very recently, Argentina was one of the last and strongest bastions of the corner
grocery store in Latin America. Neighbourhood grocery stores still far outnumber
major supermarkets, but their market share is on the decline. Unable to negotiate
competitive prices with suppliers, independent food stores are finding it increasingly
difficult to hold on to their traditional neighbourhood customer bases.

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.

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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