Mercadona 2013

Mercadona 2013

Release date: July 2nd, 2013 (128 pages)
PDF/Powerpoint format. Price: GBP990.00


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