Taking selection out of Spanish grocery-shopping

MADRID -- With Spanish unemployment teetering over 20-percent for more than two years, stores must be creative to attract customers and increase profit margins. Spanish-owed Mercadona grocery stores are no exception, as they continue to expand by limiting selection and promoting its own brands.

At the start of 2009, Mercadona's president and co-founder Juan Roig decided his slightly more expensive supermarket chain would fight the crisis by focusing its sales, marketing and shelf-stocking on its store brands. The 1,338 supermarkets feature its own products placed on end-caps and given priority shelf-space. This is done in an effort to keep prices down, which naturally happens when you do not need to advertise.

To this end, Mercadona decided to leave brands that are dominate in Spain--like Nestlè, Sara Lee, Don Simón wines and juices, and Pascual dairy products--for the lower racks or off the shelves completely. Only name brand items that are regularly sold and need daily restocking get spare shelf space. Well-known brand beauty products are barely noticeable, while the affordable Mercadona line--with many products rooted in Spanish olive oil--monopolizes shelf space. Offering customers a brand selection is no longer a priority in Mercadona stores.

Last week, in an effort to further legitimize its own brand, Mercadona posted the origin of all their store brand products on the National Food and Health Web site.

Mercadona's list of store branded products continues to expand. They just added their own make of baby food and formula to their list.

Earlier this year, Mercadona announced the development of its own capsule-based coffee machine that will not fit market leader Nespresso's capsules. The Spanish are definite coffee drinkers, consuming over 60,000 tons a year in their homes, but a mere one-percent of that is currently capsule coffee, while 95-percent is ground. Mercadona is hoping to motivate the caffeine-dependent country by creating a more affordable alternative.

The chain's household and non-perishable "marcas blancas" seems to be a big consumer draw, while the produce and meat is often perceived too expensive.

"I shop at Mercadona for some things, but not all," said Jacobo Ricord Antelo, a Madrileño fashion designer, in his native Spanish. "Some products are quite expensive. The store brands have good prices, but the fruit, meat and fish are more expensive" than at other stores.

Paco García, a civil engineer from Burgos, who is now living and working in Madrid, made a similar sentiment. "I usually to buy their store brand. For food, 'Hacendado' is very good in most of products. For cleaning products, (there) is 'Bosque Verde,' and I think it's really good," García said. "Fresh meat and vegetables are good too, but I don't usually buy fruit at Mercadona because it isn't usually very good, neither cheap."

Pushing the store brand without lowering prices of fresh products seems to be the secret to its success. Last month, Mercadona officially beat out European supermarket giant Carrefour to become the most popular grocery store chain in the Cataloña province.

Mercadona and Spanish department store giant El Corte Ingles were recently rated as the Spanish chains that will most likely have success in the coming years and are considered best in terms of management. Mercadona had by far the highest food store customer satisfaction rating.

Roig gave a keynote address to a large conference of a thousand major brands in Sevilla last week. He said in Spanish, "We live in a state of the waste. While we keep throwing money down the drain are not going to do well." Roig is a clear advocate of the "pull yourself up by your bootstraps" economics, and urged the Spanish to focus on fixing their broken economy for themselves. Roig just celebrated his thirtieth anniversary as head of Mercadona.

Mercadona is known for innovation. in 1982, it became the first Spanish company to start using barcode scanners. Now, it is a rare Spanish company in that all of its more than 63,500 employees are on indefinite permanent contracts.

Store brands have become increasingly popular during the crisis, as most consumers are looking for cost-saving alternatives. Target is an American-based superstore that has increasingly promoted its own food and household brands, which vary from low-priced products to the pricier "gourmet" and green ones. However, it still continues to maintain a large, varied stock consisting of a wide selection of name brands.

As the economic crisis continues, is the rest of the world going to follow in Mercadona's example by offering customers fewer choices?

Photo: CincoDias.es

This post was originally published on Smartplanet.com