SPAIN COUNTRY RETAIL SCENE REPORT. December 2012 KANTAR RETAIL

Transcription

1 SPAIN COUNTRY RETAIL SCENE REPORT December 2012 KANTAR RETAIL, London WC1A 2PX, / Tel. +44 (0) / INFORMATION / INSIGHT / STRATEGY / EXECUTION Kantar Retail 2012

2 Index I. Key Themes... 2 II. Socio Economic Background... 3 III. Key Players in the Grocery Retail Sector IV. Grocery Retail Channels V. Conclusion KANTAR RETAIL 2012 Spain Retail Scene 1

3 I. Key Themes National players are capturing growth and increasing concentration in Spain Despite the economic turmoil in Spain, leading Spanish grocery retailers are expected to see their growth accelerate in the coming years, led by retailers such as Mercadona and Dia, both growing at over 5% per year. Mercadona is by far the largest Spanish grocery retailer in terms of sales and has successfully adapted its strategy to the economic crisis that Spain is facing. Its impressive business model has enabled it to retain shopper loyalty and support robust physical expansion and the retailer is looking to further strengthen its domination of the supermarket channel and the grocery market overall. Due to the strong growth of two of the top five grocery retailers in Spain the dominance of a few major players will increase. In 2012 the five top retailers generated over 65% of the total grocery sales in the market. By 2017 this number is likely to reach 70% as several leading players adapt to meet changes in shopper behaviour. Private label is growing As a result of households economic concerns and retailers eagerness to enhance private label penetration, Spain is now the second-largest country in terms of private label penetration after the United Kingdom. According to Symphony IRI Group in % of grocery sales in Spain were generated by private label, a number that increased by 1.3% compared to Franchising remains the path to growth for many retailers Franchising has been prioritized by retailers in the past year as an efficient and fast way to achieve growth, especially in light of the challenging economic environment. The model offers the advantage of minimizing risk and cost for retailers, but there can also be a downside in terms of in-store execution and compliance. Retailers such as Auchan (Simply Market), Eroski (Caprabo & Eroski City), Carrefour (Carrefour Express) and Dia are rapidly expanding through franchising KANTAR RETAIL 2012 Spain Retail Scene 2

4 II. Socio Economic Background Spanish Population As of 31 st December 2011, Spain had a population of 47.2 million people. In % of the Spanish population were women and 49.3% men, with 41.1% of the population between 16 and 44 years old, and 43.1% over 45 years old. In Spain 12.1% of the population is comprised of foreign citizens. The three regions with the highest proportions of foreign nationals are Baleares (21.6%), Valencia (17.2%), and Murcia (16.1%), all of which are coastal regions. The number of households in Spain, as of the 2007 census, is 16.3 million. This translates to 2.74 people per household, more than the EU 27 average of 2.5 people per household but down 0.29 points from The most common household is now couples without children which represents 21.5%; households with at least one child represent 42.2%. Spain s population density is 91.8 inhabitants per square kilometre (sq km). By comparison, the average population density for the EU27 is inhabitants per sq km. Figure 1: Population Density in Spain Source: Britanica KANTAR RETAIL 2012 Spain Retail Scene 3

5 The most populated areas in Spain are the coastal regions and Madrid (Figure 1). The inland regions surrounding Madrid have a very low population density. Thus the most populated regions in Spain are Andalusia, Catalonia, Madrid and Valencia, which contain over 58% of the Spanish population (Figure 2). Figure 2: Spanish population by region Rank Region Population 1 Andalucía 8,424,102 2 Cataluña 7,539,618 3 Madrid (Comunidad de) 6,489,680 4 Comunitat Valenciana 5,117,190 5 Galicia 2,795,422 6 Castilla y León 2,558,463 7 País Vasco 2,184,606 8 Canarias 2,126,769 9 Castilla - La Mancha 2,115, Murcia (Región de) 1,470, Aragón 1,346, Balears (Illes) 1,113, Extremadura 1,109, Asturias (Principado de) 1,081, Navarra 642, Cantabria 593, Rioja (La) 322, Ceuta 82, Melilla 78,476 Spain 47,190,493 Source: National Institute of Statistics (INE). Spain s population is still growing every year partly due to a positive balance between birth rates and death rates. In 2011, birth rates decreased by 3.5% to 468,430 children born in Spain that year, making a natural growth of 81,083 persons. The average childbearing age is also increasing, with an average of 31.4 years in 2011, while the average number of children per mother has decreased from 1.39 in 2009 to 1.35 in KANTAR RETAIL 2012 Spain Retail Scene 4

6 Economic Indicators i) GDP and Government debt Spain s real GDP growth shows that the country enjoyed a higher growth rate than the rest of Europe prior to the 2009 economic crisis (Figure 3). However, since then, Spain has seen a consistently lower real GDP growth rate than the European average. Figure 3: Annual Real GDP Growth Source: Data Eurostat; Chart Kantar Retail. Spain has been seriously affected by the economic crisis, with a decrease from an already low GDP growth rate of 0.9% in 2008 to a severe contraction of 3.7% in Since then, Spain has been experiencing poor growth in relative terms. Real GDP growth remained negative until 2011 and is expected by Eurostat to remain negative (- 1.4%) until the end of The crisis also had a strong impact on Spain s debt levels (Figure 4) KANTAR RETAIL 2012 Spain Retail Scene 5

7 Figure 4: Government Deficit/Surplus as % of GDP Source: Data Eurostat; Chart Kantar Retail. Having experienced relatively benign debt levels, actually running a fiscal surplus until 2007, the government s finances plunged into deficit in Since then, Spanish debt levels have been beyond the Maastricht criteria of -3% maximum, and even dived further to -11.2% in 2009 and -9.4% in The bulk of GDP in Spain was generated by final household consumption in 2011 (Figure 5). Spanish imports have consistently been higher than the country s exports, representing over 1% more of the GDP. Although remaining quite stable over the past 10 years, the composition of GDP has seen small noticeable changes since The share of final consumption in GDP grew from 45.3% in 2007 to 51.3% in 2009 as a result of the crisis, whilst the share from gross capital formation shrunk (from 18.5% in 2007 to 15.8% in 2009) KANTAR RETAIL 2012 Spain Retail Scene 6

8 Figure 5: GDP Components ( ) Source: Data INE; Chart Kantar Retail. ii) Unemployment Unemployment in Spain is far higher than the European average and has been accelerating over the ten months from January In January 2012, the unemployment rate was 23.5%, 13.4 points higher than the EU (27 countries) average of 10.1%. Towards the end of the year, in October 2012, that rate reached 26.2%, being 15.5 points higher than the EU average, illustrating the tough economic environment that the Spanish people are facing KANTAR RETAIL 2012 Spain Retail Scene 7

9 Figure 6: Unemployment by month (January October 2012) Source: Data Eurostat; Chart Kantar Retail. Non-Spanish citizens are experiencing a more severe unemployment rate than Spanish citizens, by 11.5 points in Q3 2012, with the foreign unemployed segment dominated by Romanians and Moroccans, representing 30% of this group. iii) Consumer confidence and household expenditures The economic sentiment indicator, a mix of five confidence indicators (industrial, services, consumer, construction, and retail trade), has decreased sharply over the past few years in Spain, from 91.7 in November 2011 to 85.9 in June 2012 (Figure 8) KANTAR RETAIL 2012 Spain Retail Scene 8

10 Figure 8: Economic Sentiment Indicator Source: Data Eurostat; Chart Kantar Retail. Spaniards appeared to be less confident than the rest of the European Union in terms of economic prospects. Up until September 2012 the Spanish economic sentiment indicator was below the EU average. However, since September, and most likely linked to new Bank reforms and the bail-out cash handed to Spain by the Euro zone, confidence is rising. iv) Prices The Harmonised Indices of Consumer Prices (HICP) computed by Eurostat shows Spanish price levels slightly higher than the EU average. Other than a short period from January to March 2011 when prices decreased, prices have generally been growing. The index increased from in December 2011 to in October 2012, two points higher than the EU 27 average (Figure 9) KANTAR RETAIL 2012 Spain Retail Scene 9

11 Figure 9: Harmonised Indices of Consumer Prices Source: Data Eurostat; Chart Kantar Retail. For the period from January to September 2012, prices rose by about 2.1% overall, pushed by the cost of medicine, transport and accommodation. Food and non-alcoholic beverages prices rose by 1.7%. Alcoholic drinks and tobacco prices rose by 5.3%. Spanish household incomes have shrunk since 2008, strongly impacting consumer behaviour. In 2008, the average household income was EUR 26,500; in 2011 it shrunk to EUR 24,609, a decrease of EUR 1,891 in three years. Price rises, along with the decline in household income, is affecting consumption behaviour and Spanish households are now spending relatively more on medicine, food, and transport KANTAR RETAIL 2012 Spain Retail Scene 10

12 III. Key Players in the Grocery Retail Sector The Spanish grocery retail market represented 31.7% of total formal retail sales in 2011, whilst the ten top grocery retailers accounted for 26.2% of total retail sales. Figure 10: TOP 10 Spanish Grocery Retailers Rank Retailer Sales (EUR, million) Sales CAGR e 2017e Ee 2012e-17e Mercadona 12,957 17,759 23, % 5.7% Carrefour 12,184 8,147 8, % -0.4% Eroski 6,801 6,453 6, % 0.5% Auchan 4,339 4,006 4, % 1.9% Dia - 3,939 5, % El Corte Ingles 4,243 2,877 3, % 2.0% Schwarz Group 2,057 2,529 3, % 3.8% Consum Cooperativa 1,201 1,857 2, % 5.3% CEPSA 1,292 1,414 1, % 2.9% AhorraMas 1,198 1,387 1, % 1.8% Top 10 Total 46,174 50,257 59, % 3.3% Source: Kantar Retail Database. The Spanish grocery landscape is becoming more and more concentrated, with the top ten grocery retailers accounting for 83.1% of total grocery sales in 2012, compared to 76.8% in The growth of these largest players is driven by the top five grocery retailers, most notably Mercadona and Dia. The share of the top five grocery retailers is also growing from 60.4% of grocery sales in 2007 to 67% in The landscape is dominated by a mix of international and national retailers. The majority of the top ten grocery retailers are Spanish, however three large retailers are international (Carrefour, Auchan and Lidl (Schwarz Group). Primarily linked to Dia s divestment by Carrefour and the growth of Mercadona, international retailers market share is decreasing. Representing about 31% of the Spanish grocery market in 2007, Carrefour, Auchan and Lidl only accounted for 24% of Spanish grocery sales in As the economic environment will not markedly improve in the short term, grocery retailers will have to continue to cope in a market where economic pressures are impacting shopping behaviour. The structure of the Spanish market is likely to continue 2012 KANTAR RETAIL 2012 Spain Retail Scene 11

13 shifting in 2013 onwards, with Mercadona looking to grab more share, while Carrefour looks set to see a continued erosion in market share. Mercadona Mercadona is the largest retailer in Spain in terms of sales. As of 2011, it operated a network of 1,356 stores, generating revenue of EUR16.5 billion, an increase of 8% from This growth rate is expected to continue in The retailer operates primarily through supermarkets, solely operating under the Mercadona banner, but also operates an online grocery retail business. This complements its highly differentiated and distinctive discount-style supermarket chain. In response to the crisis, Mercadona took some important strategic decisions in 2008 and Firstly, the retailer lowered prices and cut costs and, secondly, it reduced its assortment by 1,000 products (400 national brand, 400 private label, and 200 perishable products) down to 8,000 SKUs. Both decisions were designed to adapt the assortment to the tough economic environment that was being faced by shoppers. Mercadona aims to provide quick, easy and cheap shopping trips to its shoppers which it calls the bosses. Its Every Day Low Price strategy is carried through its narrow assortment, its high share of private labels, and permanently low prices. The retailer does not offer many promotions, but rather communicates around new and recommended items in its assortment. The strategy of the supermarket chain is mainly one of physical expansion and of constant reinvestment in its stores, supply chain and procurement. Over the past few years and despite a slight deceleration, the retailer has opened approximately 90 stores a year but down to 46 in It invested EUR 540 million in 2011, primarily in the construction of 60 stores and the refurbishment of 39 stores, but also in the development of two logistics facilities. Mercadona s private label offer is very strong. In terms of quality its private labels are positioned as equivalent or superior to national brands. Instead of having a single brand across different categories, the retailer undertook a tiered approach to private label development. Its main food and drink brand is Hacendado, and its well-known beauty line is Deliplus. Although Mercadona is not looking to launch a premium line or expand its assortment, it is constantly aiming to improve its products KANTAR RETAIL 2012 Spain Retail Scene 12

14 Figure 11: Mercadona Sales by Channel e Channel Sales (EUR, million) Sales CAGR e 2017e Ee 2012e-17e Online Grocery % 19.1% Supermarket 12,876 17,598 22, % 5.5% Total 12,957 17,759 23, % 5.7% Source: Kantar Retail Database. Carrefour Carrefour is the second largest retailer in Spain in terms of sales. In 2011, it operated a network of 343 stores, generating revenue of EUR 8.37 billion. This was a decrease of 2% from Carrefour lost its place as a leader in the Spanish market in 2006 The retailer operates primarily hypermarkets and supermarkets in Spain but is rapidly developing its convenience store network and online operations. As is the case in France, hypermarkets are the retailer s focus and largest revenue generator, attributable for over 80% of Carrefour s sales in 2012, a number that increased due to the divestment of Dia. In September 2010 the new banner Carrefour Planet was launched in major Europeans markets in order to revitalize the division. It aimed at generating higher sales and offering entertaining and convenient shopping trips. However, the new concept has not manage to meet its targets and Carrefour s new CEO, Georges Plassat, is looking to go back to basics. By the end of 2011, there were 39 Carrefour Planet stores in Spain, this number is expected to slowly go back to zero as stores are rebannered to Carrefour. Carrefour has increased its strategic focus on proximity and the retailer is now expanding its supermarket (Carrefour Market) and convenience (Carrefour Express) banners in Spain. Carrefour Market is characterized by a selling area ranging from 700 to 2,000 square metres, and an assortment of over 7,000 SKUs of which 95% are food and around 25% are private labels. Carrefour Express is characterized by a selling area ranging from 100 to 700 square metres and an assortment of 4,000 SKUs, 30% of which are private labels. The number of Express stores doubled between 2010 and 2011 and is continuously expanding through franchises (which represented over 80% of the network in 2011) KANTAR RETAIL 2012 Spain Retail Scene 13

15 Online retailing is becoming more important for the retailer: the reach of its online grocery service now covers 90% of Spanish households. Despite poor performances in the country, which are not expected to improve quickly over the next few years, as Spain remains a Carrefour s second market in terms of sales, the retailer will continue to invest in the country. Its new CEO s strategy is to focus on those key markets where Carrefour still has a leading market share. Figure 12: Carrefour Sales by Channel e Channel Sales (EUR, million) Sales CAGR e 2017e Ee 2012e-17e Convenience % 14.2% Discounter 3, Hypermarket 8,309 7,251 6, % -2.1% Non Store Retail % 28.3% Supermarket , % 7.0% Total 12,184 8,147 8, % -0.4% Source: Kantar Retail Database. Eroski Eroski is the third largest retailer in Spain in terms of sales. As of 2011, it operated a network of 2,207 stores, generating revenue of EUR 6.64 billion, a decrease of 3.2% from Eroski s sales have been decreasing since 2009, falling by 6% in 2009 and 3% in In the first quarter of 2012 the retailer was still losing sales, but by slightly less than in the prior year, 3.8% compare to 5% in H Eroski operates supermarkets, hypermarkets, cash and carry, online grocery and chains of sporting goods and perfumeries. The majority of its sales come from its supermarkets, which was boosted by the acquisition of Caprabo supermarkets in 2007, integrated into the Eroski store network as of After selling stores in order to improve its debt situation, the retailer is investing in the development of its supermarket business through franchising. Eroski invested EUR 15 million to open 60 franchised supermarkets in Hypermarkets, Eroski s second-largest division in terms of stores and sales, have been negatively impacted by the economic crisis. In 2011 a new concept was launched, with an enhanced fresh assortment and improved provision of service counters. The refurbishment of a hypermarket, adopting the new concept, represents an investment of EUR 2 million per store. This investment would be extremely heavy if rolled-out across 2012 KANTAR RETAIL 2012 Spain Retail Scene 14

16 the network as the retailer s financial situation is not strong, with the business forced into debt restructuring in Eroski also operates online and is increasing its focus on multi-channel retailing. After expanding its offer by introducing appliances and technology items, the retailer is now looking to engage its shoppers. Promotions to push shoppers using their loyalty card online have been developed and the website itself has been improved. This service was extended to Barcelona in September Figure 13: Eroski Sales by Channel e Channel Sales (EUR, million) Sales CAGR e 2017e Ee 2012e-17e Cash and Carry % -3.1% Category Specialist % 0.8% Hypermarket 2,471 1,402 1, % -3.6% Non Store Retail % 11.1% Supermarket 3,936 4,732 5, % 1.8% Total 7,432 6,925 7, % 0.7% Source: Kantar Retail Database. Auchan Auchan is the fourth largest retailer in Spain in terms of sales. As of 2011, it operated a network of 305 stores, generating revenue of EUR 3.98 billion. Auchan primarily operates hypermarkets and supermarkets in Spain but also convenience stores and online. Its largest division in term of sales, Alcampo hypermarkets, has been experiencing tough times in the country. Despite this poor performance, Auchan is still opening hypermarkets. Auchan hypermarkets are usually opened within a shopping mall owned by Immochan, its real estate sister company. Alcampo s strategy focuses on low prices offered primarily through promotions and private labels. As in France, the retailer started rolling out its self-discount area that offers a selection of 600 products composed of unbranded items or secondary brands priced 5% cheaper than the value range. In Spain this section also includes a selection of fruits & vegetables. Alcampo has also extended its organic section which was introduced in 29 of its 53 stores in The supermarket division is growing in strategic importance for the retailer. In 2009, the rebannering of its Sabeco stores to Simply Market was completed. The retailer is looking to expand its Simply network through franchising. Auchan s fastest growing 2012 KANTAR RETAIL 2012 Spain Retail Scene 15

17 channel is its online operation. Launched in 2008, the online activities offer both home delivery and store pick-up and expanded its reach to Barcelona and Toledo in It is very likely that the service will be available throughout the Alcampo network shortly. Figure 14: Auchan Sales by Channel e Channel Sales (EUR, million) Sales CAGR e 2017e Ee 2012e-17e Convenience % 0.9% Hypermarket 3,537 3,130 3, % -0.1% Online Grocery % Supermarket , % 8.1% Total 4,339 4,006 4, % 1.9% Source: Kantar Retail Database. Dia Dia, the discount business divested by Carrefour in 2011, is the fifth largest retailer in Spain in terms of sales. As of 2011, it operated a network of 2,827 stores, generating revenue of EUR 4.14 billion. Dia focuses on the discount channel, but recently acquired the drugstore network of Schlecker, which will continue to trade as drugstores. The traditional Dia store network is divided into three concepts depending on the size, assortment and location of the store: Maxi Dia, Dia Market and Dia Fresh. Maxi Dia are the largest stores operating from a selling area of 700 to 1,000 square metres, offering an assortment of 3,500 SKUs, and are located in suburban areas. Dia Market are smaller, the stores operate a selling area of around 400 square metres, offer an assortment of 2,800 SKUs, and are located in urban areas. The most recent banner, Dia Fresh, introduced in 2012, is an even smaller store of around 150 square metres offering an assortment of 1,800 SKUs, focusing on fresh products. Dia is growing fast in its home market. In the third quarter of 2012 the retailer reported an increase in sales of 5.7%. This rapid growth is driven by store expansion. In 2012, the retailer aimed at opening 100 stores in Spain, investing EUR 116 million in the country. The majority of this expansion has been achieved through franchising. By the end of 2013, Dia expects that 40% of its Spanish store network will be franchised. Dia is not only opening new stores, it is also working on its brand image. In late 2011, it redesigned its own label range packaging and in early 2012 a new TV advertisement 2012 KANTAR RETAIL 2012 Spain Retail Scene 16

18 campaign was launched. More recently, Dia announced that it would enter the online grocery channel, another potential strong sales driver for the retailer. Dia is expected to gain market share and become the fourth largest grocery retailer in the coming years. Figure 15: Dia Sales by Channel e Channel Sales (EUR, million) Sales CAGR e 2017e Ee 2012e-17e Discounter - 3,939 5, % Drug % Total - 4,242 5, % Source: Kantar Retail Database. El Corte Ingles El Corte Ingles is the sixth largest grocery retailer in Spain in terms of sales, only taking in account its grocery sales. As of 2011, it operated a network of 475 stores, generating revenue of EUR 15.7 billion overall, a decrease of 3.9% year-on-year. The specialist grocery business comprises 292 stores and generates EUR 2.87 billion in sales. El Corte Ingles operates a wide portfolio of retail stores: department stores (El Corte Ingles), hypermarkets (Hipercor), supermarkets (Supercor), convenience stores (Opencor and Supercor Express), apparel stores (Sfera), DIY stores (Bricor), optical stores (Optica 2000), perfumeries and online operations. This large array of divisions allows the retailer to cover most types of shopping trips. El Corte Ingles also operates ancillary businesses such as telecoms, banking, and insurance both in-store and on the internet. The majority of sales come from department stores and hypermarkets, attributable for 58% and 13% of sales respectively. Like these two larger divisions, supermarkets and convenience stores have experienced difficult trading conditions, but have generated slightly better performances and are continuing to expand. Unlike the core businesses, these concepts offer a quick and easy shopping trip. These two divisions merged under dedicated management in March The retailer also launched a new convenience banner, Supercor Express, which offer 5,000 SKUs and has longer opening hours. To challenge its tricky financial situation, El Corte Ingles, is looking for ways to improve its operation. In 2012, it joined the AMS buying group and partnered with Trace One to 2012 KANTAR RETAIL 2012 Spain Retail Scene 17

19 increase productivity and private label management. It also revamped its website in July 2012, with the aim of improving product presentation. Most importantly, the retailer has been endeavouring to improve price perception. The retailer decided to lower the price of 4,500 frequently bought SKUs in all Hipercor and Supercor stores in June Figure 16: El Corte Ingles Sales by Channel e Channel Sales (EUR, million) Sales CAGR e 2017e Ee 2012e-17e Department 9,817 8,946 9, % 0.8% Hypermarket 3,347 1,980 1, % -0.2% Supermarket % 3.3% Convenience % 4.7% Non Store Retail % 14.9% Total 14,060 11,823 12, % 1.1% Source: Kantar Retail Database. *Department store sales represent the sales of the whole store and not only the grocery categories KANTAR RETAIL 2012 Spain Retail Scene 18

20 IV. Grocery Retail Channels The modern grocery trade in Spain is dominated by supermarkets and hypermarkets (Figure 17) which represent 53% and 24.3% of the market respectively in Figure 17: Spanish s Grocery Market Share by Channel, e Source: Kantar Retail Database. However, the shares of these channels have changed over the past five years, with supermarkets gaining market share. Between 2007 and 2012, supermarkets gained 5.2 points, while hypermarkets lost 6.6 points. The discount channel represents more than 10% of the grocery market and is continuously gaining market share. Over the past five years discounters gained a point of market share, accounting for 11.5% of the Spanish grocery market in The convenience channel also gained a point in market share over the past five years and is expected to hold this position. Online grocery, accounting for 0.4% of the market in 2012 managed to double its share in five years and looking to do the same over the medium term. This section will therefore cover the two major channels in term of size (hypermarkets and supermarkets), and the three fastest growing channels (discount, convenience, and online) KANTAR RETAIL 2012 Spain Retail Scene 19

21 Supermarkets Supermarkets are the largest grocery channel in Spain, generating sales worth EUR 32.5 billion. Over the past few years the channel has been gaining market share. In 2007, supermarkets represented 47.8% of the grocery market in Spain; this share rose to 53% in Overall, supermarkets grew by 2.5% year-on-year, a growth that was driven by the eight biggest players. Over the next five years, these retailers will continue driving the growth, generating over 85% of the sales added in the channel. Figure 18: Spanish Supermarket Sales e Retailer Sales (EUR, million) Sales CAGR e 2017e Ee 2012e-17e Mercadona 12,876 17,598 22, % 5.5% Eroski 3,936 4,732 5, % 1.8% AhorraMas 1,198 1,387 1, % 1.8% Consum Cooperativa 851 1,361 1, % 5.9% Spar Spain 1,196 1,130 1, % 1.3% Auchan , % 8.1% El Arbol % 0.2% Carrefour , % 7.0% Total 22,109 28,505 35, % 4.6% Sales: Kantar Retail Database. The largest player by far is Mercadona, which represents over 60% of total supermarket sales in The retailer which was already very successful prior to the economic crisis has managed to adapt its model and thrive on the current economic situation and the change in shopper behaviours. The other key players in the channel are Eroski, AhorraMas, Consum Cooperativa and Spar. Regional retailers such as AhorraMas and Consum Cooperativa, have been focusing on their regions, the centre of Spain and Valencia & Cataluña, respectively. International players, Auchan and Carrefour, started investing more recently in the channel and both of them implemented new banners in the market, which they are currently rolling-out. The increased focus in the channel will help push the growth of the supermarkets sales over the next five years. Kantar Retail expects the channel to remain the fastest growing grocery channel in Spain, along with the online grocery business KANTAR RETAIL 2012 Spain Retail Scene 20

22 Hypermarket Hypermarkets are the second largest Spanish grocery channel in terms of sales, generating sales worth EUR 14.7 billion (Figure 19). However, the channel has lost momentum since From representing 30.9% in 2007 of the market it went down to 24.3% in Figure 19: Spanish Hypermarket Sales e Retailer Sales (EUR, million) Sales CAGR e 2017e Ee 2012e-17e Carrefour 8,309 7,117 6, % -2.1% Auchan 3,537 3,130 3, % -0.1% El Corte Ingles 3,347 1,980 1, % -0.2% Eroski 2,471 1,402 1, % -3.6% Total 17,664 13,629 12, % -1.5% Source: Kantar Retail Database. The major players in this channel are Carrefour, Auchan, El Corte Ingles and Eroski. They have been facing tough times and, despite a slight improvement expected in coming years, all expect their hypermarkets activities to face ongoing structural and economic headwinds. Despite new designs and store concepts, tried by both Carrefour and Eroski, the channel seems to lack appeal for shoppers. The decreasing size of households, along with the lack of proximity and the strong competition from other formats both in terms of shopping experience and price, explain part of the ongoing underperformance of the hypermarkets KANTAR RETAIL 2012 Spain Retail Scene 21

23 Discount The discount channel is the third largest channel in Spain and generated EUR 6.9 billion in sales in 2012, about half the hypermarkets sales (Figure 20). The channel has seen strong growth over the past few years and has gained market share. Discounters accounted for 10.5% of the grocery market in 2007 and this increased to 11.5% in 2012, a trend that is likely to continue over the next few years. Figure 20: Spanish Discount Sales e Retailer Sales (EUR, million) Sales CAGR e 2017e Ee 2012e-17e Dia 3,217* 3,939 5, % 5.2% Schwarz Group 2,057 2,529 3, % 3.8% Aldi Nord % 5.4% Total 5,659 7,048 8, % 4.7% Source: Kantar Retail Database. *Sales of Carrefour Discount activities. This channel is highly concentrated and dominated by three players: Dia (over 50% of channel sales), Schwarz Group (Lidl), and to a smaller extent Aldi, which represents less than 10% of the channel. Dia is experiencing strong sales in its home country primarily due to a fast pace of expansion and an improvement of its store operations. The retailer is looking to continue investing in its stores, developing and adapting its format to shoppers, with enhanced proximity and a better assortment. Lidl is also investing in its stores, improving the quality of the fresh assortment and introducing services such as bakery. Aldi has seen strong growth over the past five years thank to network expansion, which along with store improvement will continue driving the retailer s growth. As part of the renovation of all its 5,000 stores in Europe, Aldi Nord will focus on rearranging its product categories, improving lighting and rolling out in-store bakeries in Spain. The economic situation that the country is currently facing, means discounters are considered extremely attractive to shoppers. However, in Spain the channel is not experiencing such robust growth. This is primarily due to the strong competition provided by supermarkets such as Mercadona in terms of low prices and proximity. However, discounters are adapting to changing shopper expectations and improving the overall shopping trip. Thus, along with a strong physical expansion, Kantar Retail expects the channel to be one of the fastest growing after online grocery KANTAR RETAIL 2012 Spain Retail Scene 22

24 Convenience The convenience channel is the fourth largest grocery channel in Spain, generating sales worth EUR 4.8 billion. The channel can be divided into petrol stations and neighbourhood convenience stores. Convenience stores sales have experienced a strong year-on-year growth of 3.1% between 2007 and The growth primarily came from regional retailers such as Coviran and Consum Cooperativa, and more recently players such as Carrefour who made an aggressive push into the channel with its Carrefour Express banner launched in Online Grocery Online grocery is the fastest growing channel in Spain; representing 0.4% of the grocery market in 2012 but demonstrating strong year-on-year growth of 18.7% between 2007 and Major players in this channel are Mercadona and Carrefour, who have long offered transactional online grocery websites. Other players such as Eroski and Auchan, or El Corte Ingles have started online grocery in Spain and are expanding their services across the country, contributing to the strong growth of the format. With retailers expanding their online services across their networks, such as Carrefour did in 2011, whereby it is now able to deliver to 90% of Spanish households, Kantar Retail expects the channel to continue growing at a strong pace. Online grocery websites will be attracting shoppers through a convenient shopping trip enabling them to better control their spending and offering a convenient shopping alternative KANTAR RETAIL 2012 Spain Retail Scene 23

25 V. Conclusion Spain has been very strongly impacted by the economic crisis since 2008 and is expected to remain in recession for at least another year. Due to constraints on household income, growing unemployment and austerity measures, Spanish shoppers have changed their shopping behaviour. As the economic environment is expected to remain troublesome, the impact on shoppers will continue to frame the grocery market in the coming years. The Spanish grocery market is dominated by national players, such as Mercadona, Eroski and Dia, but also some international retailers (Carrefour, Auchan, and Lidl). The ten top retailers represent almost 84% of the grocery market in 2012 and they are expected to increase their dominance, driven by national players such as Mercadona, but also smaller local businesses like Consum Cooperativa and AhorraMas. The evolution of the grocery sales among the channels is expected to continue developing, although the ranking will remain the same. Supermarkets will continue to account for over half the market, driven by Mercadona s growth and other retailers focus on the channel. On the other hand, hypermarkets, the second channel in terms of sales, will see their share decreasing. Retailers with a strong presence in the hypermarket channel, particularly Carrefour, are likely to experience lower growth rates in the future. Looking at growth areas, Kantar Retail expects two channels, supermarkets and discounters, to represent over 90% of the sales added between 2012 and KANTAR RETAIL 2012 Spain Retail Scene 24

26 ABOUT KANTAR RETAIL Kantar Retail was formed in 2009 from four Insight and Consulting businesses. It serves leading Retailers and Manufacturers globally, delivering a competitive advantage and enhanced revenue and profitability. Leading suppliers, brand manufacturers, retailers, financial services and strategic marketing firms rely on Kantar Retail s expertise to transform their businesses. Kantar Retail is headquartered in London and is part of the Kantar Group of WPP. INFORMATION AND INSIGHTS Kantar Retail provides robust data-driven insight that looks across markets, shopper and customer trends, presenting the most accurate view of the top Global Retailers and markets. By transforming this intelligence into insights, Kantar Retail helps clients to understand the trends of today and prepare for the realities of tomorrow. Kantar Retail Insights studies over 1200 of the world s leading retailers providing invaluable data and insights for the industry and our clients. Clients access Kantar Retails Insights through either its online platform KRIQ, attending workshops or conferences, through webinars or by having the retail subject matter experts visit client offices. KantarRetailiQ.eu FOR MORE INFORMATION Contact Tia Aitken Tel. +44 (0) Tia.Aitken@kantarretail.com Download a complimentary copy of Kantar Retail s Breakthrough Insights H2 2012: The Changing Environment Kantar Retail s semi-annual collection of Breakthrough Insights KANTAR RETAIL 2012 Spain Retail Scene 25