SPAIN COUNTRY RETAIL SCENE REPORT December 2012 KANTAR RETAIL 24 – 28 Bloomsbury Way, London WC1A 2PX, UK / Tel. +44 (0)207 031 0272 / www.KantarRetail.com INFORMATION / INSIGHT / STRATEGY / EXECUTION © Kantar Retail 2012 245 First Street 24 – 28 Bloomsbury Way T +44 (0) 207 0310272 Suite 1000 London, WC1A 2PX F +44 (0) 207 0310270 Cambridge, MA 02142 UK [email protected] USA www.kantarretail.com Index I. Key Themes .......................................................................................................... 2 II. Socio – Economic Background .............................................................................. 3 III. Key Players in the Grocery Retail Sector ............................................................ 11 IV. Grocery Retail Channels ..................................................................................... 19 V. Conclusion ........................................................................................................... 24 © 2012 KANTAR RETAIL | 2012 Spain Retail Scene | www.kantarretail.com 1 245 First Street 24 – 28 Bloomsbury Way T +44 (0) 207 0310272 Suite 1000 London, WC1A 2PX F +44 (0) 207 0310270 Cambridge, MA 02142 UK [email protected] USA www.kantarretail.com 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 2012 41.5% of grocery sales in Spain were generated by private label, a number that increased by 1.3% compared to 2011. 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. © 2012 KANTAR RETAIL | 2012 Spain Retail Scene | www.kantarretail.com 2 245 First Street 24 – 28 Bloomsbury Way T +44 (0) 207 0310272 Suite 1000 London, WC1A 2PX F +44 (0) 207 0310270 Cambridge, MA 02142 UK [email protected] USA www.kantarretail.com II. Socio – Economic Background Spanish Population As of 31st December 2011, Spain had a population of 47.2 million people. In 2011 50.7% 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 2001. 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 116.6 inhabitants per sq km. Figure 1: Population Density in Spain Source: Britanica. © 2012 KANTAR RETAIL | 2012 Spain Retail Scene | www.kantarretail.com 3 245 First Street 24 – 28 Bloomsbury Way T +44 (0) 207 0310272 Suite 1000 London, WC1A 2PX F +44 (0) 207 0310270 Cambridge, MA 02142 UK [email protected] USA www.kantarretail.com 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 2,115,334 10 Murcia (Región de) 1,470,069 11 Aragón 1,346,293 12 Balears (Illes) 1,113,114 13 Extremadura 1,109,367 14 Asturias (Principado de) 1,081,487 15 Navarra 642,051 16 Cantabria 593,121 17 Rioja (La) 322,955 18 Ceuta 82,376 19 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 2011. © 2012 KANTAR RETAIL | 2012 Spain Retail Scene | www.kantarretail.com 4 245 First Street 24 – 28 Bloomsbury Way T +44 (0) 207 0310272 Suite 1000 London, WC1A 2PX F +44 (0) 207 0310270 Cambridge, MA 02142 UK [email protected] USA www.kantarretail.com 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 2009. 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 2013. The crisis also had a strong impact on Spain’s debt levels (Figure 4). © 2012 KANTAR RETAIL | 2012 Spain Retail Scene | www.kantarretail.com 5 245 First Street 24 – 28 Bloomsbury Way T +44 (0) 207 0310272 Suite 1000 London, WC1A 2PX F +44 (0) 207 0310270 Cambridge, MA 02142 UK [email protected] USA www.kantarretail.com 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 2008. 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 2011. 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 2009. 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). © 2012 KANTAR RETAIL | 2012 Spain Retail Scene | www.kantarretail.com 6 245 First Street 24 – 28 Bloomsbury Way T +44 (0) 207 0310272 Suite 1000 London, WC1A 2PX F +44 (0) 207 0310270 Cambridge, MA 02142 UK [email protected] USA www.kantarretail.com Figure 5: GDP Components (2001 - 2011) 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 2012. 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. © 2012 KANTAR RETAIL | 2012 Spain Retail Scene | www.kantarretail.com 7 245 First Street 24 – 28 Bloomsbury Way T +44 (0) 207 0310272 Suite 1000 London, WC1A 2PX F +44 (0) 207 0310270 Cambridge, MA 02142 UK [email protected] USA www.kantarretail.com 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.