Mercadona is a distribution company, within what we usually know as supermarkets, 100% Spanish capital and a leader in the food distribution sector in Spain, (although Mercadona's concept also includes the distribution of drugstores and perfumery) and is currently a world leader in the sector. Its current president and author of the "miracle" Mercadona, Juan Roig, took the reins of the family business in the 80s, a time with which had eight establishments in the Valencian community. Currently, it has 1,641 establishments open to the public in Spain and 20 stores in Portugal, employs 95,000 people, most of them with a permanent contract and its current market share in Spain is 24.8 %, which represents more than 8 million homes/customers. In 1996, Mercadona began to develop the Recommended Product model, emerging distributor's own brands such as Hacendado, Bosque Verde in the range of products drugstore, Deliplus as a perfumery brand, etc., with the particularity that all of them clearly identify the manufacturer's name on the label of these products. For example
In the Hacendado Pizzas, it can be clearly identified that its manufacturer is Casa Tarradellas, the Spanish leader in these products. This new model came to revolutionize the conception that had until now of the manufacturers' brands and their relationship with the distributors.

 

This strategy followed by Mercadona, that is, differentiating white label from brand distributor, has allowed it to establish itself in a new purchasing model that is booming in Spain and the rest of the Western countries.

News about the mass consumption sector:

 

• The mass consumption sector will close 2021 with a growth of 1.4% compared to 2020, according to NielsenlO forecasts
• Regarding promotions, it is ensured that the sector must improve efficiency promotional "to attract a buyer who will look more for savings." The spokesperson from NielsenIQ has also pointed out that "with the health crisis, the launches of new products have slowed down across the European Union, although the effect is especially notable in Spain which can mean great opportunities to grow brands and capitalize on trends."
• NielsenIQ has also assured that the current crisis is debunking some myths related to pricing strategy. "It was to be expected that the consumer sensitivity to prices and more comparisons were made, But the reality is that this has not happened on a massive scale."

For Mercadona, innovation has constituted and contributed decisively to the company's continues to improve its economic results despite the economic difficulties in an environment marked by the COVID-19 health crisis, the annual turnover recorded in the year 2020 was 26,932 million euros. Innovation in products and especially innovation of character technology has constituted a true competitive engine for the company (approximately 40% of the profit in R&D&i), which translates into the reduction of inefficiencies that may exist in the supplier-distributor interface and this is where Mercadona with its resources helps to improve the efficiency of suppliers, translating into an improvement in production costs that
is transferred to the sales prices of the products.

 

To this innovation, we must add the distributor's great efforts to strictly control costs. and reduction of unnecessary costs without loss of value for money; pricing competitive and that they are perceived as such by consumers; proper management of human resources obtaining high productivity and low absenteeism in return; a gesture consistency of the corporate brand and product brands; efficient attention to suggestions and complaints from customers and promoting their loyalty and, above all, their relationship with customers. suppliers, coining the term "inter supplier" that leads to a long-term distributor-manufacturer relationship, a relationship of total trust between both in which both parties share income statements, improvements in inefficiencies in production and distribution, joint solution between distributor and manufacturer to resolve problems in models
manufacturing, distribution, etc.

 

Management model
Total quality (1)
 

Since 1993 and currently in force in 2021, Mercadona began with the philosophy of Total Quality.
This decision has led the company to realign its objectives by establishing the following order:
Client, who is known internally by the nickname "The Boss", Worker, Supplier, Society, and Capital.
Broadly speaking, this philosophy has the following effects:
Commercial: The commercial strategy developed by the company since 1993 is called SPB (Always Low Prices). In addition, work is being done on the quality assurance
intrinsic nature of the products, promoting the Life Principle strategy.

 

Human resources: The Total Quality model has led us to consider the worker as the second objective of the company. An example of this is that 100% of the 95,000 that make up the organization are fixed. Also worth noting is the payment of 100% of salary in case of disability employment, life insurance, enjoying minimum salaries that exceed the sector average, as well as such as training in Total Quality. Regarding their relationship with suppliers, as has been mentioned, a large part of these
lead to the creation of what they call Intersuppliers, translating into a joint commitment of sharing objectives and dreams, based on cooperation and stability. Regarding society, its commitment is to maintain permanent contact with it to which tries to serve continuously, maintaining a close relationship with neighbors by carrying out open days. Respect for the environment is another of its values.

 

The concept of Total Quality for Mercadona can be summarized in one sentence:
"In order to be satisfied, you must first satisfy others"
ANNEXES: Here you can find complementary information that will help you work on the case.
Annex I: Evolution of large consumption in the post-COVID-19 de-escalation.

 

Questions to answer the case:

1. What are Mercadona's objectives? What strategies do you use to achieve each of the objectives? What is your competitive advantage?
2.  In your opinion, how important is the online channel in its strategy?
3.  Identify Porter's five forces and how they occur in the Mercadona model

Answer rating: 100% (QA)

1 Mercadonas Objectives Strategies and Competitive Advantage Objectives Client Internal Nickname The Boss Worker Supplier Society Capital Strategies C... View the full answer