Spain’s Grupo Eroski recently signalled its intention to focus on its domestic operations, off-loading its stake in its French JV with Carrefour, Altis, to Intermarché. Speaking at the group’s annual conference, CEO Agustín Markaide discusses the group’s plans across its supermarket and hypermarket formats, as well as online.
just-food: Why has the company decided to only focus on Spain?
Markaide: On the one hand we believe that we still have a great deal of potential for development in Spain, which is not the case in France, which is a very mature market and where our position is relatively weak. On the other hand, we believe that spreading our attention and resources in other markets will not bring us the returns we need.
just-food: How difficult is the Spanish market in the current economic climate?
Markaide: There is no doubt that this is a complicated situation because of the liquidity problems that are hindering normal business and high levels of unemployment are having a direct effect on consumption in general. The situation has made consumers change their buying decisions.
They put off making purchases or just forget about it. The price factor, which is always there, is now a critical one for customers, although they behave differently depending on the type of product. In this aspect it is important for consumers to regain their confidence and that will depend on the political and economic decisions that the new government must make bravely and quickly.
just-food: Has the global model lost some of its appeal do you think?
Markaide: I don’t think there is such a thing as a global model from the customer’s point of view because this differs from place to place, even within the same country. We can think about a global business model as a conceptual definition, but putting this into practice involves looking at aspects such as adaptation to local markets and their customers’ demands and requirements.
just-food: Hypermarkets also seem to have reduced appeal. What’s your view?
Markaide: We have around 100 hypermarkets and 1,500 supermarkets. At the moment, the hypermarket format is suffering the effect of changing consumer habits most keenly. This situation, at least in the Spanish market, may continue for several more years.
However, we are sure that the format will continue to be valid and successful provided it adapts to current and emerging consumer needs and the unstoppable growth of new forms of consumption such as online shopping.
just-food: On that basis, where is the focus for Eroski in terms of store expansion?
Markaide: Our short-term activities in hypermarkets are focusing on revamping formats to make them attractive to clients again rather than opening new stores. We are being more ambitious with supermarkets, especially where the brand is strongest and has the highest commercial profile. In other words: the northern fringe of the country, from the Balearic Islands to Galicia, but without losing our position in the rest.
just-food: Franchises are also part of your mix, what are your plans?
We have a specific strategy to open 250 franchises nationwide between 2011 and 2015. In 2012 we intend to open 60 new franchises and continue along the same lines in the coming years. Eroski has more than 500 franchised self service stores with different brand names.
On the one hand we have an integrated franchise that uses our own name, which is called Eroski/City. They sell a selection of between 2,500 and 3,000 products, similar to those found in our own self-service and supermarket network. Therefore, these stores offer their clients the same offers, campaigns and promotions as Eroski’s own supermarkets.
On the other hand we have non-integrated franchises that go by the names Aliprox, Aprop and Onda. They have more room to manoeuvre when it comes to defining certain aspects of their sales policies, for example fresh products, particularly local foods.
just-food: You also have an online business, describe how that is developing?
Markaide: It has been growing at a significant pace over the last five years. Of course, the situation looks very promising, although there is still a long way to go, especially in the food sector. At Eroski we offer this service in all the autonomous regions where we are present, both with hypermarkets and with supermarkets.
just-food: What is the potential for this business in terms of share of Eroski sales?
Markaide: In light of the pace at which this field is evolving it would be rash to give an exact figure of the weight that online business will attain in any business. However, our ambition in the medium-term is to achieve a 5% share of our sales in the food area through the online channel.
just-food: You launched a range of healthy private label products last year – what is the plan for future new ranges?
Markaide: Eroski has a clear strategy in the healthy eating field, which has led to innovations such as our commitment to refrain from selling genetically-modified foodstuffs and to eliminate trans-fats from our own brand products, as well as the introduction of our exclusive nutritional labelling. This year we are launching a new range of healthier products called Sannia, which contain lower levels of salt, sugars and fats, which still having excellent organoleptic qualities.
just-food: Private label seems to be growing at a fast pace in Spain – how will it develop?
Markaide: While the economic situation is in its current condition, more and more own label products will be found in consumers’ shopping baskets, although this growth will slow down. This situation is not expected to stabilise for a few years, by which time new shopping habits will have become established, which will allow these products to continue to sell at the levels achieved.
just-food: You can’t avoid the issue of sustainability, what is Eroski doing in this area?
Markaide: We are developing this through our Strategic Plan for the Environment. One basic pillar of this is reduction of our consumption of energy resources, developing initiatives with industrial cooling, climate control and lighting.
Another field is the reduction of the impact of the products we sell with projects to improve design and control of production processes and application of eco-design criteria to products and packaging.
We also work on waste management and waste recovery and, with regard to logistics, we work to optimise our freight loads and routes and to use vehicles that are respectful to the environment.
just-food: What do you see as the main challenges for your business and food retail in general?
Markaide: At Eroski we want to strengthen our situation as an integral co-operative, particularly with regard to our consumer members. With regard to distribution in general, we need to develop sustainable business policies to reduce the environmental impact of all our activities and improve competitiveness. In the same way as has been done in other sectors, we also need to do our utmost to harness the full potential of new technologies.
