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 Mercadona - Summer 2009  |
Mercadona's Mission
Mercadona's TQM strategy: recipe for success. Spain has its fair share of discount supermarket chains, but none quite like Mercadona, the country’s largest supermarket chain and the second-fastest growing retail chain. While Mercadona boasts a wide range of products, from food, medicines and cosmetics to beauty supplies and pet food, this article takes a closer look at two of the store’s PL brands: Hacendado, under which an array of food products are sold, and Bosque Verde, its paper product line. A Change in Direction The company’s exponential growth and expanding market share are the result of a strategy implemented by Juan Roig, the founder’s son, in 1993 called Total Quality Management (TQM), the basic premise of which is embedding quality awareness throughout organizational processes. The International Standard for Organization (ISO) defines it as “a management approach centered on quality, based on the participation of all its members, and aimed at long-term success through customer satisfaction and benefits to all members of the organization and to society.” After abandoning a fruitless policy of adjusting prices with suppliers, aggressive advertising and changing deals for consumers, Roig implemented the TQM model. It is unsurprising that a man who considers himself “less traditional” and more of a “groundbreaker” would make a move towards such a unique strategy. His decision and hard work not only set Mercadona apart from other supermarkets, but it put it on the fast track to success. The company’s mantra became “Always low prices,” a loyalty-based plan that included paying stable prices to suppliers, cutting advertising expenditure and committing to always selling at the same low price. This enabled the company to build up a permanent base of suppliers and customers, and, with time, it translated into big profits. In 2007, Mercadona raked in 336 billion euros, growing at a rate of 25.2% and taking the 14th spot in the sector’s global ranking. TQM is believed to be behind those results. The company continued its advance to the forefront of the sector through a staunch pledge to meet the needs of customers, employees, suppliers, society and capital, in that order. Mercadona’s philosophy sets it apart from the competition in countless ways. For one, consumers are in charge. The company focuses on increasing value through low prices, constant dialogue, specialized courses on PL products and blind trials. Another priority is quality, which encompasses the concepts of comfort, speed, integrity, service and product variety. The company maintains a steadfast commitment to its suppliers, building a relationship based on trust and stability, and to its workers, through support, training programs and job security: Mercadona offers all of its employees indefinite contracts. According to “En cinco años venderemos un billíon” an article in the Spanish newspaper El Mundo, published July 30 2007, Roig says: “We aim to treat others as we want to be treated. This way they are move involved, more integrated. We treat them well but we also demand a lot from them.” Furthermore, since 2001, Mercadona has been distributing a bonus to those employees that reach their individual targets (once company objectives have been met). Despite the economic turmoil, 2008 was no different. For Roig, according to ‘Juan Roig: ‘Se ha creado la ilusión de que todos éramos ricos,’ an article published in the newspaper Levante.EMV, it’s important to “recognize the efforts of Mercadona employees. We are certain that by injecting hope and tranquility and keeping smiles on their faces, they will work harder and better serve our customers.” Reaping Rewards The company registered net profits of 320 billion euros in 2008, down 5% with respect to the previous year; nevertheless, sales expanded 10% to 15.4 billion euros. The company’s price reductions have boosted turnover, and in view of the economic situation in Spain, its low prices attract cash-strapped and conscientious shoppers. Hacendado is Spain’s cheapest private label line. In El Mundo. Roig explains its great success, saying “We don’t believe that quality has to be more expensive. Our constant objective is to cut prices. We aim for top-flight quality at the lowest price possible. That’s the philosophy behind our products.” While sales of Mercadona’s private labels continue to grow, customers have complained that the store keeps only a limited number of non-PL products on its shelves. Indeed, at 2008 year-end, the company had reduced its number of product lines by 8%. This reduction removed the least profitable brands (which included some of its own), however, in doing so, customers complained that they were pressured to buy PL products. Nevertheless, in limiting the number of product lines stocking the shelves, Mercadona has cut costs, enabling it to reduce prices even further, thereby benefiting customers. In the Retail Sector Price Observatory (Observatorio de Precios del Comercio Minorista) published by Spain’s Ministry of Industry, Tourism and Trade for the fourth quarter of 2008, Mercadona was ranked as the sixteenth most economical supermarket in Spain. Extreme price slashing, however, has paid off. In the same report for the first quarter of 2009, Mercadona ranked third. The PL Breadwinner The store’s sliced bread section exemplifies the low price and quality selection mantra. The four shelves dedicated to this product are fully stocked and boast a wide range of Hacendado items. There is just one other brand with a few options: Bimbo, whose white loaf weighs in at 820 grams and costs 2.39 euros. It is the most expensive item on these shelves. Hacendado’s white loaf may be only 460 grams, but it costs just 0.60 euros, significantly less. There is an attractively-packaged and diverse selection. The multigrain loaf without crust comes in at 1.85 euros for 450 grams, while the wheat loaf without the crust is 1.73 euros for 450 grams. The traditional wheat loaf (which is “very fresh” according to the label) is sold in an eye-catching maroon and tan bag, complete with pictures of wheat and confirmation that it is made with sunflower oil. This 460-gram package sells for 0.60 euros. Other, more “exotic” options include bread with oats, at 0.99 euros for 460 grams; country bread, at 0.95 euros for 460 grams; and Mediterranean-style bread with tomatoes, black olives and oregano, which is just 0.99 euros for 460 grams. The theme seems to be that if you’re going home with sliced bread, you’re going home with Hacendado. The PL is distributed over all four shelves, with the Bimbo products tucked away closest to the floor, almost out of sight and definitely comfortably out of reach. The store also calls attention to its PL products with a yellow and red semi-circular sign in front of certain loaves, highlighting the type and price and labeling it a Novedad, or Specialty Item. Milk for the Masses The milk section is noticeably more varied, but Hacendado still takes the cake in the price department. Non-PL brands such as Pascual and Lauki charge 0.99 euros and 0.89 euros, respectively, for a 1-liter carton of whole milk. Hacendado whole milk costs 0.85 euros per liter. There’s also a display featuring a Le Recomendamos (We Recommend) sign for a box of 4 cartons of the PL milk for just 2.24 euros. Flora brand milk, which boasts DHA Omega-3 and is gluten-free, sells for 1.29 euros per liter, whereas Hacendado’s version of the same milk costs just 0.98 euros. While some of the PL product labeling is quite simple, featuring simply a picture of a glass of milk and the PL logo at the top, others have a more detailed design with text calling attention to the fact that the milk has calcium, as well as vitamins A, D, E and folic acid. Popular Dish, Wide Selection Rice is another area where shoppers face the decision: Hacendado or Hacendado? This section features just one other label and it is significantly more expensive. Brillante brand rice comes in a 500-gram box, which retails for 0.88 euros and is stocked on the very top shelf. The PL label, however, features an extensive selection, from arroz bomba (short-grain rice, typically used in paella) to vacuum-packed rice. Wheat rice comes in an attractive brown and orange package, indicating its contents, the servings (8 to 10) and its fiber-rich quality, complete with the logo at the bottom. This 1-kg package costs 1.39 euros. Parboiled rice also comes in a 1-kg package and sells for 0.99 euros, 1 kg of long grain rice sells for 0.79 euros, and 1 kg of pearl rice is 0.75 euros. The latter three options are also prominently on display in giant boxes that reach from the floor up to almost eye level, with the “We Recommend” signs hanging above them. There are also a number of basmati rice options, one of which is aromatic. It comes in a shiny purple package with a photo of the Taj Mahal and text stating that it is top-notch, just above the PL logo. This 1-kg package sells for 2.25 euros. Shoppers can opt for the Brillante version of instant basmati rice, at 250 grams for 1.33 euros, located on the very top shelf. What’s for Dinner? Cold Cuts In the cold cut department, Hacendado also has something of a monopoly on the products on offer, as all items in the section are PL but one. Store brand thinly-sliced turkey bologna and chopped turkey, which come in 200-gram packages, each sell for 1.30 euros. The packages feature a photo of the cold cuts in the upper right-hand corner, and the logo stands prominently in the middle, just above the product name. Conveniently enough, the package is re-sealable after opening. All of Hacendado’s products in this area come in similar packaging, and a 225-gram package of turkey ham sells for 1.65 euros, and 200 grams of ham or turkey cubes costs 1.99 euros. The store brand’s thinly-sliced turkey breast (200 grams) costs 1.59 euros and is gluten free (as indicated in a small red and blue logo), while the thinly-sliced chicken breast (also 200 grams and gluten free) costs 1.82 euros. Shoppers can pick up Noel brand sliced turkey at just 1.99 euros for 250 grams, but they will obviously pay more. Pasta Madness Heading over to the pasta department, which is chock-a-block, shoppers can choose from a larger but still PL-brand heavy selection. Hacendado options dominate the shelves and the range to choose from is dizzying: from thick noodles and fideuà (a typical pasta used in Valencia, on Spain’s eastern coast) to shells and angel hair. The extensive options also include an attractively-packaged spinach linguini made 100% from durum semolina. A 500-gram box sells for 1.33 euros. The penne rigate comes in a 500-gram package and sells for 1.40 euros. The black penne is accented by the clear package, and the two-tone label features a photo of wheat beside text indicating that it is top-grade semolina pasta with squid ink. The Hacendado logo features unmistakably at the bottom next to a seal that recommends preparing it al dente, which takes just 9 minutes. The PL brand also includes thin macaroni (500 grams for 0.59 euros), spirals (500 grams for 0.59 euros), high-fiber wheat macaroni (500 grams for 0.79 euros), egg macaroni (500 grams for 0.98 euros), vegetable macaroni (500 grams for 0.99 euros) and a child-friendly dinosaur-shaped pasta (200 grams for 0.59 euros). The packaging is similar for all products: the clear plastic package has a border on the top, featuring the name of the product, and on the bottom, where the Hacendado logo is featured. The colors vary depending on the type of pasta. The section also features the “We Recommend” boxes, filled to the top with PL items, including spaghetti and traditional macaroni (both in 1-kg bags for 0.75 euros). There are just a few non-PL products, such as Gallo brand noodles (500 grams for 0.82 euros) and macaroni (500 grams for 0.72 euros). These are located on the very top shelves. Paper Galore In addition to its clearly extensive and at times monopolistic PL food selection, Mercadona also has its own PL paper product line, sold under the name Bosque Verde (Green Forest). Shoppers will find it hard to purchase non-store brand paper products, as the shelves are unsurprisingly lined with Mercadona products. Those looking for paper towels, for example, will find mostly Bosque Verde options. A package of three two-ply rolls costs 1.50 euros. The package design is quite detailed and attractive. The store label appears at the top, below which is the main informational design, indicating that the paper is extra-absorbent. A text box on the top right ensures buyers that the paper is able to absorb nine times its own weight, and to the left are six images with text indicating the paper towel’s wide-ranging uses: for crockery, in the car, for liquids, for kitchen spills, for cleaning windows and for glassware. Below the name of the product are its stats and a testament to its environmentally-friendliness and superior quality: 15.6 meters per roll, 65 uses per roll, 147.10 grams of cellulose per roll, 441.32 grams of cellulose per package, 100% cellulose paste. A six-roll package of the same product sells for 2.99 euros. Shoppers can reach way up to the top shelf for the competitor’s paper towels: Colhogar’s package of 4 rolls costs 1.26 euros. Napkins are only available under the PL. A package of 200 napkins costs 0.85 euros. They come in a two-stack pack with the word “Napkins” across the front. The private label features at the top center, and text in the right-hand corner indicates that this product is single ply. The bottom right-hand corner features the World Wildlife Fund’s (WWF) panda bear logo, confirming that it is environmentally-friendly. A PL 30-unit 4-ply two-toned package of napkins sells for 1.50 euros, while a PL 50-unit 3-ply single color package comes in at in 0.80 euros. As regards to tissues, the only option is Bosque Verde, of which there are a number of choices, all of which are similar in design. They all feature the same WWF logo at the top left ensuring that the product is environmentally-friendly and the store logo is in the center, next to which is an image of a feather and the text “Extra soft” beside “4-ply.” On the right-hand side is an image of a plant indicating that the tissues contain aloe vera, all of which is reinforced in text just below the product name. On the left-hand side is an indication that this package contains 10 packs of 10 tissues each. This orange-tone 100 pack of tissues will set shoppers back 0.99 euros. The product comes in a green version, which is menthol, with the same design, indications and price, and a blue version, which is 3-ply, sells for 0.79 euros. Win-win It looks like Juan Roig is on to something. Mercadona continues to rise within the ranks of its sector, at home and abroad, and profits continue to soar. Even in the current economic context, Mercadona stays true to what is important to shoppers: bang for their buck, and it does what it has to do to deliver the lowest prices in town. Does that mean sacrificing a wider selection of brands? Yes. But as reported at www.levante-emv.com, Roig says: “More important than the measures you implement is the way you act. Our values are based on stability, fairness and reciprocity.” Those values are indubitably reflected in the PL brands. It seems that as long as shoppers are offered diverse quality products at bargain-basement prices and TQM continues in implementation, both Mercadona and shoppers are the winners. |
