Orion Selling 'Choco Pie' Also Faces Price Cuts... The Fall of Carrefour in China

Application for Asset Freeze Due to Unpaid Payment for Goods
Compensation Not Paid to Laid-off Employees

Once regarded as a 'localization legend' in China, the large supermarket chain Carrefour (Chinese name: Jia Le Fu) is facing controversy due to delayed payments for goods, layoffs, and store closures. Orion, which popularized Choco Pie as a national snack in China, is also caught in the escalating situation, having applied for asset freezing due to unpaid receivables.

According to China’s First Financial Daily on the 30th, Jia Le Fu has become embroiled in legal disputes for failing to pay promised compensation to laid-off employees and for not paying suppliers on time. Korean companies have also suffered damages. Orion (Chinese name: Hao Li You) applied to freeze Jia Le Fu’s bank deposits amounting to 22.74 million yuan (approximately 4.06 billion KRW) earlier this year and is currently pursuing collection.

Wang Wang, famous for its rice crackers, is also reportedly demanding payment of over 23.98 million yuan from Jia Le Fu. Due to delayed payments, Wang Wang stopped supplying goods from September last year and is pursuing collection through litigation.

Jia Le Fu recently notified most of its employees of layoffs. First Financial Daily reported that the full-scale layoffs began in April, but the company has yet to pay the promised compensation and severance pay. One employee who worked for about 20 years agreed to leave with a severance payment of 200,000 yuan based on years of service but has not received a single yuan to date, the media reported.

Jia Le Fu is a French large supermarket chain considered a representative case of successful localization in China. It peaked in business by expanding to 321 stores in 2012, entering the ranks of China’s 'top three supermarket chains.' In 2019, local retail giant Suning Group acquired 80% of the corporate shares for 4.8 billion yuan, effectively turning it into a Chinese company. In 2022 alone, 58 stores were closed. An additional 33 stores were shut down in the first quarter of this year.

A store shelf in Jialefu, China is completely empty. (Photo source = China Weibo)

First Financial Daily attributed the downfall of this retail giant to competition with e-commerce, conservative franchise acquisition, friction and operational inefficiency caused by replacing existing Jia Le Fu employees with Suning staff. It pointed out, "Suning’s business methods were very different from Jia Le Fu’s own approach," adding, "They suddenly attempted changes in supply chain and workforce aspects." It further diagnosed, "Their understanding of the hypermarket supply chain declined, severely damaging their original strengths and advantages," and "With changes in ordering and contract policies, the product lineup also changed drastically."

Especially during the COVID-19 outbreak, Jia Le Fu’s offline store-centered operations suffered a severe downturn. The net loss of Jia Le Fu, which was about 795 million yuan in 2020, surged to 3.337 billion yuan last year. After restructuring, the net loss in the first half of this year was 471 million yuan. First Financial Daily explained, "Suning’s financial support is necessary, but Suning itself has reported large-scale losses with operating profits sharply declining for three consecutive years."

Jia Le Fu plans to implement restructuring by changing some business models and reducing stores and employees. However, there are opinions that the recent exposure of the situation externally has significantly damaged the brand’s competitiveness, making recovery difficult.

This content was produced with the assistance of AI translation services.