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Colombia: In less than 15 years, hard discount stores revolutionized the supermarket business.

Discount Retail Chains D1, ARA, Olympic or Jumbo, increase their competition in Colombia to serve consumers looking for the lowest prices.

These hard discount stores use smaller spaces than traditional supermarkets and have fewer references for each product they sell. Their big bet is their own private label brands. Making market not only involves satisfying basic needs by acquiring food and other supplies necessary to live, but also for many it becomes a plan, because, even if they are not able to buy what they see, they entertain themselves by choosing and comparing between a wide variety of products. In other words, the so-called standard Colombian 'Miranda family' not only walks through shopping malls, but also shop in supermarket chains. However, they now face one of their biggest challenges due to the sharp escalation of inflation and a marked change in the habits of Colombians, who are increasingly choosing to shop in hard discount stores. This discount format, which arrived in Colombia in 2009 with the D1 stores, was created in Germany in the late 1970s with the Aldi chain. The aim was to offer high-quality commodities at low prices, eliminating everything that was considered superfluous or non-essential. Instead of offering a wide variety of products and brands, hard discount stores focused on a limited number of private label or not very well-known products, allowing them to keep costs low and prices to a minimum. In their early years in Colombia, these chains only received cash, did not advertise and charged for bags in order to save costs.

Market leader D1, in less than 15 years, displaced Éxito (without considering its subordinate companies) to second place in sales value in Colombia. Discount provides you a shopping experience, in which there is not high invest in the appearance of the gondolas and use small store spaces, is what dominates the preferences of Colombians, motivated by low prices. That has caused a strong upheaval in the supermarket business and even in neighborhood stores. The result is a change of leadership in the sector. D1, in less than 15 years, displaced Éxito (without considering its subordinate companies) to second place in sales. Last year, D1, which belongs to the Santo Domingo Group, sold 13.9 billion pesos, while Éxito, which is part of the French Casino group, had a turnover of 10.1 billion. If the sales of Carulla, Superinter, Surtimax and Surtimayorista are added to this figure, Grupo Éxito maintains the first place with 14.4 billion. "We had many years in which Éxito was the one who set the rules and pointed out the trends in retail in the country, but everything has been changing with the phenomenon of hard discount. It is a situation that not only Éxito faces, but also the other giants of the market, Jumbo and Olímpica, whose gap with D1 has also been widening and, therefore, has decreased the possibility that these chains recover their historical positions (second and third place) in the ranking of the largest supermarket chains in the country", explains Luis Carlos Cadena, general manager of OCL, a consultancy specializing in market analysis.


ARA is the fastest growing hard discount chain in the country today. In the discount format of limited product references and low prices not only D1, also ARA is active. ARA is a Portuguese chain owned by Jerónimo Martins, the oldest retail company in the world. ARA stores rank third in sales in the country, billing 8.7 billion pesos in 2022. Not only are they ringing their cashiers, but they are growing at one of the fastest rates in the sector (60 percent annually), surpassing even the performance of D1, growing between 2021 and 2022 with 40 percent. Cadena estimates that if ARA maintains its growth rate in 2023 it could become the second player in the country in 2024. Currently, D1 has more than 2,200 stores open in 532 municipalities. At the end of this year they aspire to have 2,490 stores located in 551 towns. Christian Bäbler Font, president of D1, attributes part of their good results to their commitment to the country, where they are not only large employers (they have 17,000 workers), but they are also consumers of national products, since 90 percent of their suppliers are Colombian. "This year we have the goal of creating 3,000 new direct jobs thanks to the fact that we will open stores in more than 20 municipalities nationwide. We will achieve this with an investment close to 125 million dollars in 2023," says Christian. According to Cadena's accounts, the growth of D1 last year implied the opening of a store every two days, while Ara, already with more than 1,000 stores in the country, opened 275 in 2022, that is, it opened a new one every business day last year. "In both cases we are facing the retail operating elite, companies that move at a different speed than we are used to," says the expert. Despite the collapse of Justo & Bueno, which at some point reached the second spot among the hard discount stores, this business model was not weakened and, on the contrary, the bankruptcy of that firm implied an opportunity for a traditional player to open space in this format. It's about Olympic, who with Ísimo aspires to keep a piece of the cake. Currently, they already have 268 stores nationwide and in the next two months they plan to open 142 more stores. "Very much is the intelligent recognition by Olímpica that with the traditional strategy it would only widen its gap with D1 and ARA. They understood in time that with the way they have operated they have no way to grow at the speed that is imposed today, and in commerce, as in everything, those who walk slowly are left behind, "says Cadena.

Discount has not stood still On the side of success, they have not been surprised by the turmoil of the sector and have prepared themselves with innovation. In a conference with investors, organized by Davivienda Corredores, Carlos Mario Giraldo, president of the company, explained that they have compensated for the changes in the sector with significant growth in electronic commerce as it is one of the largest home delivery firms in the country. They also launched the Surtimayorista format, they brought it from Brazil, which seeks to serve final consumers, but especially shopkeepers. It is estimated that in Colombia there are 260,000 shopkeepers, who still account for the sale of 45 percent of the food sold in the country. Giraldo considers these figures a blue ocean of possibilities, to which are added those of other Grupo Éxito businesses, such as shopping centers, Tuya, its financing company, and the Puntos Colombia loyalty program.

Clearly, Colombian consumers are moving towards hard discount stores in the need to look for the most comfortable prices. A study by Kantar, a division of Worldpanel, indicates that with inflation close to 13 percent, households visit more points of sale to be able to save. The most affected channels are neighborhood stores and minimarkets, since the spending that households usually made in them has migrated to discounters. Those who make this migration the most are socioeconomic levels 2, 3 and 4, which in turn concentrate 60 percent of consumers. Another characteristic of the hard discount chains is that they have led their customers to try items that were not previously in their shopping cart, such as wines, ice cream and Serrano ham, now more accessible with everything and the rising prices.

It is a fact: the pocket is not made of rubber and Colombians are spending less than in 2022 Likewise, the McKinsey State of Grocery report for Colombia ensures that new healthy lifestyles will also alter demand and there D1, ARA and Ísimo need to react. The report estimates that 63 percent of Colombians intend to buy more healthy food, but only 11 percent are willing to pay more for these types of products. Although the Colombian 'Miranda family' has not stopped walking through the shelves of large supermarkets, discount formats are gaining more and more space in their pockets, which implies healthy competition, in which hopefully the winners are consumers.


Source: Ignacio Gomez Escobar, DRC Business Development Associate



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