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Italy Food and Drink Report Q1 2008
Business Monitor International, March 2008, Pages: 74
The Italy Food Drink Report provides independent forecasts and competitive intelligence on Italy's food and drink industry.
Italy’s fragile economy was predicted to register relatively strong growth of around 1.8% in 2007 following similar levels of growth in 2006. By historical standards this is good news for Italy and this has fed into consumer confidence leading to a rise in consumer spending. This, coupled with growing
acceptance of the supermarket and hypermarket formats, has led to moderate expansion in the MGR sector. However with many retailers having had experience of previous false dawns when it comes to the Italian economy, and several still struggling to get to grips with enigmatic Italian consumers, the pace of outside investment remains moderate as retailers wait to see if this current economic recovery is sustained.
The Italian MGR sector is one of the most fragmented and least saturated in Western Europe and many of the leading brands exist as networks of smaller companies, including the two largest chains in Italy – Conad and Coop Italia. On the surface this would suggest there are opportunities for the big global retailers to expand rapidly in the Italian market. However, complicated planning regulations that favour smaller retail formats, plus the fact that nearly all Italian MGRs belong to a buying group, mean that market entry is hard for retailers without a local partner. Peculiarities of the Italian market have also meant that foreign retailers have often found it hard to grow their revenues as they struggle to attract Italian consumers away from the retail brands and formats they are familiar with. For example, although consumer spending has reportedly grown in Italy this year, this is not reflected in the revenues of France based retailer Carrefour, which operates 57 hypermarkets and 468 supermarkets in Italy. For the first
nine-months of 2007 Carrefour’s sales fell by 2% at its Italian stores. Carrefour has blamed this poor performance on its network of Carrefour hypermarket stores that Italian consumers just don’t seem to find appealing and has outlined plans to dispose of some of the worst performing stores.
However, French based retailer Auchan, operating in the supermarket and hypermarket sector, opened seven franchised hypermarkets in Italy in 2007, suggesting that its own hypermarket stores are performing reasonably – highlighting the perplexing anomalies that exist in the Italian MGR sector. The
fact that some retailers are managing to make headway in this inscrutable market is highlighted by two recent acquisitions of substantial size. In November Germany based Rewe acquired La Centrale Lazio Spa, which operates eight supermarkets under the Mart banner in central Italy; in a separate development SPAR Austria acquired 62 Pellicano supermarkets owned by the Italian Lombardini family. This second development in particular is of significant size, suggesting that SPAR Austria is having considerable success with its current Italian operations. The Italian market continues to be mysterious and it is hard to differentiate what makes certain stores perform and others not; however, the market remains tempting because of its lack of maturity and any retailer that strikes upon a format that is popular with Italian consumers is very likely to reap significant rewards in the future.
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