The panic purchases derived from the health contingency due to the outbreak of the coronavirus had a positive effect on supermarket chains, which registered strong growth, but now face the challenge of growing from a large comparison base. In Chedraui it already had a slight impact on the financial statements of the first quarter.
Sales from January to March of this year of the chain, founded in Xalapa a century ago, fell slightly 0.9%, to 35.186 million pesos (even so, 13% higher than in the same period of 2019, the prepandemic year). Net profit, on the other hand, increased 35.9%, to 736 million pesos. The operating flow of the supermarket chain was 2,638 million pesos, which translates into a growth of 2.1%, according to the information in its latest financial report.
Arturo Vasconcelos, deputy general director of the Operations, Commercial and Logistics areas of Chedraui, says that even with the little impact that the health emergency caused to the different retail competitors, 2020 was a complex year and the first thing was to implement a strategy of care to avoid contagion of covid-19 in clients and workers.
But, in addition, the increase in the excess demand for products emptied the shelves: the first weeks ended with packages of pasta, canned goods and toilet paper. The company had to prevent supply chains from being disrupted, which affected some of its suppliers.
The company identified the scenarios that could arise in the future to be able to react even with the changes, which were a constant throughout 2020. The objective was that the work teams could make decisions to adapt to the rules of capacity and schedules that they were implemented in each of the states where its stores are located.
“Everything we see now, which is already normal for us, was a process that we had to implement in a very few days. Today, we know and we have our staff of collaborators monitored, we know how many cases were presented and the recovery they have, we follow up on each one ”, he says.
The big change for consumerism was the rapid adoption of e-commerce. Overnight, dozens of people who used to go to the supermarket chose to fill their cart online. The company already had a digital store, which received a greater number of buyers. Digital sales in 2020 grew almost 200% and omnichannel represented 3.6% of total sales in Mexico. This increase in electronic commerce allowed the retail chain to identify sales opportunities for its digital channels and, a year later, Vasconcelos believes that the chain corrected its errors, improved its service and updated its platforms.
The epidemiological risk traffic light, which until May was yellow and green in most states of the country, plays in favor, and that is why, in the following months, the capacity in the sales floors will gradually recover. , although consumers will be somewhat cautious when opening the wallet.
Chedraui has already designed some programs to offer basic products at attractive prices. “We implemented many commercial efforts to compensate for the increase in sales (due to panic purchases) … This already positions us at a different time in the future and now the challenges can undoubtedly arise in an economic recovery for our clients. We will have to find the commercial equation so that Chedraui accompanies the clients, covering their needs ”, he shares.
Grow small
The company decided to maintain its expansion plans even with the contingency and the closure of some stores in the most affected areas, which were located in tourist areas in the southeast of the country. Last year, it opened six Chedraui stores, three Super Chedraui and 11 Supercitos. He also converted from a Super Che to Super Chedraui. These openings include a Chedraui store and a Super Chedraui under the Selecto concept. In 2021 it will reduce openings and will only open one Chedraui store, two Super Chedraui and five Supercito.
“The philosophy of the company was really to continue believing in the future. We decided to keep the openings we had, in the last quarter we already opened four more stores and we continue with our expansion plans. You have to take advantage of all the opportunities that happen ”, says the manager.
Growing with its Supercito format allowed Chedraui, during the pandemic, to attract buyers who were looking to make the supermarket in nearby stores. Of the 325 units of different formats that the chain has, 47 are Supercito, that is, 14.5%.
These stores have a space of 300 square meters and are the growth bet for the company, since they are installed inside the neighborhoods and, in most cases, buyers have to walk a few meters to access these stores.
This closeness with consumers has become a characteristic in the expansion of the different supermarket chains, which have opted for the mini-supermarkets to increase their market penetration and compete with the convenience stores.
Marisol Huerta, stock market analyst at Grupo Financiero Ve por Más, points out that, in addition to offering products at low prices and, more frequently, being aimed at serving low-income consumers, these formats are a showcase for self-services to provide a promotion of the commercialization of own brands. In addition, they tend to be more cost efficient.
With an offer of low prices and essential products, these small stores have performed well during the pandemic, a period in which many people avoided attending large stores to avoid the risk of contagion and opted for establishments closer to their addresses.
“Supercito is a strategic format for us. What are you looking for? Basically, to be closer to our customers to be able to offer them a purchase, mainly from a pantry, that allows them to satisfy their needs. They could be a full pantry (due to their variety of products), but what we have seen on many occasions is that our customers prefer this format to make a replacement purchase ”, the manager points out.
The other axis of the chain’s strategy is to grow from the southeast to the north of the country and towards the United States, where in 2018 it bought the Fiesta Mart chain. In mid-May, Chedraui announced that its subsidiary Bodega Latina Corporation (BLC). The firm is a price club that offers both food and household items in jumbo and traditional presentations, without the need for a membership, as in other similar stores.
Smart & Final operates 254 stores under two brands: Smart & Final and Smart & Final Extra !, in California, Arizona and Nevada, in addition to 16 in northwestern Mexico. In 2020 it closed with sales of $ 4.1 billion and an adjusted financial flow of $ 167 million.
“The combination creates a leading diversified chain in Mexico, and a multi-format food retail platform in the United States with pro forma consolidated sales of more than $ 11 billion,” the company said in a statement announcing the buys.
