Carrefour and Ahold Subsidiary Disco Squeeze the Argentinean Supermarket Sector
the giants are assuming a dominant market position, as reflected by the fact that
1 percent of the nation's food stores now account for 57.4 percent of total sales.
As the nation's largest supermarket chains merge and consolidate, tensions are
rising between the giants and midgets of food retailing. Over the past 24 months,
friction between the two groups was exacerbated by Argentina's deep and unrelenting
economic recession. As consumer power declined and unemployment rose, supermarket
sales waned and sales per square meter dropped off accordingly.
The year 2000 is likely to be remembered as one of consolidation in Argentinean food retailing. As food sales continued their downward trend during the first half of the year, the number of independent food stores and supermarket chains has declined. According to statistics released by the national institute of statistics, retail food sales declined a cumulative 1.4 percent during the first half of this year, relative to the same period one year earlier. During the month of July alone, sales were down 1 percent compared with the level in 1999.
In spite of the recent setback in sales, Argentina's strongest food retailers are positioning themselves for the economic recovery that is expected to manifest itself late this year. According to statistics released by Strategy Research Corporation (SRC), consumer power in Argentina will rebound during the second half of the year, leading to a 3 percent annual increase compared with 1999. That increase is less than for Latin America as a region (3.9 percent), yet Argentinean households still have the highest level of consumer power. According to SRC, consumer power per household in Argentina stands at US$20,703 per annum.
The recently approved merger of French retailers Carrefour and Promodes best exemplifies the phenomenon of consolidation among leading supermarket chains. In spite of the fact that the merger took place in Europe, it directly contributes to Argentinean retail consolidation. The resulting retail giant has estimated sales of US$4 billion per annum. The impact of the French consolidation is amplified by the fact that Argentinean government is considering a request for Carrefour-Promedes to merge with three national retail chains: Norte, Tía, and Dia. If the merger goes through, the resulting retail giant will account for approximately 40 percent of total sales for the nation's 11 leading supermarket chains.
The pending Carrefour-Promedes merger is the latest in a series of consolidation moves that underscore the strong and probably irreversible trend toward supermarket consolidation. During 1999, the multinational retailer Disco (a partner of Dutch giant Royal Ahold) more than doubled its Argentinean outlets from 100 stores to a total of 219. This was accomplished by acquiring Argentinean chains Americanos de Cordoba, Gonzalez e Hijos, Pinocho, and Ekono. Meanwhile in Patagonia, the supermarket chain La Anonima invested US$10 million to raise its total number of stores from 55 to 60.
Concerns expressed by independent food store operators are mainly related to the purchasing power of their gigantic competitors. Multinational retailers and leading Argentinean chains have teams of buyers with both the sophistication and massive volume needed to drive hard bargains with both national and international food suppliers. As independent stores come to represent a smaller and smaller segment of retail food sales, they find it increasingly difficult to remain cost competitive by negotiating favourable terms with suppliers.
Carrefour, with an estimated
purchasing volume of US$10 billion per annum, has been accused by its Argentinean
competitors of unfair purchasing practices. Special terms of sale negotiated
by Carrefour, Disco and other major chains are viewed as unfair by their smaller
competitors, yet no clear cut charges have been brought against them. That situation
will likely change, however, and Argentina's leading food retailers should expect
increased government scrutiny of their business practices as they merge and
Supermarket sales per square meter have declined in Argentina since 1996.
STATISTICAL SOURCE: Mercado Digital/ACNielsen
By Steven Lewis
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