Mercadona´s revenues
Few domestic firms are prospering in crisis-racked Spain, but Mercadona is. Spain’s largest supermarket (by sales) has enjoyed double-digit growth for most of the past decade. When Juan Roig, the chairman, took over in 1981, Mercadona had only eight shops, all in Valencia. Today it has 1,310 and annual sales of €16.5 billion ($23.8 billion). Spain’s economic troubles seem to have made it stronger. Profits dipped in 2009, but surged again by 47% in 2010 after some forceful cost-cutting.
Mercadona’s strength is low prices. The family-owned chain does not fritter away cash on advertising. It mercilessly squeezes the suppliers of its own-brand products. These suppliers, of which there are about 100, put up with Mercadona’s squeezing because they have a long-term relationship with the company and have grown with it. Since 2009 Mercadona has shaved €2.2 billion of costs from its products, often with simple adjustments such as reducing packaging. Tight relationships with its suppliers foster innovation. For example, sticking a plastic lid on a large tin of tuna made it easier to open and increased its sales by 60% in 2010.
Even so, Mercadona does not skimp on technology or logistics. It was the first retailer in Spain to use bar-code scanners. And it owns a fully automated logistics warehouse just outside Madrid. Computers monitor deliveries from suppliers and organise shipments to stores. Robot arms stack goods in crates like a game of Tetris.
“Mercadona is unique in several ways,” says Zeynep Ton of Harvard University, who wrote a case study on the chain. Its 63,500 employees are on permanent contracts (with bonuses), work regular hours and receive 20 times more training than the staff of an average American retailer. This makes them more productive: sales per Mercadona employee were 18% higher in 2008 than at other Spanish supermarkets. Staff turnover is only 4% a year.
Employees constantly gather feedback from shoppers, whom they refer to, accurately enough, as “bosses”. Shops are designed to make shopping quick and easy. The selection is smaller than in other supermarkets, especially after Mercadona took the unpopular decision of eliminating 1,000 products from the shelves in 2009. Own-label items such as Deliplus (a line of cosmetics) account for 38 % of sales. Mercadona products were ranked number one, in terms of value for money, in a recent survey of 5,200 households by TNS, a market researcher.
There is still plenty of room to grow at home. Mercadona accounts for 13.1 % of the floor space in Spanish supermarkets, which makes it the third-largest chain in the country, after France’s Carrefour and the co-operative Eroski. It aims to enter the Italian or French market next year, probably through a small acquisition. Mr Roig doubts that the Mercadona model can simply be copied abroad. “We must learn everything from everyone,” he says.
Unlike most Spanish bosses, Mr Roig doesn’t mince his words. Earlier this year he said the only good thing about 2011 for Spain was that it would be better than 2012. “It will be worse if the Spanish people do not take up the challenge of transforming Spain,” he says, by which he means bringing its colossal welfare state under control.
Mr Roig believes that Spain has “great human capital”. That is true, but Spain’s youth unemployment rate—a staggering 45%—suggests that much of this talent is being squandered. The protesters in the plazas complain that Spain’s politicians have lost touch with how ordinary people live. That is not a mistake a supermarket can afford to make.
Another day in paradise 