Spain Retail – November 2020 SPOTLIGHT Savills Research Spanish food sector Spotlight Spanish food sector November 2020 The food sector in Spain is facing a new stage. Differentiation, technology and in-store experience will be the key to growth Summary The economic crisis triggered Spanish food sector by COVID-19 has changed the Food distribution has played a major role during the health crisis, landscape of Spanish grocery regaining prominence in our society distribution. Urban supermarkets and hypermarkets have been the big winners, given that The economy in June for the second consecutive month, as well as consumers avoided long trips After stabilising temporarily around mid-May, the preliminary consumer prices, which intensified the during quarantine. number of new coronavirus cases per day has started fall in July. to rise again, affecting consumer confidence. The In August, the Retail Trade Index continued to Despite the boost given to latest data confirm that global economic activity recover, posting a 1.8% month-on-month growth, online shopping, this channel bottomed out in the second quarter of 2020 and after 19.4% in May, and highlighting the positive continues to be the great began to recover in line with the progressive lifting of contribution of the food sector in department stores, strength of many brands. the containment measures, starting from mid-May. which accumulated a 0.7% increase in August. According to the Quarterly National Accounts, The progressive return to normal of social activity During the lockdown, GDP fell by -18.5% quarter-on-quarter in the second and consumption, the recovery of the global economy shortcomings in the quarter and by -22.1% year-on-year, the largest and fiscal and monetary stimuli will allow for a clear management of orders, stock drop in the historical series, dragged down by all recovery in activity in 2021, which will, however, shortfalls and high transport components except public consumption (+0.4% be insufficient to return to the level of activity or costs have become apparent. quarter-on-quarter), with falls of more than 20% in employment witnessed in 2019. In the future the market private consumption and investment, and around share of the online channel will 30% in exports and imports, standing out. Consumption continue to gain weight, By sector, the negative contribution of trade, During 2019 the average annual expenditure per transport, hotels and restaurants (-40.4% quarter-on- although the physical store household in Spain was €30,243, which meant an quarter), artistic, leisure and other services (-33.9%) annual increase of 1.2% with respect to 2018. 14% of will continue to be the stand out. this expenditure, i.e. €4,233, was spent by families on preferred option, therefore Similarly, the Labour Force Survey for the second food and non-alcoholic beverages, representing an investment in the in-store quarter of the year shows a sharp fall in employment increase of 1.9%. experience is still very (-6% inter-annual), although this is moderated by the Comparing in-home and out-of-home important. implementation of the ERTE, while the hours worked consumption, 86% of the volume of food and During 2020 major show a fall of 26.6%. beverages is consumed at home, and only 13.9% is challenges are posed by This decline in occupancy was partly reflected in consumed outside the home. The evolution of the market saturation and the the unemployment rate, which increased to 15.33% of pandemic means that this value is expected to fall in consequent reduction in the working population, while the inactive population favour of household consumption. increased sharply. The preferred shopping channel for Spanish productivity per store, as well By product, this favourable evolution was due to consumers is the supermarket and self-service which as the essential incorporation the slower rate of decline in personal equipment and received 47.8% of total expenditure, with a growth of technology in the sector. service stations (moderation of the double-digit fall of 2.5% with respect to 2018. The traditional store is New delivery formulas (Shop to around 23% year-on-year, both) and the upturn in the second preferred channel (17%), but it reduces its & Go, Click & Collect, Click & household equipment (over thirty points to 9.6%). weight by 2.3%. Car or Pedestrian Drives), Retail activity is outstanding, increasing strongly The hypermarket has a 13.6% share of total hybrid models where you can taste and buy, as well as Dark Graph 1: Family consumption evolution Supermarkets are some of the trends that are beginning to Food Fashion Household Restaurants Rest of activities take shape and will define the model of the future. 40% 30% The resilient performance of supermarkets during the crisis 20% makes this type of product a 10% -1% 0% 0% 3% 2% good option for the investors, 0% -3% -1% 7% 5% -2% 3% 1% 0% and as a result the number of -10% transactions associated with -20% supermarket portfolios has increased. -30% -40% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source Spanish food consumption report 2019 . Ministry of Agriculture, Livestock and Fisheries savills-aguirrenewman.com/research 2 Spotlight Spanish food sector November 2020 Market experts anticipate the online food market share could reach 3.5% this year turnover and discount stores have a 12.6% It is interesting to note that regions such Following the transaction (Q1 2021), Carrefour plans to share. as Madrid (281 sq m) or Murcia (293 sq convert the acquired stores to convenience and supermarket The lock-down caused by the Covid-19 m), which have a high density of shopping formats under its Express and Market banners, respectively, crisis has meant a before and after for the centres, occupy the last places in the ranking as well as to its Spanish discounter Supeco format. online channel of the food sector, and of densities in grocery areas, with values Currently, Carrefour is the leader in Madrid where it although its weight on total expenditure below the average for Spain. occupies 17.60% of the region’s foodstuff area. represents only 1.5%, it is important to note Eroski is in third place with 6.83% of the total area, made that in 2019 it will register a growth of 18.7%. Groups up of the Eroski cooperative and other companies such Experts from Aecoc (Spanish Association of In Spain, the distribution market is as Vegalsa and the Caprabo Group. In 2010 it transferred Manufacturers and Distributors) point out dominated by five large groups: Mercadona, eleven supermarkets in Castile-La Mancha to Eco Mora and that the market share could reach 3.5% after Carrefour, Auchan, Día and Eroski. Except Sabeco supermarkets and sold 15 centres in Andalusia and the lock-down and above 5% in 2025. for Mercadona, all of them operate under Valencia region, opening its first hypermarket in the Canary their own brand and other affiliated brands, Islands. Current stock, formats and densities the result of strategic purchases, with the A year later it negotiated with Leclerc the sale of its The total stock of food retail areas in Spain objective of taking control of local markets; hypermarkets in the Community of Madrid and in 2015 it sold now reaches 16.6 million square metres such as the case of the acquisition of Caprabo 160 supermarkets to the Día Group and 36 hypermarkets to and 23,701 stores. The figure includes by Eroski in 2007. the Carrefour Group. hypermarkets, supermarkets, discount Mercadona is the leader in the food After this long restructuring process, Eroski dominates the stores, cash & carry, convenience stores and market in Spain, with more than 1,600 market in the Basque Country (42.72%), Navarra (32.00%) specialist stores. points of sale and an area of 2.4 million sq m, and the Balerares (27.43%). The hypermarket retail formula emerged representing a share of 15.88%. The family- The DIA Group (6.29%) remains the fourth largest in Spain in 1973, basing its growth on its owned Spanish company currently represents operator in Spanish distribution. In 2008 the company opted assortment and lower prices. Its increase in 28.6% of the sales share (3 out of every 10 for its new DIA Market and DIA Maxi format, renewing the openings was based on price competitiveness euros spent on mass consumption ends up at image of its logo and its centres. In 2012 it launched Dia Fresh due to its greater purchasing capacity and Mercadona). and acquired the Schlecker household and cleaning products cost efficiency. During 2018 it focused its strategy on chain, and in 2015, after purchasing the El Arbol Group, the However, in the nineties the hypermarket refurbishing its establishments. In 2019 it new format La Plaza del Día was born. model faced the restrictions introduced opened ten supermarkets in Portugal and In 2019 Letterone Investment Holdings, the investment by the 1996 Trade Law, which imposed an plans to open another ten in 2020, with a group led by Russian tycoon Mikhail Fridman, takes over 75% additional licence on department stores total of 150 supermarkets. of the company and in 2020 it has offered the company’s bond and the increasing competition from One of the most important milestones owners to buy its shares, in a transaction that could reach 450 supermarkets, which had the advantage of was reached between 2009 and 2010 when million euros. being closer to the consumers and had a sales the company opened 134 new stores and Día is currently the leader in the autonomous communities volume that allowed for economies of scale.