Eroski set to break into Balearic market

Related tags Retailing

With new store developments tightly controlled there, the Balearic
Islands is one of the toughest markets in Spain for supermarket
groups to break into. But Basque group Eroski could become the
biggest operator there if it succeeds in buying local group Mercat.

Eroski​, the Basque retail group, could be on the verge of breaking into one of the most restrictive retail markets in Spain - the Balearic Islands.

According to a report in the Spanish newspaper Expansion​, Eroski is near to finalising the acquisition of Distribucion Mercat, a move which would allow the group to gain a major foothold (130 stores) in an autonomous region, while neatly bypassing the mountains of red tape imposed by the local authorities on new retail developments.

Eroski already owns 31.85 per cent of Mercat, but is now trying to take 100 per cent control of the group. Francisco Orell, head of Mercat, told the newspaper that the company was in negotiations with Eroski, but that no agreement had as yet been reached.

Mercat is the leading supermarket retailer in the Balearics with 123 wholly-owned stores and six franchised outlets. Sales last year reached around €482 million, up 20.5 per cent on the previous year. The stores operate under the Syp, A Prop and Consum fascias, the latter of which is owned by Eroski.

Eroski is already one of the largest retail groups in Spain, with 62 hypermarkets, 1,537 supermarkets and a raft of other stores including cash & carrys and sports equipment retailers. But it is also one of the most ambitious groups, and recently announced plans for a share issue to help finance its expansion plans.

Some €300 million has already been set aside for the construction of 100 supermarkets and eight hypermarkets.

Like many Spanish retailers, Eroski's expansion plans have often been hampered by the excessive restrictions imposed on food retailers by the local planning authorities in many parts of Spain, which is why the ready-made chain in the Balearics is such a big prize.

But the restrictions on new store developments are just the beginning. The Catalan authorities recently decided to impose a tax on some of the larger food retail outlets already operating in the region - a move decried by the leading companies, including Eroski.

Ironically, this kind of restrictive measure has helped drive the growth of Internet shopping in Spain, with increasing numbers of shoppers opting for home delivery because their nearest store is too far away.

Related topics Retailer & shopper insights

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