Spanish retailers show good growth

Basque retailer Eroski has recently been forced to restructure its supermarket unit after erstwhile partner Consum decided to end their joint venture, but this had no financial impact on its business during the year - indeed, the company reported a 1.6 per cent increase in sales for the year to €5.2 billion even excluding Consum.

The sales growth was also helped by the consolidation of another supermarket group, Mercat, based in the Balearics, and by substantial investments in new stores - 155 outlets were opened in the year, including eight hypermarkets, 28 supermarkets, 26 convenience stores and 16 franchised stores - and in existing store renovations.

Caprabo, meanwhile, saw its sales rise by 16.6 per cent during the year to €2.3 billion, also helped by the acquisition of two supermarket chains, Supermercados Alcosto this year and Enaco the year before. There was also an excellent performance from capraboacasa.com, the company's online supermarket, which consolidated its market leadership with a 31 per cent increase in sales to €26.8 million.

The two companies' increasing focus on the supermarket sector - indeed, Caprabo has no hypermarket format outlets at all - reflects the ongoing loophole in Spanish planning regulations which allow groups to expand their supermarket operations far more easily than hypermarkets - a move designed (not particularly successfully) to protect small store owners from competition from hypers.

With little chance of a change in the law in the immediate future, the supermarket sector is likely to see further growth, and Dutch retailer Ahold's decision to sell off all of its stores this year will simply add further momentum to a market already growing strongly.

Whether Eroski or Caprabo will be able to bid for Ahold's stores remains to be seen, however, with major foreign players such as Carrefour thought much more likely to be at the top of the list of potential buyers. Carrefour's Spanish hypermarket business has certainly performed better than its French counterpart, but the European market leader could see greater potential for expanding its Champion supermarket fascia there through the acquisition of the Ahold business.

One factor which could make this less of an attraction for Carrefour - and more of one for smaller players such as Eroski and Caprabo - is the relatively small size of much of Ahold's portfolio, and the fact that it is made up of a number of smaller regional chains rather than one homogenous whole (even though Ahold has hinted that it hopes to sell the business as a single going concern).

Both Caprabo and Eroski have grown their businesses throughout Spain from strong regional bases (Catalonia and the Basque country respectively) and have a wealth of experience in successfully integrating smaller groups into their wider portfolio.

As for whether the two groups have the necessary funds to add the Ahold business to their portfolios, Caprabo at least is sitting on a cash pile, following a 20 per cent capital increase last year which saw the La Caixa bank become a major shareholder in the company. Eroski is more tight-lipped about its ability to finance expansion, but in the last four years alone it has invested €2.26 billion in new stores or refits - evidence enough of its ongoing commitment to growth.