Lottery Chief in France Takes No Chances in Her Bet on Expansion

(Bloomberg) -- Stephane Pallez is no gambler.

The 57-year-old woman at the helm of FDJ, France's state-controlled national lottery, is meticulously crafting a strategy based on international partnerships and high-tech investments as global competition in online betting intensifies. Her challenge is to keep growing the manager of the country's Loto and Euromillions, which has gone from a small World War I veterans' scheme to one of the world's largest betting and gambling groups.

Pallez travels to Singapore Wednesday to attend the World Lottery Summit 2016, and present her latest initiative, FDJ Gaming Solutions, a business selling lottery technologies, services and games to other gambling groups. It adds to FDJ's offer of equipment, maintenance and advising services already in place.

"Now is the right time as FDJ is growing to prepare for the future," Pallez, one of very few women at the top of the gambling industry's biggest companies, said in an interview at her Boulogne-Billancourt office, in the western suburbs of Paris.

FDJ, which once flirted with the idea of going public, had revenue in 2015 of 13.65 billion euros ($15.15 billion), ranking it the fourth such group in the world behind China Sports Lottery, China Welfare Lottery and Italy's Lottomatica. Previously known as La Francaise des Jeux, the French group whose lottery tickets and scratch cards can be bought at tobacco outlets across the country, fills the state's coffers with more than 3 billion euros each year.

As in most countries, lottery in France is a state-monopoly and gambling is heavily regulated. FDJ was created in 1933, when two WWI veterans' associations sought to move from a rustic scheme to a proper lotto system to generate revenue for badly disfigured former servicemen and more generally retired soldiers in need of additional income. The French state took over the lottery after WWII and to this day, the vets' associations remain minority shareholders with a stake of about 20 percent.

No Complacency

Pallez, a Paris-born executive who attended France's elite Ecole Nationale d'Administration and represented France at the World Bank, was brought into the lottery group in 2014 to transform it from the stodgy seller of lottery tickets to an ageing population into an online gaming outfit that can cater to a younger audience living with a creeping ‘Uberization' of entire industries.

"All lotteries are faced with the same challenge, which is how to remain attractive to the Millennial population," said the mother of two young adults who worked on the digitization efforts of phone company Orange in the 2000s.

Pallez plans to beef up her domestic offer of lottos, scratch cards and online games with innovations to lure younger players who prefer casual games like "Candy Crush," developed by King. The game, available on smartphones, lets players crush candies and win points. Even though such games are free and have no cash reward at the end, companies offering them make money by selling tools to get players to another level.

FDJ also plans to invest 500 million euros over the next three years, of which 250 million euros will be to boost IT systems and more than 20 million euros for partners who can help develop new games and services.

Mandarin Advantage

In Singapore, Pallez wants to raise interest for her B-to-B offerings.

“We think there is room for a player like us, who clearly choose to invest in innovation," she said. FDJ supplied Portugal its sports-betting platform in 2015, she said.

This time, she's eyeing at Asia, and more specifically China, where she has developed a ticket partnership with China Welfare Lottery, the country's No. 2 player. The fact that she learned mandarin in school is helpful, she said, although pointing out that it's rusty.

"Everything I've done during my career is serving me well," she said.

Inaction Risk

For all those forays, Pallez is cautious about FDJ's international ambitions.

“I haven't set a number target at this stage for our international expansion,” she said. “This is all additional profitability for our investments in France.”

While she's pushing her lottery ideas, Pallez steers clear of placing any bets herself. Even though French law doesn't prohibit it, she won't be caught betting on a soccer team or even playing a game of cards at home. There can't be any perception of a conflict of interest, she said. But that doesn't mean she's risk averse in her business.

"The main risk is not to take risks; inaction is a risk," she said. "A monopoly which doesn't innovate is a monopoly running a serious risk of being ‘Uberized.'"

To contact the reporter on this story: Geraldine Amiel in Paris at gamiel@bloomberg.net. To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net, Alessandra Migliaccio