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Mercadona invested a record 1,008 million euros in 2017, and it forecasts that 1,500 million will be invested during 2018 using exclusively equity capital.
In 2017, Mercadona increased its turnover by 6% to reach 22,915 million euros, and it saw sales volume growth levels of 5%, reaching 11,586 million kilos and litres (kilitres). In terms of like for like sales growth, both indicators have shown the same evolution (+6% in turnover and +5% in volume). Both these numbers showcase the strategy of transformation started by the company a year ago is moving along the path set, which is also reflected in an average increase of more than 75 receipts/store/day in 2017.
To boost the strategy implemented in 2017 of carrying out the investments needed to transform the company, throughout the year the company went about approaching a number of endeavours. In terms of store innovations, we would like to mention the implementation of the New Efficient Store Model in 157 supermarkets to optimise the shopping experience for the clients, and the steps taken to become more like shopkeepers and specialists by means of the Global Fresh Products Project already implemented in more than 200 stores. To this end, the company is introducing a number of important improvements in the fresh products sections: butcher’s stocking produce of increased quality and providing customised meat cuts at the finishing stations, a renewed ham section that offers knife-carving and vacuum packaging services, fishmonger’s offering a better service and local selection thanks to the wholesale fish market project and the new sushi range or the new bakery section, boasting fresher products that are more adapted to the needs of the clients, as well as numerous other initiatives.
Also, in 2017, Mercadona continued to foster its Effective Selection model of becoming increasingly more Totalers, built with “The Boss” and for “The Boss”. To this end, and thanks to the work carried out in its 16 Co-innovation Centres, in addition to the hard work put in by its integrated suppliers and specialist suppliers, Mercadona continued to adapt the selection by innovating and constantly progressing, which allowed for introducing 300 new products and improvements in the selection.
Mercadona’s president Juan Roig has stated that 2017 was a turning point of sorts for all of us who form part of Mercadona. “We have our sights set on the long-term, and in line with this, we are committed to the consolidation of a disruptive transformation project that places people’s effort right at the centre. Achieving this takes resolve, and the merit lies with the effort put in by the 84,000 people that make up Mercadona and the specialist suppliers, in guaranteeing the satisfaction of “The Bosses”, our clients, on a daily basis. They are the reason for these outstanding results”.
To achieve this strategic transformation in a sustainable manner, the company invested 1,008 million euros from its own resources, which is 47% more than in 2016. This investment has financed the opening of 29 new supermarkets (which has meant that its network has grown to 1,627), as well as refurbishing another 126, all featuring the New Efficient Store Model. Additionally, the investment also went towards boosting the fresh products sections and opening two new Co-innovation Centres, one in Paterna (Valencia), and another in the Portuguese Municipality of Matosinhos (Porto). To this we must add the projects carried out to automate the Logistics Blocks and eliminate employee overexertion, the building works at the Logistics Block in Abrera (Barcelona), those of the Logistics Block in Vitoria-Gasteiz (Araba/Alava) and the start of the building works for the Park Sagunt Logistics Block, in the municipality of Sagunt, Valencia and the Data Processing Centre in Villadangos del Paramo (Leon).
As for the progress made in terms of digital transformation, Mercadona has entered into a 5-year agreement with business application software firm SAP with the disruptive objective of transforming and improving the company’s processes. Within the context of these technological advances is also the development of the Mercadona online project, whose start phase in laboratories in certain districts of the city of Valencia is scheduled for the second semester of 2018. The project contemplates building a new online web site, a mobile web site and a specific distribution warehouse (hive) for distribution in Valencia using specific, three-temperature vehicles designed especially for Mercadona. It is a “testing and learning” project, of which we’re aware of the potential it presents to fully satisfy “The Boss”, online and Capital (make it profitable).
Mercadona’s project in Portugal has continued to move forward and represents another of the significant investment areas. In addition to opening the Matosinhos Co-innovation Centre, the building works for the Povoa de Varzim (Porto) Logistics Block have been announced, and it will be opening together with the four supermarkets Mercadona plans to inaugurate in Greater Porto during 2019, some of which building works has already been started.
In terms of job creation, more than 120 executives have been hired, and the selection process for the teams who will work in the first four stores is underway.
Within the context of the company’s commitment towards stable, quality employment, Mercadona created some 5,000 new jobs in 2017, which means that by year-end, the company’s workforce stood at 84,000 (64% women). The new incorporations - 15 per day on average - all have a net starting salary of 1,132 euros per month, and like everyone who already works for Mercadona, they benefit from the same work-life balance policies and training and promotion opportunities. Currently, 47% of executive positions are held by women. In this regard, the company’s yearly investment in training in 2017 was of 65 million euros, which benefitted 40,560 employees.
For another year running, Mercadona has reasserted itself in the principle of “success is sweeter when it is shared”. From the total profit generated, 35% was shared among the workforce - 313 million euros by way of performance-related bonuses, whereas 25% - 205 million, went back into Society by means of taxes, in addition, a further 25% - some 202 million, were reinvested in the company as equity capital, and the remaining 15% was distributed among the stakeholders by way of dividends.
As a consequence of this commitment towards shared growth, and in keeping with the methodology updated by Valencia’s Institute for Economic Research (IVIE), Mercadona’s global contribution towards wealth generation in Spain represents 3% of the country’s total employment (545,000 jobs) and 1.7 % of its GDP (19,500 million euros), while its purchasing volume in the national market stands at 17,533 million euros, which represents 85% of the total purchases carried out by the company.
In 2018, Mercadona will once again achieve historical investment levels of more than 1,500 million euros, which will go towards opening 27 supermarkets, among which will be the new stores in Ceuta, Melilla and in La Palma, in addition to refurbishing more than 200 supermarkets to include the New Efficient Store Model. Furthermore, the company will continue to implement the Global Fresh Products Project in a further 200 stores throughout the year.
Similarly, the company will continue the building works for the logistics blocks in Vitoria-Gasteiz (Araba/Alava) and Abrera (Barcelona), the new online warehouse in Valencia and the Data Processing Centre in Villadangos del Paramo (Leon), in addition to starting the building works at the Parc Sagunt Logistics Block in the municipality of Sagunt. All of this will be added to the advancement of Mercadona’s project in Portugal, where it will be building the Povoa de Varzim Logistics Block (Porto) and four supermarkets that are set to open their doors in Greater Porto during 2019, in addition to the SAP digital transformation project and the start of the online project.
This sustainable investment will be carried out using the company’s own resources, which stems from the decision made by the shareholders last year to base Mercadona’s decisions on the long-term, because, as expressed by Juan Roig, “if you focus on short-term profits, it is hard to make decisions, and we are currently firmly committed towards investing to transform Mercadona; in fact, more than 8,500 million euros are expected to be invested from equity capital between 2018 and 2023. To continue building a model for a company that is different and socially responsible, one whose existence inspires pride in people. This is the path along which all of us who form part of the Mercadona Project have decided to advance, a path which, considering the results achieved in 2017, is the correct one."
Juan Roig during Mercadona’s 2017 press conference.
Annual Report 2017