Argentina: DIA plans super low prices, more private label products and discounts

Discount Retail Chain DIA's (listed ad owned by LetterOne) global CEO of the Spanish discounter chain, Stephan DuCharme, will invest US $ 115 million in over the next three years. What is his strategy, in a context of inflation, falling consumption and price controls. And he says: "We have been in the country for 25 years: we have gone through everything"


"We have been in Argentina for 25 years: we have already gone through everything," says the executive, about the disbursement that the company will make in the country in the next three years. At the national level, the Spanish chain plans to disburse US $ 115 million until 2023 and generate 3,000 new jobs, between direct and indirect jobs. With super low prices, the expansion of its own brand portfolio, more fresh food and personalized discount coupons, DIA seeks to become the neighborhood store where consumers can make all their purchases in one place.


"We aim to create proximity spaces that bring together fresh and warehouse products in the same place, as is already the case in several of our points of sale. We want to replicate the concept in more stores," explains DuCharme, who assumed this position in May 2020 .


To this end, the capital injection will be used, mainly, to open 263 proximity stores (which will be added to the current 904) and the remodeling of 370 existing ones, an initiative that it launched at the beginning of the year to expand its presence local and differentiate itself from the competition in the seven provinces in which it operates: Buenos Aires, Entre Ríos, Corrientes, Santa Fe, Chaco, Jujuy and Salta.


For now, the next stores that will open will be franchises, a system that the brand relaunched in November 2020, with the aim of improving its service and attention. In this sense, it plans to end 2021 with 60 openings, double the number originally planned. There are already five in operation with the new scheme and the remaining 55 will be inaugurated before the end of the year. They represent 70% of the network of stores in Argentina.


"Franchisees play a fundamental role in our growth. We want them to be merchants who live in the area where the stores open. They know their neighbors and their needs better than anyone. The intention is to focus on the opportunities that the plazas present. where we are present to take advantage of geographic concentration, and thus make logistics more efficient ", explains the CEO Stephan DuCharme.


This commercial format implies a structural change, not only in the image, which includes the refresh of the façades and the gondola equipment. In an inflationary and regulated economy like Argentina, cost control and process efficiency are key to ensuring low prices.


"It is about making the operation more efficient with a simple model that optimizes costs and an assortment based on what the customer demands, working together with suppliers to maintain quality", sums up the essence of the new axis.


"We optimize", he replies, when asked how he deploys his strategy in a context of inflation and price controls, fundamentally, in basic necessities, such as those sold in his stores. That, however, also opens up opportunities. In a context of falling consumption and loss of purchasing power, more and more customers are looking for alternatives to lower their purchases. Attentive to this, in the next two years, DIA will increase its own brand portfolio by 50%, which has a key weight in its sales: it represents 35% of its tickets.


The offer includes more than 1000 sweet and savory products, frozen, drinks, perfumery and cleaning; and more than 75 without TACC, suitable for celiacs. They are manufactured by 200 SMEs, mostly from the province of Buenos Aires, with which the development is jointly defined. He plans to add around 500 items.


In line with the new eating habits, the differential will be in healthy categories at accessible values, driven by a 50% growth in sales of fresh products registered by the chain in the last year.


"We will launch everyday foods, salads and other ready-to-serve dishes, as well as personal care and household items. We will work with suppliers to ensure low prices," anticipates DuChamre, who has more than 30 years of experience leading organizations. of the financial and industrial sector.


To supply the stores with the new products, the chain will need to adapt its logistics network. That is why part of the announced investment will go to the construction of a new distribution center of approximately 400 square meters, the location of which has not yet been defined. "A higher delivery frequency and commensurate cooling is required," DuCharme clarified.


Another point on which the company will emphasize will be the acquisition of customers through Club DIA, its loyalty program. 80% of sales are made through it, in a situation in which discounts often determine the purchase decision. In the last year, he gained 5% more partners. In total, it already has more than 3.8 million members.


New members must download the mobile app to access the benefits. Although the printed card can still be used, supermarkets no longer offer it in this format for adherents. By digitizing the system, benefits were added.


"Now, customers have their DIA card on their cell phone. In the aisles of the stores, we put up posters for them to join. They can download the app at the moment and use it immediately at the checkout lines," explained the executive.


In the last year, Club DIA gained 5% more members. In total, it already has more than 3.8 million members. Thus, the mobile version of Club DIA offers exclusive discounts that are not available with the physical card, as well as the possibility of checking the offers brochure digitally, making savings calculations and preparing a shopping list.


"Through the app, we offer additional coupons with personalized discounts, depending on the brands and product categories our consumers choose. We will expand services," he anticipated.


Although the digital channel still represents a low portion of DIA's transactions in Argentina, electronic sales are on the rise. "With the pandemic, they went from practically 0 to 4%, with more than 10,000 unique users per month," DuCharme said.


Club DIA went digital

Faced with the rise of electronic commerce, DIA will bet on the integration of its channels. "The digital purchase does not replace the physical purchase. We are going towards a mix. In Argentina, we see that the preference for pick & collect is still stronger than for delivery. This is explained by the proximity of the stores by population density. We have 350 stores with withdrawal points. The idea is to bring the modality to all the branches, "he analyzes.


DIA landed in Argentina in 1997 with its first location, located in Villa Devoto. In 1999, it opened its first distribution center in Vicente López. Today, it has five more: two in Tortuguitas, and the rest in Burzaco, Salta and Paraná. It employs 3,600 people.


THE DAY NUMBERS

In May 2019, the majority stake in DIA was acquired by the Letterone group, owned by Russian magnate Mikhail Fridman. Since then, and after years of numbers in the red, it began to reformulate its business model, with a focus on the most profitable formats. A strategy that it first launched in Spain and then extended to the other markets where it operates (in addition to Argentina, Brazil and Portugal), with 6,000 stores globally.


Already in 2020, the company adjusted its numbers: it reduced its losses globally and recorded profits of almost 20 million euros in Argentina (approximately $ 2,294 million, according to the current exchange rate). In the country, net sales represented 813.8 million euros (around $ 93,374 million), according to the accounting balance corresponding to last year.


DIA will open 263 stores

But the results of the first half of this year (latest data available) showed a global loss of 104 million euros (translated into local currency, approximately $ 11,932), which, likewise, is 44% lower than the deficit of the first half of 2020 , "thanks to the reduction of financial losses, benefited by an active management of exchange rate risk".


Net sales were down 9% year-on-year, according to the same financial results report. In Argentina, they plummeted 7%: they amounted to 426 million euros (around $ 48,878 million). If only the second quarter is observed, the country was the only one that managed to sustain a positive performance, since they rose by 2.7% measured in constant currency. They went to US $ 228 million (about $ 26,170) in this period. On the other hand, in Spain, they fell by 13.2%. The same happened in Portugal (-8.7%) and in Brazil (-13%).


DuCharme attributes this difference to the local devaluation and to the "exponential growth of stocks in other markets during the first months of 2020, even greater than that experienced by Argentina at the beginning of the quarantine."


Asked about how the end of the year is shaping up for the group, the executive prefers not to make projections, but anticipates that the company is heading towards "an improvement in the balance sheet" in its businesses in all countries, after concluding the expansion process in September. of capital and the refinancing of its liabilities, with a reduction of its net indebtedness in 1028 million euros (about $ 118,000 million).


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