French fine food emporium Fauchon eyes Middle East | Reuters

* Sales up 10 pct in 2009/10, seen up 8 pct this year

* Tea and chocolate are growth drivers

* Eyes Middle East for growth, China later

By Pascale Denis

PARIS, June 29 (Reuters) - Famed French fine food group Fauchon, whose flagship stores are located on Madeleine Square in Paris, aims to boost sales in Middle East markets with tea and chocolate as big growth drivers.

With sales up 10 percent to 145 million euros ($179 million) in the year to March 31, the group has come through the crisis mainly thanks to its catering activities -- up 30 percent and making up 18 percent of the total -- and sales via the Internet as well as corporate gifts, which rose 40 percent.

"Luxury food has benefited from the fact that it can be shared and remains an accessible pleasure," General Manager Isabelle Capron told Reuters in an interview, saying she expected a rise of 8 percent this year.

"In times of crisis, people are less inclined to postpone the purchase of an eclair than a Ferrari," she added.

The area around the Madeleine church is a haven for well-heeled shoppers with a gastronomic inclination -- alongside several Fauchon shops there is rival Hediard, one shop specialising in truffels and another in caviar.

Nearby Alain Senderens runs a top restaurant, and big fashion names have stores around Faubourg Saint Honore street, while Vendome Square houses top jewellery stores.

Fauchon was saved from bankruptcy in 2004 by Michel Ducros, son of Gilbert Ducros who founded a spices firm, who bought 90 percent of the capital with the rest in the hands of management and some private investors.

In 2009/10, the group reached operational break-even and aims for an operating margin of 5 percent within three years -- via an international store network and partners.

FROM TOOTHPASTE TO TRUFFLE OIL

To get there, Capron, who is a marketing and advertising specialist who worked for Colgate (CL.N), overhauled the group's sites and product lines to dust-off the stuffy image of the 120-year old firm and make it more in line with modern tastes.

In dry goods, tea and chocolate are the main products making up 18 percent of sales each, and Capron aims to make them the drivers of international expansion.

Fauchon launched a new range of exclusive chocolates, "Choc made in F", with top chocolate maker Pascal Caffet.

Fauchon makes 25 percent of its sales in France while half of group sales comes from Japan, where the brand has been based for dozens of years due to a partnership with the Takashimaya stores.

Capron said however that the growth potential in Japan was limited and her focus was on the Middle East.

In that region Fauchon now makes 15 percent of sales and plans to add 20 stores in the next two years with an aim of doubling sales to 30 percent of the total in five years.

Fauchon was forced to close a store in Beijing it had opened in 2007 as it was too big and not well-placed and is now focusing on smaller gift shops -- one has been opened in Hong Kong and there are talks with partners for continental China.

In the United States, Fauchon had to close its New York store but hopes for a come back with a partner on a franchise basis. Russia is also a main long-term growth market.

($1=.8103 Euro)

(Writing by Marcel Michelson; Editing by Jon Loades-Carter)

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