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Spain Food and Drink Report Q4 2009Published by: Business Monitor International Published: Oct. 7, 2009 - 71 Pages Table of Contents
AbstractThere were several indicators over the last quarter of the impact of the ongoing recession on some of themajor players in Spain’s food, drink and mass grocery retail (MGR) sector.Firstly, in mid-July 2009, food and drink giant Sara Lee agreed to sell three bakeries in Spain to localfood producer Grupo Siro. Following the completion of the transaction, Sara Lee's Spanish bakerybusiness will consist of eight plants employing 2,500 people, while Siro will operate 14 productionfacilities with 3,100 employees. Sara Lee has attributed the decision to the country's weak economicclimate. Sara Lee International Beverage and Bakery's CEO has said that sale will improve the company's'production economics' and that the firm will continue to supply Spanish consumers with the 'productsthey know and love'. The move can be seen as an attempt to cut costs at a time when Spanish consumers are increasingly pricesensitive. The market will therefore continue to be a very difficult place to do business for major brandbuilders such as Sara Lee, and BMI expects such firms to continue to look for ways to cut costs andcreate efficiencies so as to maximise their chances of maintaining sales in what is now a highly pricesensitiveenvironment. Additionally, there were reports in July that French retail group Les Mousquetaires, which owns theIntermarché supermarket network, is planning to exit the Spanish market. The report, which has not yetbeen confirmed, suggests that local operator Bon Preu has been lined up as a buyer for the firm's 53outlets. The move would be indicative of the current difficulties surrounding the Spanish retail marketwhich, up until recently, was among the most dynamic in Western Europe. If Bon Preu does go on toacquire Les Mousquetaires' Spanish operations it could be seen as significant that none of the leadingoperators were prepared to take a punt on the business. The Spanish MGR market was once seen as oneof the most attractive in Western Europe and was a hotbed of merger and acquisition activity in 2006 and2007. The reluctance of the big three operators (Carrefour, El Corte Ingles and Mercadona) to use thecurrent market weakness to broaden their networks is perhaps indicative of the current pessimismconcerning the length and depth of the downturn. In more encouraging news, Spanish food group Ebro Puleva benefitted from lower commodity prices toreport a jump in earnings for the first half of 2009. In the six months to June the firm's earnings beforeinterest, taxes, depreciation and amortisation (EBITDA) were up by 21.5% to EUR144mn (US$205.4mn)(for continuing businesses). However, there were also signs that it may not escape unscathed from theeconomic downturn, with the company reporting that revenues declined by 1.8% over the period. This isin contrast to 2008, when it managed to successfully grow sales by 18.8% against a gloomy economicbackdrop and can be primarily attributed to a 15.5% drop in sales at the company's dairy unit. While Ebro Puleva's ability to grow earnings against a difficult economic backdrop is a positive, it isunlikely that this will remain the case if sales continue to stagnate or decline. Given BMI’s gloomyeconomic outlook for Spain, with GDP expected to contract by 3.9% in 2009 and by 0.9% in 2010, EbroPuleva, along with other major players, may be facing a difficult couple of years. Get Full Details About This Report >> |
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