PARIS (Reuters) - Fifty years ago, on June 15, 1963, two French families opened Europe's first hypermarket in Sainte-Genevieve-des-Bois near Paris. Stocking 5,000 products over 2,500 square meters, it was three times the size of most grocery stores.
Today, owned by retail giant Carrefour, it has tripled in size and offers 19,000 different products.
The store's growth mirrors Carrefour's global expansion, but the format - an out-of-town warehouse offering cheese, lawn mowers and almost everything in between - is shrinking as online vendors, convenience shops and discounters bulk up.
Some fear the decline could be terminal.
Not Carrefour, which pioneered the stores across the globe, making it the world's second largest retailer after Wal-Mart, but its attempts to revive the hypermarket in France have ended the tenure of a string of chief executives.
Not long ago, ballooning debts, falling profits and strategy U-turns such as a failed merger in Brazil led to concerns the company might be broken up. Now, with the French economy slowly crawling out of recession, it is trying again.
"I was happy when Georges Plassat took the helm at Carrefour, because he has no doubts the hypermarket has a future, so now at least two of us think that way," said Vincent Mignot, managing director for France of rival Auchan.
Plassat, who became CEO in May 2012, is streamlining an empire that sprawled from China to Brazil. He has sold assets in Colombia, Malaysia and Indonesia to reduce debt, and pledged to invest up to 2.3 billion euros to renovate or expand stores, mostly in France, which accounts for nearly half of group sales.
Plassat wants to offer shoppers low prices and simpler products, renovate aging stores and give managers more autonomy after decades of central planning.
Even one of its biggest investors, property tycoon Thomas Barrack, concedes that reviving the firm was "like moving an aircraft carrier".
Earlier this year, Carrefour for the first time lost its market lead in France, as Leclerc, a cooperative of independent store owners, took 19.9 percent in the four weeks to May 19, pipping Carrefour's 19.6 percent.
It was back on top in the period to July 14, but it has little wiggle room on margins to give shoppers the low prices they want when unemployment is at a 14-year high. In 2012, it made just 2.6 percent profit on sales, compared with 3.7 percent for smaller rival Casino and 4.7 percent for Britain's Tesco in its home market in 2012/13.
The head of a big food supplier in western France, who asked to remain anonymous, said recent negotiations with Carrefour were "extremely tough and combative". The company was asking for price cuts of 2-5 percent despite higher raw material costs.
"We got a flat to 1 percent increase, and that is far from what we need to cover operating costs," he said.
Plassat has cut debt and plans to use part of the cash raised from selling international operations to fund renovations and price cuts in France.
Carrefour has said about 150 of its 220 French hypermarkets need remodeling over the next three years, and it will work on 50 this year.
The 8,770 square meter hypermarket at Brive-La-Gaillarde, a rural town in southwest France, was last renovated in 2002 and is in line for a makeover.
One spring Saturday afternoon, its 33 checkouts not very busy, shoppers described it as shabby.
Alice, a 34-year old social worker who lives nearby, said she preferred two rival stores a 30-minute drive away; Leclerc was cheaper, and Geant Casino was "clean and well designed".
"It can be hard to find staff, and labeling is not great," said Sylvain Mathevet, 53, a construction worker.
"Our stores lacked investment in recent years. We have started a renovation and upgrade plan over two years, and the Brive hypermarket is part of that plan," said Noel Prioux, Executive Director for France.
"At national level, there has been a very sharp improvement in over eight months on a variety of criteria such as cleanliness, quality, fresh products, staff friendliness, waiting time at checkouts, price image," he added.
The smaller Leclerc store, also last renovated about a decade ago, had long lines at each of its 22 checkouts. Banners trumpeted the Leclerc slogan - "At Leclerc you know you buy cheaper".
Leclerc, which has 560 stores in France, mostly hypermarkets, compared with Carrefour's 4,635, likes to remind customers of the benefits of its co-operative status.
"Our members own their stores," its CEO Michel-Edouard Leclerc recently told reporters. "The difference with a listed group is that our shareholders are in for the long-term."
Casino, Carrefour's other main rival, is listed, smaller, and more heavily indebted. It joined the price war in the last quarter of 2012. In Brive, a farming town of 50,000, Casino found a direct way to convey its low-price message - two trolleys at the store entrance, both filled with 41 identical staple products. One, marked Casino, cost 88.85 euros, the other, Leclerc, cost 94.57 euros. Inside, every aisle carried direct price comparisons.
The hypermarket is also bumping up against a demographic trend. In the 1960s and 70s, at least half of French households were of three people or more. That has dropped to a third. With more single and older consumers - and petrol bills rising - fewer people want to drive to out-of-town emporiums for a big weekly shop, and more convenience stores are popping up to cater to their needs.
Even so, new hypermarkets are opening up every year, and they still account for more than half of all food purchases in France. But their market share has shrunk from 20 percent at end-1990 to 18.2 percent in 2011, according to the national statistics institute INSEE. Average size has also fallen over 12 years to 5,400 square meters from 5,800.
Carrefour has been here before. Previous boss Lars Olofsson started to revamp its hypermarkets with a program dubbed Planet, which aimed to treat customers to "theatrical" retail.
Some stores, like at Auteuil in Paris, renovated in 2009, got Sushi bars, low lighting and wine cellars, before Planet, slated to cost 1.5 billion euros, was dropped as too costly and ineffective.
Carrefour's capital expenditure then fell 27 percent to 1.547 billion euros in 2012. Though Plassat has bumped it up to 2.3 billion this year, he says he's not planning anything fancy. It is likely to include space for traditional butchers and organic goods, plus improved lighting and signage as in the Charenton Le Pont hypermarket near Paris, renovated last summer.
Plassat's budget may be bigger than his predecessor's, but others are spending more. Carrefour's forecast capital expenditure for the next 12 months is 2.8 percent of sales, according to Thomson Reuters data. That compares with 3.24 percent for Casino and 4.28 percent for Tesco.
"The retailers with the highest capex to sales ratio are those who lead," Plassat told the annual shareholders meeting.
Carrefour's second-quarter sales showed the first fruits of Plassat's efforts; the decline in same-store sales at French hypermarkets slowed to 1.1 percent from 2.9 percent in the first quarter, and store traffic increased.
The stock has risen 73 percent since Plassat's arrival, in anticipation of improvement. It trades at 13.64 times forward earnings, a premium to Casino and Tesco.
"We have the right leadership," Barrack said. "We are on the right road. Everything takes time. We are quite enthusiastic with the long-term prospects of Carrefour."
(Reporting by Dominique Vidalon, additional reporting by Gus Trompiz in Paris, Editing by Sara Ledwith and Will Waterman)