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Spain: Mercadona lowers prices, but rules out entering a price war with Lidl and Aldi

Updated: Mar 5, 2021

Spanish supermarket chain Mercadona, the market leader with a market share of 24.5%, has moved up and is thus lowering the price of some products, mainly fresh ones, such as meat, fish or vegetables, but also some white-private label packaging (see here more on private label development).

The decreases are between 10 and 25% approximately and, according to the company, these are "selective" movements, which are mainly due to stock management. "At Mercadona, our daily struggle for 40 years has been to provide our bosses (the customer in the company's jargon) with products with strong quality at unbeatable prices," they explain from the company. As they say, "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."

Mercadona is forced, in any case, to make a move, so as not to lose market share, especially considering that both Lidl and Aldi are carrying out very strong sales and promotions, to which the rest of the market is also joining. Although, according to data from the consulting firm KantarWorldpanel, Mercadona maintains the first position in the market, it closed with the first drop in its history, of 1.1% points. Lidl, on the other hand, won half a point and took third place from Dia, reaching 6.1%, very close to Carrefour, which maintains the second position with 8.4% share. Florencio García, Director of Retail at Kantar, has no doubt that the increases in the price of the shopping basket in recent months are going to give rise to a very different situation. Before new descents "We expect to see price wars in the coming weeks," he says, explaining that although a greater promotional pressure is already being seen in the market, although "the consumer has not yet perceived" that drastic drop in prices, especially after the increase in prices registered. during the pandemic. NielsenIQ data show, in fact, that during the last year, and due to increased costs and logistics difficulties during confinement, the price of fresh products rose by 5.5% and that of packaged by 0.4 %. Lidl has made permanent drops of up to 50% in more than 360 own brand and manufacturer products, the assortment of which will also expand in the coming weeks, according to the company, "to further facilitate purchases by Spanish households." From the group they insist that "these drops complement the policy of discounts and promotions that the supermarket chain already applies on a regular basis to always offer its customers the cheapest shopping basket" and in the market they fear that they may go every time more, thus forcing a general reduction in margins. In the same vein too, Aldi has announced strong drops. From this chain they explain that "while the prices of packaged products increased on average in 2020 by 1.5% due to inflation, in Aldi prices were contained and inflation remained at 0.6%, this being the most market drop. " In data from the company itself, which analyzes the price of all its products compared individually, during the last year there was a reduction of 0.75% compared to the previous year. Dia, which is remodeling its stores and seeks to distinguish itself from the image of hard discount, has fallen for the moment to fourth place, losing 0.6% points and keeping 5.8% of participation.

Regional chains Those who are best managing the current crisis situation, in any case, are not the chains specialized in discounts, but regional ones, such as Uvesco, Alimerka, Ahorramás, Gadisa or Consum, among others. Kantarworld panel does not break down its participation individually, but together these companies add up to 14.3%, which is 2.1 points more than a year earlier. In the sector they explain that "due to the mobility problems that have occurred, they are the ones that have come out the most strengthened, with growth in sales and profits."


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