence over industry relatively cheaply: When the Covid crisis first hit, the government asked grocery chains to indulge in “economic patriotism” and favor domestic produce.
The reality here is one of French exceptionalism, with a tradition of protecting firms as key levers of industrial policy whatever the sector. In the mid-2000s, after having defended soft-drink brand Orangina from a US takeover, France decided dairy firm Danone SA was too strategic to let fall into foreign ownership. Supermarkets aren’t such a big leap, especially as Carrefour is France’s No. 1 private-sector employer and 2022 is an election year. Le Maire has been keeping an eye on Carrefour’s 2 billion-euro ($2.4 billion) turnaround plan, which involves job cuts, as its baby-boomer-era hypermarkets fall by the wayside in favor of millennial organic convenience stores.
For all the rhetoric, it doesn’t mean this story is over. The paradox of French power under Macron is that loud pronouncements aren’t always backed up with means or conviction. Le Maire’s track record is revealing: After a botched attempt to merge Renault SA and Fiat Chrysler Automobiles NV, he gave his blessing to carmaker Peugeot SA’s merger with the Italian firm. And even a government veto failed to stop Engie SA from selling its stake in water and waste-management giant Suez SA to domestic rival Veolia Environnement SA.
This latest supermarket salvo sounds a lot like a “communication game,” as one analyst told Bloomberg News. Maybe Le Maire wants to be let into the negotiating tent more than he really wants to block a possible deal.
The question now is what kind of concessions, if any, can remove the hurdles in the way of this deal. Carrefour and Couche-Tard each has something the other might want: The French firm has seen the strategic chops of its boss Alexandre Bompard vindicated by outside interest, while the Canadian company wants to diversify out of fuel stations into a bigger range of goods. What can they offer politicians like Le Maire? Job guarantees and other pledges are one possibility. But the two companies have a glaring lack of overlap, as my colleague Andrea Felsted points out, meaning that chunks of Carrefour may eventually be sold off. Guarantees are also easy to extract but hard to enforce.
Given the increasing Covid pressures on the French state, and how politically advantageous it is to be seen to be protecting jobs, the bluster will be hard to stop. Just don’t put it down to sovereignty.
Bloomberg
