 | Mercadona 2013Release date: July 2nd, 2013 (128 pages) PDF/Powerpoint format. Price: GBP990.00 |
Abstract
While Inditex is dominating the clothing sector, Mercadona is the equivalent in Spain’s grocery retailing, and the two business models and strategies share a surprising number of core elements.
While almost all businesses in Spain have felt the brutal impact of the crisis, the recession, far from undermining Mercadona, has actually strengthened its dominant position further. What’s more, the retailer has stormed through the worst downturn Spain has gone through since 1929.
Mercadona sales have not only grown rapidly and outpaced its direct competitors in Spain, but Mercadona also outperforms most other leading European retailers. We believe that Mercadona’s success story has no parallel in European grocery at the moment.
The retailer has a unique business model and culture which is deeply embedded in every stage of the value chain. From its supply chain operation to research and new product development, its logistics infrastructure or its workforce management, Mercadona’s business model stands out.
Despite avoiding special offers and deals and hardly any advertising the grocer has become one of the most popular brands in Spain. The private label range is synonymous with low and stable pricing and is perceived as high-quality by shoppers. Mercadona’s range of private label health & beauty and cosmetics products have seriously impacted the premium channel and its brands have become the biggest sellers in many grocery categories Spain, outpacing the biggest brands.
However the success is not only down to its unique business model, the retailer has also taken decisive action and bold measures when the crisis hit Spain in 2008, which have resulted in further market share gains.
As the company prepares to expand to other European countries, we believe it is time to provide you with an in-depth analysis into one of the most successful business models in the grocery industry worldwide.
Table of contents
| Executive summary | p13 |
| The macro-economic outlook for Spain | p22 |
| The macro-economic outlook for Spain: GDP Growth – the double dip | p23 |
| The macro-economic outlook for Spain: The outlook, light at the end of the tunnel? | p24 |
| The macro-economic outlook for Spain: Unemployment, catastrophic heights | p25 |
| The macro-economic outlook for Spain: Inflation: 2006-2011 (HICP), % | p26 |
| The macro-economic outlook for Spain: Population outflows | p27 |
| The macro-economic outlook for Spain: Population shrinkage to continue | p28 |
| The Spanish grocery market: in unchartered territory | p30 |
| The Spanish grocery market: Distribution channels | p31 |
| The Spanish grocery market: Retail sales, 2004-2012 growth rates | p32 |
| The Spanish grocery market: Net Sales Market shares 2012 | p33 |
| The Spanish grocery market: Market shares, selling space in sq m | p34 |
| The Spanish grocery market: Consumer expenditure on groceries, regional discrepancies | p35 |
| Recent developments – Timeline of the Crisis and Mercadona | p38 |
| Recent Developments: The years before 2008, the property bubble | p39 |
| Recent Developments: 2008, the crisis hits Spanish grocers | p40 |
| Recent Developments: 2008, raging unemployment changes consumers’ profiles | p41 |
| Recent Developments: 2008, Mercadona responds to the crisis by reducing prices | p42 |
| Recent Developments: 2009 the crucial first step, slashing product ranges | p43 |
| Recent Developments: 2009, reduction of SKUs sparks a revolt from branded manufacturers | p44 |
| Recent Developments: 2009, reducing the number of products on shelves | p46 |
| Recent Developments: 2010, the Euro Cent saving theory | p47 |
| Recent Developments: 2011, Mercadona’s U-turn in fresh categories | p48 |
| Recent Developments: 2012, Fresh counters are back | p49 |
| Recent Developments: 2012, Mercadona’s competitors start to fight back | p50 |
| Recent Developments: 2013, “Becoming more like a shopkeeper” | p51 |
| Financials and Company overview | p53 |
| Mercadona: Financials at a glance, sales, profit, stores, investment, SKU count 2011/12 | p54 |
| Company overview: A Family business, board members | p55 |
| Company overview: Staying private, avoiding financial markets and analyst influence | p56 |
| Retail expansion: the domestic strategy | p58 |
| Retail expansion: Mercadona’s organic expansion | p59 |
| Retail expansion: The Basque country, the final frontier | p60 |
| Stores: the core of the business model | p62 |
| Stores: Location, nearby supermarkets (Supermercados de cercanía) | p63 |
| Stores: Evolution of store size, getting bigger | p65 |
| Stores: Real estate policy, lease break clauses, Spain’s most preferred property anchor | p66 |
| Stores: Opening hours and shopping patterns, no Sunday trading | p67 |
| Stores Layout: “ambient stores” – innovative store design | p68 |
| Stores Layout: “ambient stores” grocery - pictures | p69 |
| Stores Layout: “ambient stores” household care - pictures | p71 |
| Stores Layout: “ambient stores” health & beauty – pictures | p72 |
| Stores Layout: “ambient stores” – pictures | p73 |
| Stores: New formats, integrating into local food halls and markets, mercadillos | p74 |
| Stores: Checkouts at every exit, managing bottlenecks, no SCOs for now | p75 |
| Business model: how to vertically integrate in the right way | p77 |
| Business Model: 2013 “Becoming more like a shopkeeper” | p78 |
| Business Model: Vertical integration, 2k suppliers, “inter-suppliers” | p79 |
| Business Model: Inter-suppliers, agreement terms, exclusivity, cash flow | p80 |
| Business Model: Inter-suppliers, aiming for permanence, long hook-up periods | p81 |
| Business Model: Inter-suppliers, types and sizes of providers | p82 |
| Business Model: Inter-suppliers, logistics matters, driving up load utilisation rates | p84 |
| Business Model: Inter-suppliers, Mercadona’s investment | p85 |
| Business Model: Inter-suppliers, Indirect equity investment through VC | p86 |
| Business Model: Inter-suppliers, direct involvement, the Caladero case | p87 |
| Business Model: Inter-suppliers, the exercise of power by Mercadona | p88 |
| Private Label: best in class products and processes | p89 |
| Private label: Mercadona’s USP, product range | p90 |
| Private label: R&D from inter-suppliers, innovations in supply chain | p91 |
| Private label: Co-innovation, crowd sourcing and the “Apron Strategy” | p92 |
| Private label: Cross-pollination & innovation, crossing category boundaries | p93 |
| Private label: a champion of gluten-free products | p94 |
| Private label: cosmetics, the jewel in the crown | p95 |
| Private label: cosmetics, breakthrough innovations | p96 |
| Private label: Mercadona’s “local-total” vision | p97 |
| Merchandising and pricing strategy | p98 |
| Business Model: Marketing, Always Low Prices and the absence of promotions | p99 |
| Business Model: Marketing, Prescribing products & word-of-mouth | p100 |
| Business Model: Marketing, Zero spend on traditional advertising | p101 |
| Business Model: Marketing, social media, the beauty bloggers | p102 |
| Online and supply chain efficiencies | p103 |
| Business Model: E-commerce and new technologies, lagging behind for once | p104 |
| Business Model: Logistics, Just-in-time, interleaving and reducing the number of trips | p105 |
| Business Model: Environmental sustainability, no organic category, energy efficiency | p106 |
| Workforce: the importance of staff engagement | p108 |
| Workforce: Number of employees and productivity, Spain’s biggest jobs creator | p109 |
| Workforce: Work culture and KPIs for employees | p110 |
| Workforce: Always hired permanently and multidisciplinary-trained employees | p111 |
| Workforce: Stability and work life balance reconciliation | p112 |
| Outlook: Going abroad | p114 |
| Outlook: Announced foreign expansion but without fixed deadline | p115 |
| Outlook: Mercadona aims to “make itself from there” and become local, the obstacles | p116 |
| Outlook: Difficulties of exporting Mercadona’s business model, supply chain | p117 |
| Outlook: Potential strategies for its own brands | p118 |
| Outlook: Potential expansion strategies - opting for a JV? | p119 |
| Outlook: Avoiding M&A at home, an option abroad? | p120 |
| Outlook: Target markets: Italy, Portugal, France and Belgium | p121 |
| Outlook: Italy, the first probable market, the Italian team | p122 |
| Outlook: Italy, similarities to the domestic market, difficulties to tackle | p123 |
| Outlook: Italy, a fragmented market, difficulties in setting up new businesses in Italy | p124 |
| Outlook: Italy, focus on the North-East, take-over candidates | p125 |
| Outlook: Portugal, suffering like Spain, the supply chain fit | p126 |
| Outlook: France & Belgium, tough markets and logistics nightmare | p127 |
| Sources | p128 |
| Chart 1: GDP growth y-o-y Spain versus Eurozone 2002-14 Chart 2: Unemployment rate y-o-y Spain versus Eurozone 2002-14 Chart 3: Inflation HICP rate of change y-o-y Spain versus Eurozone Chart 4: Population by age 2010 and forecast Chart 5: Grocery formats market shares 2012 Chart 6: Mercadona versus total market growth rates 2004-12 Chart 7: Grocery market shares by Top ten retailer Spain 2012 Chart 8: Hypermarkets, supermarkets, discounters selling space by Top ten retailer 2012 | p34 |
| Chart 9: Consumer expenditure by region 2012 | p35 |
| Chart 10: Mercadona sales versus Spain’s GDP 2004-12 | p39 |
| Chart 11: Financials at a glance, sales, profit, stores, investment, SKU count 2011/12 | p54 |
| Chart 12: Mercadona Board | p55 |
| Chart 13: Selling space per outlet and new stores 1990-2012 | p65 |
| Chart 14: Number of gluten free SKUs | p94 |
| Chart 15: Mercadona’s warehouse locations | p105 |
| Chart 16: Mercadona employees and productivity 2006-12 | p109 |
| Chart 17: Mercadona expansion strategy decision matrix | p119 |
