Discounters Escalating Price War In Spain

 

Namnews, 25th February 2021

Analysts are predicting that the supermarket sector in Spain is heading for a fresh price war, led by Aldi and Lidl.

Florencio Garcia from Kantar Spain believes chains will be rolling out further price reductions over the coming weeks and months to meet demand from consumers impacted by the pandemic.

Garcia said: “Price cutting between Aldi and Lidl is inevitable but shoppers also want quality, and rivals to chains like Mercadona have learnt lessons from the past where they simply wanted to copy the success of the Spanish supermarket giant.”

The country’s top three supermarket chains of Mercadona, Carrefour and DIA all lost market share in 2020, with Lidl leapfrogging DIA in terms of sales.

The threat from Aldi and Lidl has seen Carrefour and DIA both enter the price war via special promotions and loyalty cards. Mercadona has held back from joining the battle, although recent reports suggest it has been lowering prices, particularly in the areas of fresh produce. It has also lowered the cost of some packaged products.

However, the chain has ruled out a specific price war with its rivals. A company spokesperson said: “Always low prices is our strategy to have competitive prices without entering into promotional battles or aggressive offers, which in the medium term do not benefit the sector”.

Garcia commented: “Mercadona is still the number one retailer with a market share of 24.5% in 2020, which was a 1.1% fall on the previous year. The chain has to reinforce online sales and also tempt previous customers who have shopped around during the pandemic and not returned.”

Garcia believes that Mercadona will not enter a new price battle but will focus on its programme of store expansion across Spain and developing its takeaway food sections.

“Despite the obvious loss of customers by Mercadona and other traditional names, it is typical of what has happened in other countries, especially if people have not been able to travel to their regular outlet,” he said.

“We should not lose sight of the fact that Mercadona has a very strong market lead, and even though rivals like Carrefour and DIA have also seen percentage falls, all of them have seen their profits rise as supermarket spending rose by nearly 13% last year.”

NAM Implications:

• Consumers everywhere will emerge from Lockdown…
• …worried, confused and concerned about conserving cash…
• …saved by not commuting, and inability to access ‘non-essential’ retail/hospitality.
• A no brainer opportunity for discounters…
• …and price-cutting the only option for other retailers.
• If it looks like a price war, moves like a price war and results in lower prices…
• …then guess what!