MASTER THESIS LARA ARMAS 2015

TO WHAT EXTEND CAN A SPORTING GOODS
RETAILER MANAGE THE WEATHER RISK?
EXAMPLE OF DECATHLON
Master thesis prepared and presented by Lara ARMAS
Thesis adviser: Luc VANDEPUTTE
Printed both-sided on recycled paper for
an eco-responsible publication
MASTER OF BUSINESS IN SPORT
Promotion 2015

~ 3 ~
Acknowledgement
First of all, I would like to thank all the persons I interviewed and who gave me great
insights into this subject. I would thus like to expressly thank the experts I had the chance to
interview for their time, availability and patience: thank you again Jean-Louis Bertrand,
author of most of the weather-risk management works I read about; Maxime Fortin,
consultant at Meteo Protect; and Pascal Bouquet, Commercial Director at Climpact-Metnext.
Thank you for answering to all my questions and for your interest in my thesis.
Secondly, I would like to deeply thank my Decathlon colleagues: Mélanie, Sophie,
Delphine, Cédric, Hugo and Philippe, who devoted me time during their working hours and
without whom writing this essay wouldn’t have been possible. A huge thank you to the other
“Decathloniens” I had the opportunity to interview: Khalid Ben Seghir, Responsable Gestion
France; and Xavier Fouré, Financial and Administrative Responsible at decathlon.fr. Thank
you both so much for your helpfulness.
I would also like to thank those who helped me from my Sport Business School AMOS
Lille: my thesis director, Luc Vandeputte, for his conviction in my subject and his advice.
Thank you also to Carine Canone, my school and program director, for her constant
sympathy and support. And thank you Xavier Rivoire too, External Communication Director
at Decathlon and speaker at AMOS, for the contacts he shared with me.
Of course, I can’t forget all those who helped me outside from school and work:
many thanks to my friend John Castro who offered to proof-read my work. I’d also like to
thank my college friend Anna Nozac’h, who wrote a Bachelor thesis on a similar topic and
sent me her essay. A particular thank you to my best friend Maya, who understood I had to
focus on my paper and couldn’t see her much: thank you for not trying to drag me to the
beach! And thanks to your parents too for their backing - Merci Bernadette et Daniel! Thank
you so Sophie Miller for being like a second mother to me! Thank you to my college roomies
Momo, Clarita & Fonfec for sending me pictures of them in the pool while I was working!
Danke Evi for your last minute support & tips! And bon esprit Nicolas for your kindness!
And at last, but not least, I would like to thank my family. Thank you a thousand times
to my mom, for helping me typing those endless interview transcriptions. Mom: even
though you were sometimes annoying and putting pressure on me, you’re the best and you
deserve a medal! Thank you to my dad for his researches to help me out when I had
questions, and for feeding me! And thank you to my little sister, just for being my little sister.
I am even grateful to my cat that distracted me during the hard moments and kept me
company some long nights… I couldn’t have done it without you all, so thank you again for
all your help and support; I won’t forget it and I really appreciated!

~ 4 ~
Summary
Acknowledgement................................................................................................................................... 3
Summary ................................................................................................................................................. 4
Introduction............................................................................................................................................. 5
I. Consumer behavior and weather issue: Old and new concerns for businesses.................................. 8
A. Consumer behavior – old concern for businesses .......................................................................... 8
a. Definitions.................................................................................................................................... 9
b. Theories..................................................................................................................................... 10
B. The weather issue – new concern for businesses......................................................................... 17
a. History of weather and of weather as a business matter ......................................................... 17
b. Impact of weather on consumer behavior, and other consequences ...................................... 24
C. Weather risk management: existing solutions.............................................................................. 28
a. Weather risk insurances and weather derivative contracts...................................................... 28
b. Weather risk management: who to ask? Associations, sites, blogs, & cases ........................... 35
II. Field study: Decathlon & answer to the Hypotheses........................................................................ 42
A. Decathlon...................................................................................................................................... 43
a. Presentation of the company and its environment .................................................................. 43
b. Why Decathlon?........................................................................................................................ 48
B. Methodology, Hypotheses and Analysis of the Interviews........................................................... 50
a. Methodology & Hypotheses...................................................................................................... 51
b. Results: Analysis of the Interviews............................................................................................ 55
C. Solutions, Answers to the hypotheses and recommendations..................................................... 63
a. Possible solutions ...................................................................................................................... 63
b. Answer to Hypotheses and Recommendations ........................................................................ 64
Conclusion ............................................................................................................................................. 70
Bibliography........................................................................................................................................... 71
Books................................................................................................................................................. 71
Articles............................................................................................................................................... 71
Websites............................................................................................................................................ 71
Glossary................................................................................................................................................. 77
Annexes................................................................................................................................................. 78
Abstract ............................................................................................................................................... 152

~ 5 ~
Introduction
Have you ever wondered how weather affects the economy? You must have noticed
that it daily impacts our lives. Think about it: on a rainy or cold day, what nicer than to stay
under the blankets, watching a movie with a cup of hot chocolate? And on a warm sunny day,
what about going shopping for example? Turning on the heater or the fan, buying soup or
ice cream, it all depends on the temperature outside, on the weather forecasts for the rest
of the week. What we wear also varies with the weather. Basically, most of what we do with
our spare time depends on the weather. Indeed, even if it’s not always obvious, we all
behave differently according to the weather conditions. It can affect our mood, our
motivation, our will to go out and do things. It therefore naturally influences our behavior as
sportspersons and as customers, which is what we will study and analyze in this thesis.
If it affects our behavior as customers, it also definitely affects companies, of all kinds.
Energy firms are unquestionably influenced by the weather conditions. For instance, are you
using the cooler or the heater as you read this introduction? It depends if it is summer or
winter of course! Well for energy corporations, the issue is that a warm winter or a chilly
summer can negatively affect their financial result. But beyond the energy industry, there
are many sectors impacted by the weather: the other obvious one is tourism. What is the
point in staying in a campsite or a resort if it’s supposed to be raining another entire week?!
Even retailers are affected, as are clothing stores among others. Thus, we can say that there
exist weather-sensitive companies, bearing the consequences of what is called the weather
risk. These are important notions for our thesis and we intent to show that they are essential
for businesses in the sports industry, like Decathlon.
The idea of this theme for our Master thesis was born during the first weeks of work
at the blue company: September’s weather was unexpectedly nice, and managers grumbled
that if they had known it, they would have kept the camping gear longer instead of sending
it back to the warehouses! Besides, we knew we would have access to the store’s numbers,
so our field of research was all settled; we had a harder time defining the perimeter of our
study. We finally narrowed it to retail’s standpoint, because of the insights we had in this
department. The goal here is evidently to write a thesis that could be used by Decathlon, or
by another similar company, or maybe even by a different industry or sector.

~ 6 ~
The issue of the weather is almost omnipresent for businesses, which is what we
understood once we entered Decathlon. Weather risk management is a new market: it exists
since a few years and, to us, deserves to be more analyzed and researched about, linked to
the sporting goods industry. The key words in this thesis will be consumer behavior and
weather risk management: we would like to research about current solutions & actions a
store manager could undertake, considering the weather conditions and its impact on
consumer behavior.
American economic studies show that 80% of the companies are influenced by the weather
risk, and that it represents about 30% of the national GDP.1
In Europe, the numbers are quite
similar, impacting about 25% of each nation’s GDP, which is about equal to the sum of
export sales! In France, a study published about Weather risk management explains that 2
out of 3 business sectors are impacted by the weather risk and that sometimes, the sole
weather variations can explain more than half of the sector’s turnover’s fluctuations.
In today’s world facing climate challenges, there are less than 20% chances that the weather
conditions of year N-1 are the same in year N. It is thus not efficient or pertinent to look up
the last year’s numbers to evaluate and anticipate future sales and consequently order the
right amount of products e.g. Knowing how sales and temperatures are related would allow
companies to better understand the demand, to globally improve its logistic processes, and
so create more value. Treasurers who have invested in a study have noticed that 3 times out
of 5, weather conditions have higher impacts on finances than exchange rate fluctuations,
interest rate and the price of raw materials all combined!
Unfortunately, as we will expose later, too few directors and decision takers have the
knowledge about the various solutions now existing on the weather risk management
market: companies still have much to learn to effectively manage the weather risk! Indeed,
most managers believe that there is absolutely nothing to do about the weather as it is an
uncontrollable external factor. Which leads us to our first hypothesis: A sports retailer
cannot manage the weather risk: it can only undergo the consequences. Interestingly, the
1
JL. Bertrand, 2011, "La gestion du risque météo en entreprise", Ed. Revue Banque – translated from French to
English by the author of this thesis

~ 7 ~
only thing they execute depending on the weather is to quickly adapt the heads of gondolas,
indicating us our second hypothesis: Knowing the weather conditions a few days ahead is
enough for a sports retailer to adapt its offer.
We will later see in this thesis that once businesses have understood what implications
weather has on their finances, there are different ways to better manage this impact. It can
become a competitive advantage as only very few companies use these new tools. A
weatherized business can prepare for unfavorable periods, order the right quantities of
products and minimize unnecessary expenses. And this brings us to our third and last
hypothesis: It is useful for a sports retailer to carry out a weather-sensitive study, as it could
turn into a competitive advantage.
We will try to confirm or infirm these hypotheses at the end of this composition thanks to
academic researches about the topic, and through some interviews with people from both
the sports industry and the weather risk management sector. This is not an exhaustive work
about weather risk management as there are lots of limits to a thesis like this, but we hope
to make it as obvious to you as it is to us that this is an innovative, interesting and useful
issue to address. In order to do so, we will research about how weather conditions impact
Decathlon, through an analysis of consumer behavior theories.
First, we will study a few consumer behavior theories, before investigating about the
weather and its impact on purchasing habits. The existence of a weather risk triggered the
birth of a weather market, and of a weather risk management business. We will expose the
existing solutions and products available to weather-sensitive companies, and then tackle
the Decathlon case: we will briefly present the company and explain why it is a pertinent
choice to examine this corporation. At last, we will present the methodology in more details
and finally analyze the several interviews conducted all along this thesis. And before
concluding, we will expose possible solutions, answer to the hypotheses and give concrete,
practical and hopefully valuable recommendations!
We will now start with learning more about consumer behavior theories and
consumption patterns linked to weather conditions.

~ 8 ~
I. Consumer behavior and weather issue:
Old and new concerns for businesses
Consumer behavior and weather risk are two apparently non-related notions. We will see
that consumer behavior is a key aspect for businesses to understand, as companies need to
be aware of buyers’ decision making and purchasing processes, in order to better adapt their
marketing strategies. The importance of understanding consumer and buyer behavior has
been commonly accepted by companies, and it is a feature that has already been studied
and incorporated in management decisions long ago. In addition to that, we will define and
identify what weather risk is: in contrast, it is a quite new concept for managers to
understand and integrate in the running of their corporations. Weather risk, as well as
weather risk management and weather sensitive companies, will be notions at the heart of
this thesis and thus important to clearly grasp. We will see how the weather risk can be
tightly linked with customer habits.
A. Consumer behavior – old concern for businesses
As we just saw, there as several key notions to understand and clearly comprehend in order
to fully follow the work of this thesis. We will therefore define the main concepts exposed
above and identify different theories linked with the subject, if relevant. Thus, we will first
define consumer behavior and represent the main models still accepted nowadays. There
are obviously a lot of different theories depicting buyer’s habits, but for the sake of this
thesis, we will have to choose a few pertinent ones, being universally employed and referred
to. We decided to start and expose a model of consumer buying process in 5 steps,
developed in 1968 by Engel, Blackwell and Kollat to find out which influence factors are
leading to this complex process of choosing a particular product to buy. Then, we will shortly
focus on Maslow’s famous Pyramid (or Hierarchy) of Needs (1943), illustrating what
motivates behavior, and on Herzberg’s Motivation-Hygiene theory (or dual-factor theory)
(1966). It is said that the Utility Theory is “the most prevalent model examining the basis of
consumer decision making from an economic perspective, and focused solely on the act of
purchase”2
, but we decided not to analyze this theory, or others, too focused on economy.
2
J. Bray, Consumer Behaviour Theory : Approaches and Model, 2008, p. 2

~ 9 ~
a. Definitions
Just as there are many diverse theories justifying consumers’ decision making, there are
several definitions for consumer behavior, but with basically the same fundamental input.
One “official” definition, according to L. Perner3
, is “the study of individuals, groups, or
organizations and the processes they use to select, secure, use, and dispose of products,
services, experiences, or ideas to satisfy needs and the impacts that these processes have on
the consumer and society.” According to BusinessDictionary.com4
, consumer buying
behavior is “the process by which individuals search for, select, purchase, use, and dispose of
goods and services, in satisfaction of their needs and wants.” For Blackwell et al. (2001)5
,
“consumer behaviour is the activities people undertake when obtaining, consuming and
disposing of products and services.” Another definition of consumer behavior is as follows:
“the behavior that consumers display in searching for, purchasing, using, evaluating, and
disposing of products and services that they expect will satisfy their needs” (Schiffman and
Kanul, 2007)6
. And for some: “consumer behaviour consists of activities/process followed in
making any buying decision of goods as well as a service.”7
The approaches in defining
consumer behavior are quite similar, as stated earlier, and psychology techniques are widely
used to understand consumer behavior. As those definitions are comparable, we won’t have
to decide which one to accept as being the ‘right’ one – we acknowledge that there are
different ways to define consumer behavior, but the general idea is the same.
Why consumer behavior?
But you might wonder why we even focus on consumer behavior in this thesis? Is it that
important for firms and organizations as we believe it is? Why do marketing managers spend
so much money on understanding buyer’s and consumer’s decision making processes? It is
quite easy to get: consumer behavior is vital to marketers and businesses because customers
are the lifeblood of any company and shape the fortunes of organizations. Indeed, we buy
things every day: we decide what we will wear, what we will eat, what we will do every day.
We make decisions about how much money exchanging for which goods and services in
order to meet our needs on a daily basis4
. The aim of any firm is to retain their customers,
3
L. Perner, Consumer Behavior : The Psychology of Marketing, 1999-2010 - www.consumerpsychologist.com
4
www.businessdictionary.com/definition/consumer-buying-behavior.html
5
J. Blythe, Chapter 1: The importance of understanding consumer behaviour, 2013
6
J. Bray, Consumer Behaviour Theory : Approaches and Model, 2008
7
Management Study Guide (MSG), Consumer Behaviour – Meaning, Determinants and its Importance
www.managementstudyguide.com/consumer-behaviour.htm

~ 10 ~
and in order to do so, they have to understand what motivates them to buy: why do
consumers make the purchases they make? What factors influence consumer purchases? By
knowing this, marketers can easier predict how consumers will respond to their marketing
campaigns and strategies. Managers have it easier to provide customer satisfaction because
they effectively target customers, which in turn enhance the value of the company, etc…8
“All marketing decisions are based on assumptions and knowledge of consumer behavior”
(Hawkins and Mothersbaugh, 2007)7
. Understanding the psychology of “how consumers
think, feel, reason, and select between different alternatives” and the psychology of “how
the consumer is influenced by his or her environment” will help firms to more effectively
reach their consumers2
. But consumer behavior does not necessarily end with a purchase,
and “post purchase activities are included in consumer behaviour”6
, which we’ll also justify.
Consumer behavior vs. Buyer behavior
We have to clarify that there is a difference between consumer behavior and buying
behavior, namely consumer behavior “talks about process and actions taken by the final or
end users”, or “the process of an individual or organization in coming to the purchase
decision”, while buyer behavior also takes into account the intermediate users, meaning the
buyer which is not automatically the final user6
: “buying behavior is the decision processes
and acts of people involved in buying and using products”8
. But the key to understanding
consumer behavior is to start with the study of the consumer buying process6
. Consumer
buying behavior refers to the buying behavior of the ultimate consumer9
.
b. Theories
The purchase is only the visible part of a more complex decision process, created by the
consumer for each buying decision he makes.9
But we are entitled to wonder what happens
before and after the purchase and what are the factors that influence the specific choice of
product bought by the customer. Engel, Blackwell and Kollat developed a 5-step model of
consumer buying decision process in 196810
. For the three authors mentioned above, there
are five steps in the consumer buying decision (F. Perreau, theconsumerfactor.com, 2013).
8
www.marketingteacher.com/what-is-consumer-behavior/
9
www.udel.edu/alex/chapt6.html
10
F. Perreau, Les mécanismes qui guident le comportement du consommateur et comment les comprendre pour
augmenter ses ventes, 2013 &
www.theconsumerfactor.com/en/5-stages-consumer-buying-decision-process/

~ 11 ~
THE ENGEL-KOLLAT-BLACKWELL MODEL - CONSUMER BUYING PROCESS
11
source: The British Chamber of Commerce, Singapore
11
Stages of the Consumer Buying decision Process - model
1. problem/need recognition; 2. information search; 3. evaluation of alternatives to meet
this need; 4. purchase decision and 5. post-purchase decision
As shown on the illustration, it is necessary to start with need recognition: if there is no need,
there is no purchase. One acknowledges he needs something when there is a gap between
the actual situation and the ideal and desired one8
. We saw that consumer behavior doesn’t
necessarily mean that there is a purchase decision taken at the end: indeed, “not all the
needs end up as a buying behavior”10
. Only if the main factors influencing the decision
making are identified as acceptable will there be a buying action. These factors (product
11
British Chamber of Commerce Singapore: www.britcham.org.sg/static-pages/consumer-watch

~ 12 ~
price, ease of acquisition, etc..) need to be perceived as satisfactory by the consumer in
order for him to take action and fulfill his ideal situation by filling in the gap he identified. It
all depends on the level of importance attributed to the need.
Every stage of the EKB model (Engel-Kollat-Blackwell model) conducts to the next one. The
need recognition leads to information search, which can be obtained from various sources
(internal and external), and the different alternatives found are being evaluated in the third
step. Then, the purchase decision is taken, when the intent is converted into an actual
purchase5
. And the last step is the post-purchase reaction, where customers evaluate the
satisfactoriness of the purchase (would they recommend it or buy it again?).
CONSUMER BUYING DECISION PROCESS – STEPS
Example: you want to hire a gardener to take care of your backyard (ideal situation), because you are tired of
cutting trees and mowing the grass (actual situation). But after some research on internet, you find out that it
would cost 150€/month, and you don’t find the “way” to reach your ideal situation (here the price) as
“acceptable”. Particularly because compared to the relatively low importance you attach to it. So you won’t have
a purchase behavior in this situation. But then again, buying yourself a computer because you need to write a
master thesis, for example, has a strong utility. So even if the cost is high, there will be a purchasing action.
(F. Perreau, theconsumerfactor.com, 2013)
•The recognition of a need by a person can have several origins: there are
internal stimuli like hunger or thirst (which are physiological needs), and
external stimuli like exposure to a good smell, the sight of a nice garment or
to advertisement for example.
Stage 1
Need recognition
•Depending on the complexity of the choices to be made and on the level on
involvement, one will search more or less information: first internal
information (memory, experiences, opinion..), and if not sufficient, then
external information (family, friends and thenadversiting, brochures...)
Stage 2
Information search
•Evaluation of the attributes to decide which has the most chances to satisfy
one: there are objective characteristics (features, functionality) and
subjective ones (perception, perceived value, reputation). The process lead
to determining "evoked set" (alternatives with a probability of being
purchased) and "inept set" (no chance of being chosen).
Stage 3
Alternative
evaluation
•The decision will depend on the information and selection previously made,
based on perceived value, produc'ts features and capabilities, but also on
the shopping experience, on the store, existing promotions, etc..
Stage 4
Purchase decision
•After the product or service has been purchased and used, the consumer will
evaluate the adequacy with his original needs, which can lead to satisfaction
or disappointment. If the acquisition was quite satisfying, the stage of
information search and alternative evluation will be lessen next time (leads to
customer loyalty); if disappointing, the acquisition will be excluded from the
"evoked set" next time.
Stage 5
Post-purchase
behavior
source : theconsumerfactor.com

~ 13 ~
To conclude about the Consumer Buying Decision Process, or the Engel-Kollat-Blackwell
model, we will illustrate what this theory means with a simple real life experience example.
AN EXAMPLE OF CONSUMER BUYING DECISION PROCESS
Influence factors
Obviously, there are lots of other factors influencing one’s purchase decisions. It does not
only depend on motivation, but also on: cultural factors (culture and societal environment,
the sub-cultures, social classes, cultural tendencies…); social aspects (family, roles and social
statutes, membership groups or reference groups…); personal features (age and lifestyle,
personality, purchasing power…); and psychological characteristic12
(motivation, perception,
experience, beliefs and attitudes, implication…).
12
F. Perreau, Les mécanismes qui guident le comportement du consommateur et comment les comprendre pour
augmenter ses ventes, 2013
Stage 1
•Need recognition --> You're hungy (internal physiological stimuli) and will thus order food
(statement of need)
Stage 2
•Information search --> You know the dishes of the closest Chinese restaurant by heart (internal
information). A friend recommended an Italian restaurant near by (external information from
environment). You received flyer sfor an Indian restaurant and a Japanese one in your mailbox
(external information from advertising).
Stage 3
•Alternative evaluation --> You don't like Indian food anymore as you were sick the last time you
ate some (inept set). The Italian restaurant is suggested by a friend (evoked set). But the Japanese
restaurant has good reviews on internet (positive perception - evoked set)
Stage 4
•Purchase decision --> After evaluation of the options, you decide to listen to your friend and try
the Italian restaurant. You want to order a pizza to be delivered as there is a good movie on TV
tonight (circumstances of the shopping experience).
Stage 5
•Post-purchase evaluation --> The food was good (positive review). But it was quite heavy and fat
and you know you should eat lighter in the evening. Next time, you will order at the sushi
restaurant as it is less fat than pizza (next purchase behavior!)
source : theconsumerfactor.com

~ 14 ~
According to Blythe13
and to Ladwein14
, the study of consumer behavior is a combination of
other disciplines. It “draws from economics, sociology, psychology and anthropology and,
more recently, neuroscience for its basic theories and research approaches”.
According to Blythe again (2013), “the general model of consumer behavior [shown below]
shows that basic attitudes (formed of thought, emotion and intended behavior) is influenced
by personal and environmental factors to create actual behavior.”
CONSUMER BEHAVIOR DYNAMICS
12
Maslow’s Pyramid of Needs
We could go on and on forever talking about this literature review, but for the sake of this
thesis, we will quickly expose two other universal and widespread theories about consumer
behavior, as Maslow’s Pyramid of Needs. For this humanist psychologist, “our actions are
motivated in order to achieve certain needs.” 15
It is one of the most famous and “widely
13
J. Blythe, Chapter 1: The importance of understanding consumer behaviour, 2013
14
R. Ladwein, Le comportement du consommateur et de l’acheteur, 2
ème
édition, Economica, Paris, 2003: see
figure 4 page 18 « Ancrages théoriques »
15
http://psychology.about.com/od/theoriesofpersonality/a/hierarchyneeds.htm
ANTECEDENTS OF STUDYING
CONSUMER BEHAVIOR
source: The Importance of understanding consumer behavior
source: The Importance of understanding consumer behavior

~ 15 ~
used classifications and representations for hierarchy of needs.” (theconsumerfactor.com).
According to it, a person has to achieve and fulfill certain levels of needs before focusing on
the next ones.
Only if the basic needs are met, can a person start focusing on fulfilling its psychological
needs. This theory remains valid today for understanding human motivation and even much
more, like management training and personal development. Maslow’s theory links basic
needs/motives to general behavior.
Herzberg’s hygienic and motivation theory
The way Maslow’s theory is built can be compared with Herzberg’s (1966) hygienic and
motivating factors in his job satisfaction theory. “A deficiency in the hygienic factors creates
dissatisfaction, while fulfillment of these factors does not create satisfaction. The motivating
factors, when fulfilled, give rise to job satisfaction. Job satisfaction, and probably also
consumer satisfaction, is not measurable on a simple bipolar scale but consists of two more
or less independent (sets of) factors. In consumer research, we may distinguish between
necessary product attributes (hygienic factors) and motivating product attributes. Absence
of necessary attributes gives rise to dissatisfaction, while the presence of motivating
attributes leads to satisfaction.”16
16
www.acrwebsite.org/search/view-conference-proceedings.aspx?Id=9488
source:https://doorwayproject.wordpress.com/2010/11/23/is-
it-safe-issues-of-home-and-domestic-violence/
MASLOW’S PYRAMID OF NEEDS

~ 16 ~
Limits: numerous existing models for describing consumer behavior
We will here state a first limit of this thesis: there are way too many theories describing and
explaining consumer behavior. But as this is not a research paper about consumer theories,
we had to decide to select some fundamental concepts, and couldn’t therefore be
exhaustive in this part. The selection of models and theories we opted for is a sample to give
the reader an idea about the importance of understanding consumers for any company. We
will from keep these theories in mind to explain consumer behavior in link with the effect
weather can have on people, and thus on customers.
As we have seen with the various theories we learned about, consumer behavior is a
quite old concern for businesses already: the EKB model in 5 steps was developed in 1968,
Maslow’s pyramid was built in 1943, while Herzberg’s concept exists since 1966. We will
now focus on a completely different issue businesses have to cope with. This matter is not a
new concern for businesses properly speaking: weather management solutions were found
decades ago to confront the risk weather represented, especially in the energy and
agriculture sectors and industries. But we can say that the weather risk is an affair of
growing interest, as more and more managers try to take the weather variability into
account when predicting sales numbers for example. Indeed, we will now see in the second
part of this chapter that weather affects our mood and thus our behavior as consumers.
source:
http://www.strategicleadershipinstitute.net/news/s
tart-with-herzberg-if-motivation-lacks-at-work/
HERZBERG’S TWO- FACTOR THEORY

~ 17 ~
B. The weather issue – new concern for businesses
“The power of weather: Weather has universal influence. Every day, weather impacts the
thoughts and behaviors of everyone across the globe, both consciously and
subconsciously”17
. Weather has influence on what individuals will wear, where they will go,
what they will do, and even what and when they will purchase. But before exposing how
weather impacts our mood as people and thus our habits as consumer (because we all are
consumers), we will shortly find out the history of weather and of the weather market.
a. History of weather and of weather as a business matter
We will start by representing the history of the weather, in order to comprehend that it has
always been an important concern for people since the early ages of civilization. Then we
will see that weather has created a new market: the weather market, and that the weather
has now become a business object, almost a financial one.
A brief history of weather
According to Skymosity16
, “weather’s influence on the human environment is something that
has been studied for over 2 millennia, from Aristotle to the present, with radical
improvement in predictability models taking the forefront throughout the last century.”
17
Skymosity, Weather is the new Black, Part 1 : Weather changes everything, 2014
source: Skymosity’s Weather is the new Black

~ 18 ~
History of the Weather Market
The weather risk management association18
(which we will discuss about a bit further in this
thesis) stipulates that “in 1997 three transactions involving Willis, Koch Industries, and
Enron19
marked the beginning of a new way of managing weather risk. Their work focused
on the use of weather data (measurable weather variables such as temperature or
precipitation) as the basis for risk indices, which turned out to be the key for making weather
risk fungible. This approach of expressing and transferring risk in terms of temperature,
precipitation, snowfall, wind or other measurable variables has attributed greatly to today’s
current weather risk market”17
. The weather market historically started because energy
companies and the agriculture sector felt too dependent on weather conditions and
variability. Indeed, unexpected weather conditions could highly affect both sectors’ turnover:
a warm winter would mean less heating for the energy companies for example, but a really
bad weather during spring could mean destroyed harvest for the agriculture industry! “The
weather market has experienced rapid evolution in short history” (WRMA, 2006). The
market now encompasses a variety of sectors, including construction, transportation, and
entertainment (but not only those) and the “constellation of market participants offers the
18
wrma.org/history/
19
Bertrand states in his Entreprises européennes face à la gestion des risques climatiques (2008), p. 5, that it
was not the first weather coverage, but the first one to be publicized about in the news. The first ones
apparently took place in 1996.
A BRIEF HISTORY OF WEATHER
source : Skymosity’s Weather is the new Black

~ 19 ~
weather market greater depth, breadth and financial security […]. Its numbers include
several of the strongest financial institutions on the globe. Since its start, the weather
market has expanded geographically, with weather business being transacted on risk from
all inhabited continents.” WRMA.org expects this market to continue to grow as the weather
risk “affects a third or more or the world’s GDP”. As a matter of fact, it appears that the
weather market has helped the “management of risk in a wide variety of businesses and
areas of government responsibility”. (wrma.org)
We just mentioned the notion of weather risk: there is indeed a risk linked to weather
conditions and variability for businesses, as we will see. And we exposed that there are
various industries and sectors implied in the weather market because impacted by the
weather: these companies are called weather-sensitive companies. We will now describe
and define those important notions we will talk about all along this work.
Definitions
Weather risk
According to the specialist Jean-Louis Bertrand 20
and his blog meteosensibilite.com,
“weather risks arise when unusual weather conditions destroy or alter production, decrease
sales volumes or push production or manufacturing prices higher.” The weather risk is “an
external risk which affects an entire business sector in the same way”21
. There is no formal
definition of weather risk for fahrenheitrisk.com22
. But it is usually defined as “the variability
of operational and financial variables (sales, EBIT, net income, etc…) that is cause by non-
expected or adverse meteorological conditions.” It is also the “uncertainty about income
generation caused by non-catastrophic climate events.” Fahrenheitrick.com states that
weather risk could be the most “extended risk factor globally”. In fact, everybody agrees to
say that climate events don’t need to be extreme to impact businesses: “a few days raining
slightly more than average may be enough for a considerable economic damage”. For J.
Cogen23
, “Weather Risk is the uncertainty in cash flow and earnings caused by weather
volatility.” Weather is the largest source of financial uncertainty for many energy companies,
20
JL Bertrand is specialized in weather risk management and weather risk solutions for businesses and co-
founder of MeteoProtect who sells financial protections against the effects of weather on companies
21
http://meteosensibilite.com/weather-risk
22
www.fahrenheitrisk.com/what-is-weather-risk.html
23
www.retailenergy.com/articles/weather.htm

~ 20 ~
which could also be the case for the agriculture industry, as we have seen that these two
sectors were historically the first one to recognize the existence of a weather risk. The
weather risk involves fluctuations of the weather variables, which are temperature,
precipitation, wind and sunshine, and its potential impact on a company’s performance. A
weather anomaly is the fluctuation around its average value, usually estimated on 30 years24
.
Weather sensitive companies
As we have seen already, there are several industries and companies impacted by the
weather risk. According to the US Department of Commerce25
, 70% to 80% of the economy
is “weather-sensitive”, meaning concerned by the weather risk and sensitive to climatic
hazards, which represents about 30% of USA’s GDP, which equals approximately $2500
billion26
. On certain markets, climatic hazards can created up to 100% variations of a
business’ turnover! (Fustier, 2011) In Europe and in France, the numbers are quite similar.
According to a Metnext study27
, weather uncertainty represent 25% of the €uro’s zone’s
GDP, meaning around 700 billion US$ for Germany, 470 billion US$ for the UK or 420 billion
US$ for France, which equals the export amount! In France, a study published by Bertrand in
his book “La gestion du risque en entreprise” (2011) shows that 2 out of 3 business sectors
are vulnerable to the weather28
. In industrialized countries, it seems to be 8 out of 10
companies (80% of all the companies!) that are impacted, to different degrees, by weather
variability29
. According to the different sources, the numbers change slightly, but they stay
very impressive: the French author JL. Bertrand30
maintains that climate affects between 20
and 30% of the industrial production in Europe (20% for France & Germany) and 35% for the
US31
, meaning 1250 billion US $ for Europe and 700 billion$ for Japan. These companies are
the ones from the following sectors and industries: “energy, transportation, tourism,
24
Bertrand JL, La gestion du risque météo en entreprise, Ed. Revue Banque, 2011
25
J. Fustier, Météo, quel impact ?, Supply Chain Magazine n°56, Juillet-Août 2011, p. 38
26
Interview avec… Jean-Louis Bertrand, co-fondateur de METEO PROTECT, Le magazine du Tresorier n°76, 4
ème
trimestre 2011, p. 6 à 9
27
Metnext is a French company specialized in operational management of weather climatic risks. See at
www.lenouveleconomiste.fr/lesdossiers/strategie-meteo-previsibilite-et-meteo-sensibilite-12845/
28
http://www.leblogdesfinanciers.fr/2012/01/17/deux-entreprises-sur-trois-sont-concernees-par-le-risque-
meteo/
29
http://www.challenges.fr/economie/20130521.CHA9661/meteo-pourrie-les-entreprises-ne-sont-pas-
condamnees-a-subir-ce-printemps-pluvieux-et-froid.html
30
He is considered as a reference for weather risk management for businesses, thanks to his many writings
about this topic and the first one to have written about weather risk management
31
JL. Bertrand, Les entreprises européennes face à la gestion des risques climatiques, 2008, p. 3 and according
to a study done in 2005 by ABN-Amro about the 1980-2003 period.

~ 21 ~
agriculture, food, textile, beverage, construction, cosmetics […]”32
retail products, air traffic
and leisure are “amongst the most weather-sensitive sectors” (Bertrand, 2011). Obviously,
weather sensitive companies can see their financial results be “boosted or slashed
depending whether climate conditions are favorable or not” (meteosensibilite.com,
Bertrand’s website). But obviously, companies are not affected the same way by the same
weather conditions, and the “financial consequences of weather anomalies can significantly
differ from one company to another”. It all depends mostly on the geographic location (as
weather is very “local”), to the local supply and demand, and basically its capacity to adapt
to new conditions, plus the level of “integration of weather information in the day to day
management”.
The different climate risks
According to Bertrand (2009)33
, there are three types of climate risks: extreme events, global
warming, and climatic hazards, or said differently, the weather risk. Extreme events are
necessarily well reported on the news (hurricanes, tornadoes, floods, earthquakes, etc…)
and companies in dangerous zones mostly have subscribed to insurances to protect them
against these tremendous risks. In order to prevent global warming and greenhouse gaz
32
See Annex 1 to see a graph about the weather-sensitive sectors in the USA
33
JL Bertrand, La valeur d’une entreprise peut-elle être sensible à la météo ? Une étude empirique du marché
français, 2009
EXAMPLES OF WEATHER SENSITIVE SECTORS
source: meteosensibilite.com/weather-risk

~ 22 ~
emissions, firms localized in those countries who have signed the Kyoto protocol have to be
careful and make sure they have the appropriate solutions in order to limit their impact on
the environment. And at last but clearly not least, there are the climatic hazards, which have
never arouse the attention and awareness they do nowadays. The consequences and
importance of climatic hazards is definitely not nearly as important as when an extreme
event happens, but on the other hand, these happen much more often. These still usually
have a non-negligible financial impact on cash flow, on the company’s turnover or its result,
as we have seen on the graph above34
(see annex 2). Indeed, the rise of temperatures, or the
fall of snow, or a more rainy semester than expected or than last year, all of these small and
apparently insignificant weather variables can have a huge impact on the whole economy,
and thus on specific sectors and corporations. Bertrand, in some of his interviews35
, also
likes to point out, when asked the question what climate risk is for a business, that there are
on one hand the risks linked to the non-respect of the rules established about sustainable
development (carbon footprint, general respect of the environment and of national and
international regulations due to climate change): on one side, the impact the climate has on
the companies, and on the other side the impact of the companies on the climate.
34
This diagram’s available on www.meteosensibilite.com/weather-risk and in a more detailed version in French
35
Interview avec Jean-Louis Bertrand, co-fondateur de METEO PROTECT, Le magazine du trésorier n°76, 4th
semester 2011, p. 6 – 9 + http://www.next-finance.net/Jean-Louis-Bertrand-Many-companies
SEGMENTATION OF THE CLIMATE RISK FOR BUSINESSES
source: La Gestion du Risque Météo en Entreprise

~ 23 ~
Weather sensitivity per country and sector
In August 2008, WeatherBill36
classified 68 countries according to their weather sensitivity
(thanks to the works of Larsen, 200637
) and according to it, the most weather sensitive
country is Brazil, France being number 50 and Pakistan last. But when ranged by most
weather sensitive GDP, USA are first and France is 6th
with its 422 billion US$ that are
“weather sensitive”.
Just like countries’ GDP are more or less impacted by weather fluctuations, different
business sectors are diversely affected: the sole temperature variations can explain up to 90%
of the disparities in energy consumption from a year to another; a degree more in winter
(above the “normal” temperature) reduces water, gas and electricity consumption by 3%
(Bertrand, 2009). Temperature is known to be the most important predictor of clothing sales,
rather than purchasing power during autumn and spring! Temperature also explains up to 80%
of beer consumption and 70% of textile sales, as well as 60% of food products like tea or
coffee38
. We could go on and on like this as there are dozens of examples for all the sectors
we mentioned earlier that are weather-sensitive. And within a weather sensitive company,
different departments can be wedged: the purchase department, the production process,
and obviously the sales branch, linked to the actions and conduct of shoppers, which is what
36
WeatherBill is an American startup located in San Francisco and who offers climate insurances for companies
and individuals
37
JL Bertrand, La valeur d’une entreprise peut-elle être sensible à la météo ? Une étude empirique du marché
français, 2009
38
JL Bertrand, Les entreprises européennes face à la gestion des risques climatiques, ESSCA, 2008, p. 4, and
according to a work of Marteau D.
10 FIRST WEATHER-SENSITIVE COUNTRIES (amount in billion $)
source: Bertrand, 2009

~ 24 ~
we mostly focus on in this thesis. Indeed, the weather impacts the whole economy, but in
order to so and have that effect on firms, it first has to influence people, meaning customers,
and thus consumer behavior.
b. Impact of weather on consumer behavior, and other consequences
Weather is everywhere in the news: there is not a single day we don’t speak about it on the
TV, and we every so often discuss about it at home, at work, with friends… Weather is
omnipresent as it partially dictates our lives: depending on the weather, we will adapt our
activities (outdoor or not), the way we will dress (is it warm or chilly?), and even what we
will buy. Undeniably, we are less tempted of buying ice cream when it’s freezing outside and
rather buy oatmeal porridge. The other way around is true too: who buys soup when there’s
a heat wave outside?! These are very straightforward examples, but we can find less evident
correlations between the weather outside and our purchasing comportment, as we will see.
Weather directly and indirectly influences Consumer Behavior
“It is widely known in the marketing community that a variety of key factors affect consumer
behavior in the marketplace”39
. As we have seen while studying the different theories
explaining consumer behavior, “the most widely discussed factors of influence are social,
economic, cultural, personal, and physiological, underscoring that both internal and external
factors play a crucial role in consumer behavior and the decision making process” (Skymosity,
2014).
39
Skymosity, Weather is the New Black – Part One : Weather Changes Everything, 2014, p. 3
source: http://www.enotesmba.com/2014/03/mba-notes-factors-influencing-consumer-behaviour.html

~ 25 ~
We have seen and know now that how we buy, meaning what, when, how much we
buy, depend on various elements like our needs, our motivation, our personality, values,
attitude, family, social and cultural background, age, sex, and so on, that will determine our
preferences and furthermore, our consumer behavior. “Who a person is, who they associate
with, how much spending power they have, what their needs are, as well as their cultural
background are basics to understanding consumer behavior, but upon further evaluation, it
becomes clear that weather plays a meaningful role, as well” (Skymosity, Weather is the
New Black, 2014). “Bad weather keeps people at home”40
as it makes going out and
shopping less attractive. It consequently negatively affects retail “sales volume and store
traffic”. But if extremely cold weather conditions likewise impact online purchase behavior
in an undesirable way for businesses, “in extremely hot conditions, consumers show similar
behavior” (Skymosity, 2014).
Weather influences people’s mood and purchase psychology; and in the end, the economy
There are two things here to grasp: first and on one hand, we all believe that weather
influences our mood and as a result, our behavior. This is not necessarily true, according to a
number of studies: in his work Mood and Temperament, the psychology professor and well-
knows American specialist of mood, D. Watson41
has inventoried several studies about the
correlation between mood and weather and has found… nothing! People apparently tend to
believe that both are connected, but mostly in the same sense: if they are sad and it is grey
or raining outside, they will make a connection and believe there is a link of cause and effect,
same thing when happy and sunny. But when happy and grey, people tend not think about
this causality at all anymore! We therefore believe that our mood often reflects the weather
outside, while researchers have found no evidence of it in their studies42
.
But on the other hand, it is easy to understand that people are “more prone to purchase
different items based on the immediate weather condition outside”, hence water and sun
lotion when it is hot and sunny, umbrellas when it is raining, or turning the heater on when
the temperature go down (which is also a way of consuming: buying energy). “Weather
40
http://weatherlift.weathersource.com/advertisers/weather-and-consumer-behavior/
41
http://www.psychologies.com/Moi/Se-connaitre/Personnalite/Articles-et-Dossiers/Nos-humeurs-tombent-
elles-du-ciel
42
The only thing that they know for sure, is that seasonal depression is a fact in the north where there is less
light during the winter, and thus that light is very important to us and to our mood: there are even “light
therapies” against seasonal depressions… http://www.meteocity.com/magazine/bien-etre/la-meteo-a-t-elle-
une-influence-sur-notre-moral_159/

~ 26 ~
affects the way that people consider their day and opportunities, driving divergent consumer
behavior, based on divergent weather conditions” (Skymosity, 2014). But we shall not be
mistaken: “these individual consumer decisions add up and together have a very significant
impact on the economy”. We saw that “the activity of many companies, small and big, in
many sectors depends directly on actual or expected changes in weather conditions”43
.
Other consequences of the weather on businesses’ reactions
If we know now that the weather has a significant impact on companies, we haven’t seen yet
what to do or how to react in order to prevent a potential disaster. We will see in the next
section what are the available tools and solutions already existing. But before that, we will
see what a few pioneer companies have come up with and as a consequence of the weather
impact on their business.
EDF/GDF integrating the weather factor in their annual performance report
Understanding that adopting a climatic point of view will from now on be necessary in order
to evaluate the real performance of their firm, be it on the short, mid or long term44
, this
French energy supplier was the first one in France (in 2011) to communicate the impact that
the weather has on its turnover. Other companies have followed the lead as we will see, and
it is a tendency that should be generalized in the following years, first and at least amongst
the other energy companies, and supported by financial authorities in order to promote a
better lecture of a corporation’s performance. In 2010, according to an interview with
Bertrand45
, the weather impact on EDF was +337 million euros on the turnover, and +215
million euros on the EBITDA (earnings before interest, taxes, depreciation and amortizations).
The year 2010 was truly auspicious as the temperatures were in average lower than normal.
But the story is different for 2011: GDF indicated that the negative impact of the warm
winter was -480 million euros on the EBITDA.
43
http://meteosensibilite.com/weather-risk
44
http://www.atlantico.fr/decryptage/meteo-nouvel-indicateur-analyse-financiere-harilaos-loukos-
362367.html#RKy51WWQZDOqMdC4.99
45
semester 2011, p. 7

~ 27 ~
Allianz Weather Risk Management Report46
This international insurance company has broaden its horizons and put online a report on
weather risk management, called “The Weather Business – How companies can protect
against increasing weather volatility” and was written in collaboration between the Allianz
Global Corporate and Specialty (AGCS) and Allianz Risk Transfer (ART). “The report examines
the strong links between unexpected weather patterns and company performance, and
explores the solutions that Allianz Risk Transfer can deliver through its weather risk
management expertise. A key message from the report is that bad weather is no longer a
good excuse for missed sales targets. A perhaps surprising finding in the report is that annual
costs from routine weather variance can triple those from the headline-grabbing global
natural catastrophe losses” 47
.
The weather risk exists and is ubiquitous, universal. We have seen that it was only in
1997 that the weather was identified as being a real business risk: it is thus a quite new
concern for companies. Weather-sensitive companies have started to react to this
exogenous issue, and the “counter-attack” is on its way. Indeed, we will now see that there
are already solutions to this recent matter, brought by weather risk management. But what
is risk weather management? And how can firms hedge against the weather risk? Do all
weather sensitive companies really have to hedge against it? We will all discuss it in the next
section of this thesis: a new concern for businesses calls for greater means and modern-day
solutions.
source: http://climatesecure.eu/constat.html
46
Allianz Global Corporate and Specialty (AGCS), The weather business: how companies can protect against
increasing weather volatility, 2013
https://www.allianz.com/v_1385454283000/media/press/document/2484_Allianz_Weather_Risk_LR.pdf
47
http://www.agcs.allianz.com/insights/white-papers-and-case-studies/art-weather-report/

~ 28 ~
C. Weather risk management: existing solutions
After having exposed the threat represented by the weather, which is underlying on diverse
companies from various sectors, we will see what are the contemporaneous resolutions
existing nowadays. Because there are already solutions available on the market, yes. And it is
called weather risk management. So no more “weather excuse”48
for those who don’t do
their job correctly: weather won’t be a reason to complain about anymore!
a. Weather risk insurances and weather derivative contracts
It is important to understand that climate variability costs a lot of money every year to the
world’s economy49
. This is why the United Nations and UNEP FI50
work closely since a few
years in order to foster financial markets and weather Services to operate together and offer
weather financial coverages capable of improving companies’ resilience facing the increase
of weather variability51
. Finance has an important role to play in helping corporations and
governments to adapt to climate changes. But first, let’s quickly see how it all started.
Weather hedging history52: From Antiquity to the 20th century
Insurances against the consequences of unfavorable weather have in fact existed for a very
long time, according to Bertrand on this blog meteosensibilite.com. Roman emperor
Claudius (41 to 54 before the Christ) had implemented a financial cover to compensate ship
owners carrying grain from Egypt from damages due to bad weather. Similar products were
used in Mesopotamia, Egypt and the Byzantine Empire. In the 17th
Century, a rice futures
market was created to help producers to hedge against the consequences of unfavorable
weather. At that time, an insurance product was also created to offer financial
compensation to the customers in case of excessive rain (Pluvius insurance). This is
considered by many historians as the first weather derivative instrument created, in the
middle of the 19th
Century by using a “cumulative rain index to calculate the payout on their
Pluvius insurance” (meteosensibilite.com).
48
R. Myers, What every CFO needs to know now about weather risk management, 2008
49
http://meteosensibilite.com/assurance-meteo/el-nino-la-variabilite-climatique-coute-cher-si-elle-nest-pas-
geree-2732
50
The UNEP Finance Initiative is a global partnership between the United Nations Environment Program & the
financial sector: www.unepfi.org. UNEP FI thus means United Nations Environment Program Finance Initiative
51
JL Bertrand, translated from his blog and the article referenced above by the author of this thesis.
52
http://meteosensibilite.com/weather-hedging-history

~ 29 ~
Weather derivatives’ story
As we have seen several times already, it all started with the energy companies who, in
order to survive, had to find a way to protect themselves against warmish temperatures
during winter, and fresh ones in the summer, because of their very noteworthy effects on
their business53
. From then on, insurers and risk takers proposed a “financial instrument
based on a temperature index, which worked like a traditional outright”. The reference line
for corporations was to establish “what their profits should be on a normal year”.
Proportionally to the “difference between the actual unfavorable temperature measured at
the end of the cover period and normal temperature”, “financial instruments would pay a
financial compensation”: this is how the weather derivatives were born. Since the first
transaction covered by the media in 199754
, lots of transactions have taken place, but
“hedging weather risk is a strategic decision and many companies are understandably
reluctant to disclose the transactions” Bertrand explains on his blog. He adds that it took
international authorities55
15 years to understand the importance of climate risk: the market
stayed confidential from the end of the 90s until 2006, when the WRMA56
announced that
the weather coverages used by corporations multiplied by 4 to reach 45 billion dollars
(WRMA, 2006). “In 2010/2011, the total value of trades in the weather market was 11.8
billion dollars, up 18.4% from a year to another”57
. But in Europe the situation is way
different, still according to Bertrand (2008): the weather coverages launched in 2001 were
withdrawn in 2003 for a lack of transactions. Moreover, given the strategic and tactical
nature of those business deals, it is rare that they are made public.
But how does it work?
Before considering weather coverage, the company first has to identify and understand
which is/are the variable(s) most impacting the firm’s activity. This allows the company to
study the effects of this factor’s variations and quantify in euros the impact of the weather,
53
English version of : http://meteosensibilite.com/historique-de-la-couverture-meteo
54
We have stated in part B that the first transaction concluded took place in 1996 but without media coverage.
In Europe, the first one took place in 1998 between Enron and Scottish Hydro Electric.
55
In his work Les entreprises européennes face à la gestion des risques climatiques, 2008, p. 2 - See annex 3 to
read a few recommendations of the UNEP FI Climate Change Working Group
56
Weather Risk Management Association, www.wrma.org
57

~ 30 ~
as well as follow the corporation’s performance at constant climate58
. The potential losses
can as a result be found before they actually are materialized. We will see that there are
businesses who can accompany treasurers who are still novice with weather risks. This study
is called “weather-sensitivity study” and supposes that the chiefs or shareholders of the
company admit that their activity depends on climate hazards (the same way they admit
that the dollar variations can affect the result or turnover in euros). The aim is for example
to be able to associate the quantity of products corresponding to a degree more. But outside
the energy sector, it is still hard for investors, analysts or business owners to identify the
most significant weather variable and link it to financial performances. Nonetheless, too
many companies hide behind the climate conditions to explain their poor performances,
sometimes year after year, without provoking any reaction of shareholders or analysts (see
annex 4). But in spite of this, “the last available Weather Risk Derivative Survey prepared by
PwC for the Weather Risk Management Association (WRMA) in 2011 revealed that the
proportion of energy companies represented less than half of the total enquiries about
weather risk instruments 59
. Agriculture accounted for 12%, construction for 23%,
transportation for 5% and retail for 3%. Other sectors including tourism accounted for 11%”.
Weather risk management vs. other “classic” risk management
“Weather risk management is the management of financial risks that are directly or
indirectly linked to the occurrence of an observable weather event or variability in a
measureable weather index”60
. Unlike with traditional insurance products, no physical
damage is necessary to require a payment. Those products “focus on the use of weather
data – measurable weather variables such as temperature, precipitation, sunshine, snowfall
and wind – as the basis for risk indices. Protection is based around the accurate recording of
independent weather data”. Basically, the concept of weather derivatives is quite easy to
understand for people who have addressed risk management issues or have some finance
knowledge. Weather derivatives are financial products that allow companies to manage or
hedge their weather related risk exposures: they protect against abnormal weather
outcomes. “Weather covers are traditional financial hedging instruments, except the index
58
semester 2011, p. 7 & Bertrand, Les entreprises européennes face à la gestion des risques climatiques, 2008
59
JL. Bertrand, X. Brusset, M. Fortin, Assessing and hedging the cost of unseasonal weather: case of the apparel
sector, 2015, preprint submitted to European Journal of Operational Research, p. 4
60
Allianz, The weather business – How can companies protect against increasing weather volatility, 2013

~ 31 ~
on which the payout is calculated is a weather index”.61
Like financial derivatives (the
traditional financial risks to which companies are exposed being the foreign exchange rate,
the interest rate risk, the cost of raw materials, actions etc…), weather derivatives depend
on the value of an underlying asset, index or commodity62
. The only difference is that the
index on which the payout is calculated is a weather variable (Bertrand), but these products
work exactly like foreign exchange or commodity hedging instruments. “The value of a
weather option depends on the value of an underlying weather statistic” (Molyneux). The
most common weather index is temperature. “It is often an average temperature or a
cumulative weather anomaly. Other contracts can be based on rain, wind speed, sun hours
or cloud cover. Again, for each of these variables, it is common to use average indices or
cumulative anomalies.” (meteosensibilite.com)
Bertrand explains the procedure on his blog meteosensibilite.com: “The company can
choose the level at which the cover should trigger (the “strike”), the payout per unit of
change of the index (known as the “tick”), the maximum payout, the time period and the
geographical area which applies to the cover. The price of the cover depends on the choices
made by the company and the probability that the risk materializes”63
. Then, “pay-off is
based on how the index performs relative to a trigger or strike value – not on actual loss.
Coverage usually has a defined maximum limit” (Molyneux), and is limited in time too:
according to Bertrand in his interviews64
, hedging periods are usually short, from several
weeks to a few months. We won’t talk here about futures and options (Put and Call –
“options are the most commonly used weather hedging instruments” declares Bertrand),
HDDs and CDDs65
, about swaps and collars, or other possible index or strategies. We
estimated that this is not the aim of this work and would be too long for the sake of this
thesis, which has to respect precise instructions in terms of length. Indeed, it is possible to
go much more in-depth in the explanation of weather derivatives, but we consider it to be
too complex and finance-oriented to be included in this paper.
61
62
D. Molyneux, presentation about Weather Risk Management, FCAS, Zurich Re:
https://www.casact.org/about/ECCppts/WeatherRisk.ppt
63
http://meteosensibilite.com/weather-risk-hedging
64
semester 2011, p. 9 & Y. Olivier, Interview with Jean-Louis Bertrand, « Many companies have recognized the
need to hedge against weather risk », 2011
65
Heating and Cooling Days: most temperature contracts in current practice are based on HDD for winter
protection and CDD for summer protection, according to Molyneux.

~ 32 ~
FUNDAMENTAL STEPS TO WEATHER RISK MANAGEMENT PROCESSES
source: http://wrma.org/what-is-weather-risk-management/
Limits of the weather derivative tools
Then again, “most companies are only just beginning to discern a path to managing weather
risk for improved performance. Indeed, a scant ten percent of finance and risk executives say
their companies take advantage of readily available financial tools for hedging weather risk
today, and only about 12 percent say they plan to do so in the years ahead. Seldom have
executives been so like-minded in recognizing a threat to their business, yet seemingly
uncertain about how addressing it”66
. But weather will increasingly be viewed as a core risk
to business performance, and shareholders’ demand for weather risk management tools will
increase significantly in the future. Deviation from expected weather, the increasing weather
volatility, or simply unfavorable weather won’t longer be an excuse accepted by
shareholders and stakeholders, even if traditionally, companies were of the opinion that
nothing can be done to combat the negative effects of the weather. “While companies
cannot expect to control the weather they are now expected to better control the risk of its
financial impact” (Allianz, 2013). “They are expected to understand the impact of it on their
business in order to make an educated decision how to insulate unwanted weather risks to
66
Identify the critical weather variable or variables
Identify the impact of the weather variables on revenues, margins, profits and/or costs.
Identify a reliable, neutral source of historical data and current recordings of the weather
variables (usually a government agency such as the National Weather Service in the U. S.,
MeteoFrance or the Japan Meteorological Agency)
Identify the date period during which the weather variables’ influence is operative (e.g. hot
weather influences air conditioning use primarily in the summer).
Quantify the relationship between changes in the weather variables and changes in the financial
parameter affected by weather
Establish sensitivity to the changes in the financial parameter and translate the sensitivity into terms
of the weather variable.
1
3
2
4
5
6

~ 33 ~
better control the risk of its financial impact”. Construction companies can mitigate the
weather risk of seeing projects completion being delayed via coverage structured by the
weather risk management market. The same goes for airlines fearing cancelled and delayed
flights, retail stores “being disappointed when a cold summer or a warm winter changes
consumer behavior in terms of seasonal items” (Allianz, 2013).
Differences between “traditional” weather insurance and personalized weather coverage
The distinction is quite easy to make: when the weather risk is identified and measurable,
then it is possible to use an adapted coverage using custom made index67
, reflecting the
company’s exposure to the climate hazard, explains Bertrand68
(2011). If the firm wants to
hedge against some yet unknown risk, like a natural catastrophe, then the business should
opt for a standard weather insurance, suggested by traditional insurers. In general indeed,
“weather derivatives cover low-risk, high-probability events. Weather insurance, on the
other hand, typically covers high-risk, low-probability events, as defined in a highly tailored,
or customized, policy”69
. But while both accomplish the same objective, “their characteristics
are not always the same. In general, derivatives are considered a more sophisticated, but
currently less regulated risk management tool than insurance. […] Insurance does, however,
lack some of the flexibility associated with derivative-based solutions”70
. Following is a chart
summarizing the key disparities between the two products. We will address this topic again.
http://www.vortexinsuranceagency.com/AboutUs/InsuranceOrDerivative.aspx
67
Index or parameter: custom index-insurances or parametric-insurances are the same, as we will see!
68
JL. Bertrand, Risque météorologique: analyse et couverture, 2011, Supply Chain Magazine n°56, p. 50
69
http://www.investopedia.com/articles/optioninvestor/05/052505.asp
70
http://www.vortexinsuranceagency.com/AboutUs/InsuranceOrDerivative.aspx
DIFFERENCES BETWEEN WEATHER INSURANCE AND DERIVATIVE
source: http://www.vortexinsuranceagency.com/AboutUs/InsuranceOrDerivative.aspx

~ 34 ~
“Weather” to hedge or not to cover, that is the question
One might still wonder: Why hedge against the weather risk if not in the energy industry?
Let’s continue the same way we always have as it is working! Is the cost of hedging against
the weather risk really worth it? Isn’t it going to be higher than the actual weather loss?
Indeed, one might argue that as long as the shareholders don’t complain and invest without
knowing about the risk, and as long as the competitors are not covered against it, why do it?
Moreover, Cogen explains that “One-hundred years of scientific research has proven that
you cannot forecast the weather beyond a few days with enough accuracy to support sound
commercial decisions”71
. Well, there are still several reasons.
First, weather volatility is increasing significantly: insurers have the bills to prove it
(Allianz report, p. 2). In fact, in this changing climate, there is less than 1 chance out of 5 to
see similar weather conditions replicate from a season to another. Consequently, focus
solely on last year’s sales to anticipate the year to come is rough approximation when talking
about weather-sensitive sectors72
. Fustier73
confirms and states that in this environment of
global warming, there is indeed less than 20% chances to see the weather conditions
replicate from a year to the next.
Secondly, it is important to note that the weather risk can be more important than
the exchange74
rate, the interest rate risk and the cost of raw materials put together. “The
weather risk is similar to the exchange rate” (Bertrand, 201175
). In fact, treasurers who have
invested in a statistical study have observed that climate had higher financial consequences
than exchange rate variations, interest rate variations and variations in the cost of raw
materials combined76
(Bertrand, 2009). Besides, Cogen explains that “the cost of weather
hedging can be lower than other risk management products. This is particularly true for long-
term agreements reaching out 5-10 years”77
. In addition to that, the quality of the weather
forecasts up to a year is much more reliable than any other forecast about exchange or
71
http://www.retailenergy.com/articles/weather.htm
72
http://www.atlantico.fr/decryptage/meteo-nouvel-indicateur-analyse-financiere-harilaos-loukos-
362367.html#RKy51WWQZDOqMdC4.99
73
74
See annex 5 to discover to what extend the diversity of risks are hedged in French companies
75
http://www.lenouveleconomiste.fr/lesdossiers/strategie-meteo-previsibilite-et-meteo-sensibilite-12845/
76
Bertrand, La valeur d’une entreprise peut-elle être sensible à la météo ? Une étude empirique du marché
français, 2009, p. 4  3 out of 5 treasurers established that climate’s financial consequences were higher
77
http://www.retailenergy.com/articles/weather.htm

~ 35 ~
interest rates still currently used by companies to calculate the budget78
(Bertrand, 2011).
This is confirmed by Cogen who justifies that “weather hedging is reliable, safe and fair.
Weather data is accurate and more objectively collected than any other major commodity or
financial index. At least 50 years of official weather data is on record for most major cities in
North America and readily available from government sources”.
At last, business directors and treasurers should know that “retailers quoted adverse
weather (94%) and lower consumer traffic (71%) as the most often mentioned reasons for
their poor performance”79
. According to the Storm Exchange Inc.80
, “of the companies that
have used weather hedging tools, 86 percent say they were useful, and 72 percent say they
will continue to use them over the next three years”. An ESSCA81
and AFTE82
study showed
that 56% of the companies having studied the effects of climate variations admitted that the
financial impact of the climate is superior to all market risks (changes in currency, interest
rates or in price of raw materials)83
(Bertrand, 2008). This kind of study could easily be asked
by shareholders who, more and more, will want to know the vulnerability of their company
face to climate hazards and understand “the difference between real growth and weather
conditional performance […] to prepare for adverse weather fluctuations in the future”84
.
Bertrand (2011) reminds decision-takers that if it is hard to explain the past performance, it
is going to be even harder to project the company into the future.
b. Weather risk management: who to ask? Associations, sites, blogs, & cases
Every cloud has a silver lining - this expression, translated word to word from the French
expression gives a clearer sense: after the rain comes the good weather. This is such an
important concern in our daily lives that we sometimes impatiently wait for this information,
even with stress sometimes: will it be umbrella or sun glasses? This existential topic is part of
our daily reality, so much that weather applications are often already pre-installed on our
smartphones or tablets85
. On a business scale, there are other ways to get information about
78
semester 2011, p. 9
79
JL. Bertrand, X. Brusset, M. Fortin, Assessing and hedging the cost of unseasonal weather: case of the apparel
sector, 2015, preprint submitted to European Journal of Operational Research
80
R. Myers, What every CFO needs to know now about weather risk management, 2008, p. 6
81
Ecole Supérieure des Sciences Commerciales d’Angers, where JL. Bertrand is a Finance professor
82
Association Française des Trésoriers d’Entreprise – French Association of Business Treasurers
83
JL. Bertrand, Les entreprises européennes face à la gestion des risques climatiques, 2008, p. 9
84
http://www.businessinsurance.org/how-much-does-weather-affect-your-business/
85

~ 36 ~
how to behave as a company depending on the weather: there are businesses specialized in
advising weather-sensitive companies what to do and how. We will shorty bring comment
on these experts. But as Bertrand (2011) explicates86
, in order for the information given by
the consultants to have an economic value, the company’s business model necessarily needs
to enable the firm to adjust either production, storage or sales on a quite short time scale.
Marketing tools
Before getting in touch with one of these weather experts, as we can call them, a company
can on its own purchase marketing tools in order to appreciate the relationship between
textile sales and temperature for example, which would allow concerned companies to
better identify demand and optimize the whole logistic process and thus create more value87
(Bertrand, 2009). According to Skymosity (2014), “marketing teams can easily understand
how weather has influenced purchase behavior on their site or in their bricks and mortar
store” by “using breakthrough technology”. “For example, a retailer can use Skymosity’s
Weather Analytics Suite to see AOV (Average Order Value) and Revenue fluctuation when
it’s colder than 20 degrees, […] or their top 10 selling products when it is raining. Using this
information, marketers can then take advantage of savvy technology to create a better user
experience. On their website, a brand can serve different content based on the visitor’s
current weather condition; they can trigger advanced emails based on current or forecasted
weather; and more”88
.
Weather and shopping, 2 major national occupations interconnected far more than we imagine
In the US, Sears, Subway (subs), and Campbell’s (soup), among others, have all been known
to do extensive research and weather predictions in order to optimize their product
offerings to meet the fluctuating demand of their consumers89
. As a very interesting example,
Tesco Company, the British multinational retailer90
, explains in a BBC News video91
that they
have got a very sophisticated system which has 5 years-worth of weather data, and plotted
on top of that sales information of every store in the country allowing them to accurately
86
semester 2011
87
http://www.cairn.info/zen.php?ID_ARTICLE=MAV_028_0056
88
Skymosity, Weather is the New Black – Part One : Weather Changes Everything, 2014, p. 2
89
http://www.businessinsurance.org/how-much-does-weather-affect-your-business/
90
UK’s largest supermarket chain
91
« How British weather affects retail figures »: www.bbc.com/news/business-14525366

~ 37 ~
predict detailed sales of different products, depending on the day of the week and the
temperature outside. Tesco adds that thanks to their weather software there are fewer
empty shelves and that it saves them 6 million pounds a year! Nevertheless, they make it
clear that only high street giant can afford systems on this scale. According to Richard Dodd,
British retail consortium speaking in the video, “after the general state of the economy and
how well-off people feel, weather is the second most important influence on how people
spend”. They observed that there are different patterns on different days of the week, and
that weather affected sales for around 4.5% of the overall sales which could make the
difference between making a profit or a loss. For this kind of company, this sort of
information is like gold dust!
Public weather cover
We stated earlier that hedging weather risk is a “strategic decision” rarely made public, in
order for example not to alert competitors or shareholders. But there are some companies
who have made their weather cover public92
: Soccram in Grenoble, France (winter
temperatures) and Bombardier in Canada (snowfall) in 1999, Corney & Barrow Wine Bars UK
(temperatures) and Rock Garden Restaurant (temperatures) in 2001, Gut Apledor Golf Club
(precipitations) in 2002, Club Med in 2003 (snowfall), or the World Food Program in Ethiopia
(drought) in 2006. Thanks to Bertrand (2009), we also know that three French companies
(Bonduelle Traiteur, Saunier Duval et Mérial) recently explained how they integrate weather
data in the management of their activity. These are exceptions because it is rare that the
studies of weather-sensitivity are published. Indeed, Bertrand confirms that there is a
strategic stake behind it: knowing the weather effects before competitors become aware of
it means adjusting production or price first, or even starting a promotional advertising
campaign. And he adds that companies don’t want to draw attention about an unknown risk
to investors, bankers or commercial partners.
Weather Risk Management Association (WRMA)
“Everybody talks about the weather but nobody does anything about it” said Charles Dudley
Warner and Mark Twain at the end of the 19th
century93
. But it’s only in the beginning of the
21st
century that specialized societies in weather risk analysis and covers will emerge.
92
93
http://meteosensibilite.com/

~ 38 ~
We will now take a quick glance at the actors of weather risk management, starting
with the Weather Risk Management Association (WRMA94
) which is a “trade association
representing the global market of weather risk management professionals. WRMA is
dedicated to promoting the weather risk management industry to providers and end users.
WRMA members represent all sides of the weather market including insurance and
reinsurance providers, brokers, end users, data providers and exchanges. Since its inception
in 1999, WRMA has made major contributions to the development of the weather risk
market in the areas of: standardization, market expansion, access enhancement. On their
website wrma.org, one can find all the different members of the WRMA, but we wanted to
give some examples to give an idea as some are well-known names: Allianz, Celsius Pro, CME
group, E.ON, EDF, EEX (European Energy Exchange), MeteoProtect, ReedSmith, University at
Albany (state of New York), and many more but again, for the sake of this thesis, we cannot
describe all the companies’ sectors, or their countries, or cite more of them95
.
“Business Weather Intelligence” solution providers
As stated above, we won’t be able to cite all the actors involved in weather risk management,
or offering “Business Climatic Intelligence” solutions. But we will expose some facts about
those we consider being the most important ones on the French market.
But if interested, one can also check out the websites of these other weather risk
management professionals: Skymosity (“Enterprise Weather Targeting Solutions”96
- we
used the article “Weather is the New Black” written by this site for this paper), Planalytics97
(also a “global leader in Business Weather Intelligence” 98
), AER (Atmospheric and
Environmental Research helps “governments and industries understand weather and climate
risk, predict impact and take action”99
) and WeatherTrends 360 (“features robust analytics
and business planning tools to help you make critical decisions”100
), for example, and
amongst lots of other actors involved in the weather market.
94
http://wrma.org/about-wrma/
95
The exhaustive list can be found here: http://wrma.org/companies/
96
http://www.skymosity.com/
97
They also present their solutions and address the weather issue during presentations: see in annexes
98
http://www.planalytics.com/who-we-are/
99
http://www.aer.com/
100
http://www.weathertrends360.com/ - a “web solution to help retailers and suppliers capitalize on the
weather and its influence on sales and marketing plan up to a year ahead”

~ 39 ~
Climpact & Metnext (see interview with Pascal Bouquet)
The two French experts on climate Business Intelligence solutions used to be rivals on the
weather risk management market, but have merged together in 2012 to become the
European leader on markets for consumer goods, energy and insurance101
. Climpact-
Metnext help companies analyze, quantify and anticipate the impact of weather variations
and volatility on their activities in order to become more competitive. Climpact offers mainly
annual subscription and is very present in the consumer goods sector (some of its clients are
Nestlé, Coca-Cola, Unilever, Bonduelle, etc.) but also assists companies from a number of
different sectors: retail, tourism, vehicle industry, pharmacies… (elaia.com) Metnext is
mostly present on the energy sector (EDF, Aerowatt, GRTGaz…) but also intervenes in the
FMCG102
and retail sectors. It used to be actor in the tourism and leisure industry (Marmara,
Pierre & Vacances, Easy Voyage, etc.), as well as in finance and insurances (Sofinco, AON,
Gras Savoye). According to Fustier103
, in 2011 Metnext used to sell its own software,
essentially to the energy and hospitality sectors. An interesting example of Metnext’s
services is the following: BMW offered his clients to lower their monthly payment if they
bought a convertible car and that it rained during the summer. The car constructor used
Metnext’s assistance to evaluate the risks of this promotional operation104
. Here Metnext
had to provide precipitation probability for the whole summer. According to M. Cauvin105
,
Metnext gathers the clients’ data on the 3 to 5 last years on specific products in order to
have a vision of sales’ evolution that are not “polluted” by weather’s effect. Given the
temperature of the following week, Climpact-Metnext is able to tell what it will imply in
terms of tons of ice cream for a particular region106
for example! They make equivalences
between temperatures and the corresponding quantities of specific products.
Meteo Protect (see interview with Maxime Fortin107)
This society (co-founded by J-L Bertrand, the famous French scientific author about weather
risk management) owns the biggest European team of weather risk specialists exclusively
101
http://www.elaia.com/climpact-et-metnext-fusionnent-naissance-du-leader-europeen-de-la-business-
intelligence-climatique/
102
FMCG: Fast Moving Consumer Goods  consumer goods sector
103
104
http://lexpansion.lexpress.fr/actualite-economique/comment-la-meteo-influence-nos-habitudes-de-
consommation_1382792.html
105
http://www.lenouveleconomiste.fr/dossier-art-de-vivre/la-business-intelligence-climatique-22489/
106
107
See annex

~ 40 ~
dedicated to it108
: they help companies manage their weather-vulnerability and develop
solutions of financial hedging for when the weather is disadvantageous. They incite
companies to diversify their product range or their supply/sales regions in order to increase
their resilience to weather, by working with consulting firms in weather risk management to
select the diversification strategy that will reduce the impact of the climate’s natural
variability109
. But Meteo Protect also insists that the power of geographic diversification is
relative: indeed, countless people wrongly believe that being “global”, they are exposed to
weather risks only very little – but this is a myth according to meteoprotect.com. The proof:
Coca-Cola’s results in 2013’s 2nd
semester showing a decrease in volumes sold in Europe
because of an abnormally cold spring, which is exactly what happened also in the US and in
China for the same reasons. Meteo Protect (and Képler Cheuvreux) showed by analyzing the
weather abnormalities of the last 30 years that there is a compensatory weather effect
between Europe and the US only 16% of the cases, meaning 1 year out of 6. In the end,
Meteo Protect explains that when it is not possible of diversifying the range of products
anymore or the geographic location of the activity, because of the limits we just evoked, the
only efficient solution to decrease the weather-vulnerability is to hedge using financial tools.
Weather forecasts: a limiting factor?
Climpact and Metnext use weather forecasts with different reliability, depending on the time
horizon. Several centers in the world are capable of estimating weather activity for the next
4 weeks, like Météo France. And these data are then used by Climpact and Metnext, which
buy weather forecasts from various weather centers in Europe and the US in order to
produce the best possible predictions (Fustier, 2011). They use these estimates on a 4-week
horizon to give daily forecasts, but beyond 2 weeks, they inform their clients that there is a
risk linked with the weather calculations. In France, their reliability level is in fact good up to
2 weeks forecasted. Their data is 80%110
reliable up to 2 weeks, and 60% up to 4 weeks111
.
The other issue linked here is that it is unclear how many industries have the means to react
quickly enough to adjust their production with short term forecasts like 1-week or 2-weeks
108
http://www.meteoprotect.com/fr/
109
Translated from French into English by the author of this thesis (source: the link to the website right above)
110
111
Météo France has different numbers: 75%-80% for the first week, 60% for the second week and less than 50%
for 4 weeks. After that, it’s more risk management by guessing than a real forecast 

~ 41 ~
horizon. According to some, it is more useful to correct the past archives and records of sales
linked to the weather conditions, in order to improve the sales expectations for the next
year. The weather predictions are useful for products having short supplying cycles, situated
between a week and a month112
. And apart from production, industries can find ways to
improve the logistic or supply chain processes.
Added-value?
But Metnext admits that the real added value of their solutions is the correction and clean-
up of a company’s archives and records: this is of key interest. Indeed, industries usually lack
reactivity (who can produce 150 000 quantities more in 3 days?!) to use the weather
forecasts optimally. Climpact believes that the conversion of weather risks into a
competitive advantage is possible, and that this weather competitiveness concerns all
business departments: administration and finances, marketing, sales, Supply Chain and
human resources. And to the question How much does it cost? it is hard to answer: both
Metnext and Climpact vaguely announce from a few thousand euros to several hundred
thousands of euros (Fustier, 2011). These contracts are annual, and the aspiration is thus to
amortize the investment in 12 months, the ROI being directly linked to seized weather
opportunities or avoided losses.
Weather is money. In French, the expression Le temps c’est de l’argent could be
translated this way, temps meaning both time and weather. What we mean is that weather
risk management is not an easy mission to undertake and it necessitates quite some
involvement to succeed, but it can be very interesting financially. Indeed for those agile
companies which are “flexible enough to adjust their business within in a few days, the use
of weather forecast could improve sales or margins by a couple of percentage points”113
.
This is part of the dream of any company, and thus also of Decathlon. Now that we are
almost experts on weather risk management, we will try to see to what extend a sports
equipment retailer can manage this risk, and we will focus on the sports company Decathlon.
112
113
http://meteosensibilite.com/la-couverture-meteo

~ 42 ~
II. Field study: Decathlon & answer to the Hypotheses
“A change in the weather is sufficient to recreate the world and ourselves” says
famous French writer Marcel Proust. Numerous are the writers or poets that have written
about the weather, always reminding us that it is an important part of our lives and world’s
economy that we cannot avoid or change – even the Dalai Lama speaks very seriously about
weather variability and global warming. This is a universal issue, and there will certainly be
no other choice in the future for companies than to adapt to these changes creating new
risks for businesses. The question that remains is only When. “While most of the world has
accepted the science behind global warming and begun to appreciate its long-term
consequences, the near-term implications of weather and seasonal variations [on companies]
remain less well-recognized and often unaddressed by many businesses”114
. But the change
has already started: several corporations are indeed integrating the weather risk issue into
their strategies to be less impacted by the different moods of the weather.
The purpose of this thesis is to fill in what we identified as being a gap in the existing
weather risk management literature: in fact, little or nothing has been written about how a
sports equipment retailer could or should manage the weather risk, as the weather market
only slowly starts to integrate businesses outside from the energy and agriculture sectors. In
this second and last part, after having put the last touches to the literature review, we will
finally write about the application of weather risk-management to a concrete case: the
weather-sensitive company Decathlon. So after having learned about a few major theories
on consumer behavior, which is also central to this work as it is essential to any business
(Decathlon therefore definitely too), we will now focus on the company itself, how it works,
why this company, and thanks to the various different interviews we conducted and will
analyze in this part, we will be able to confirm or infirm the hypotheses we identified in the
beginning.
114

~ 43 ~
A. Decathlon
You might wonder Why write about Decathlon? and not about any other company that is
more evidently weather-sensitive. The argument is singular: there has been a lot written
about Decathlon already, as it is an international company on the edge of innovation,
employee-training, and efficiency among other. Various theses have been composed about
the 2020 Vision of Decathlon, the managerial communication practices (“Pisser bleu”115
), the
marketing, its consumer orientation, its pricing policy, its unique logistics process, and more
recently about the efficiency process, etc… But we have found nothing about managing risks,
and as previously said, there has little, if not nothing, been researched about weather risk
management practices for the sports industry. And Decathlon being at the crossing between
several weather sensitive sectors, being textile, the sports industry (leisure) and retail, we
had the conviction that there is something to be explored and investigated about. We will
see in more details what other factors make it a good study case, and we will now start; with
quickly presenting the company and the environment in which we operated a year long.
a. Presentation of the company and its environment
Is it really necessary to present this company? Decathlon with its famous blue catchphrase
“A fond la forme !” is the world’s largest sporting goods retailer, leader on the French and
European market, and currently present in more than 20 countries worldwide. In continuous
expansion, the company is well-known for its low prices but still technical and innovative
products (called the Blue products), innovation being one of the core notions of its business
spirit. Decathlon’s vision is “to make the pleasure and benefits of sport accessible to all” and
its latest motto has changed to become “Innovation lovers for the happiness of all”,
concretely proving that innovation is at the heart of their activity and in every of their
departments. With its 700 stores all over the world, it is important to note the diversity of
sports equipment proposed under the same roof: one of the key commitments of Decathlon
to all sports lovers and practitioners is to offer a wide range of sports products for every type
of athlete, from the beginner to the professional sportsperson, for kids and grown-ups.
Created in the north of France in 1976, the company now employs 60 000 co-workers
(17 000 in France, of which 15 000 in stores), realizing a turnover of 7.4 billion € in 2014116
,
and half of it abroad. Decathlon is also well known for its “Passion Brands”, existing for the
115
http://www.abci.org/documents/Memoire%20Pisser%20bleu.pdf
116
Numbers of 2015 – internal source

MASTER THESIS LARA ARMAS 2015

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (7)

En vedette

En vedette (7)

Similaire à MASTER THESIS LARA ARMAS 2015

Similaire à MASTER THESIS LARA ARMAS 2015 (20)

MASTER THESIS LARA ARMAS 2015