About a month ago the Mega supermarket chain unveiled a new multi-year strategic plan. The company intends on cutting back its real estate holdings and implementing logistical changes, but the plan's most notable feature is a massive move into the heavy discounting arena and the establishment of a new store brand that will supply shoppers with reduced price stickers.
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The move by Mega is long overdue – both in answer to Super-Sol, its largest competitor, which for years already has taken a similar tack, but mainly in response to dramatic changes in shopping patterns in recent years that have turned the word "discount" into the retail industry's primary motto.
The discount chains competing with Mega and Super-Sol are expanding their market shares in Israel's food marketing industry and in combination are rapidly approaching the 50% mark. This growth is being fostered by consumer price consciousness and the numbers should certainly worry the two leading players. For years Mega and Super-Sol have rested on their laurels, enjoying market dominance thanks to their convenient locations inside and outside of the cities. But the BdiCode rankings issued by the BdiCoface business information firm vividly illustrate which way the market is headed.
"The two leading companies still hold over half the industry's revenues pie by themselves," explains Tehila Yanai, co-CEO at BdiCoface. "However, the share of revenues held by the two large companies has been in constant decline in recent years with the penetration of independent chains that are considered cheaper – like Rami Levy and Kimat Hinam. Whereas six years ago the share of revenues belonging to Super-Sol and Mega was 69%, today it is estimated at just 54%, with the trend pointing towards the popularly-priced chains continuing to encroach upon the top chains. The economic slowdown is creating new growth opportunities for discount chains."
Rami Levy sales up 26%
According to BdiCoface, sales for the top five retail chains rose 3% in 2012 to NIS 24.3 billion, with Super-Sol maintaining its lead with a 34% market share (not including small supermarket chains) while dipping 0.25% to NIS 11.57 billion. The chain's workforce increased by 3% compared with 2011 and it added seven branches, bringing the total now to 274 stores.
Mega, controlled by Alon Holdings Blue Square, ranked second with NIS 6.9 billion in sales. The chain currently operates 211 branches, including 119 Mega in Town stores, 66 Mega Bool outlets, and 15 stores under the Zol B'Shefa banner serving the ultra-Orthodox sector.
Sales for Rami Levy Hashikma Marketing, in third place, jumped 26% last year to NIS 2.79 billion, accounting for about 8% of aggregate revenues for the surveyed supermarket chains. Manpower at the chain also rose 26% in 2012 to 3,760 employees. In 2012 its number of stores grew from 21 to 24 and the chain has opened two more branches since then. According to recently published figures, Rami Levy leads all other supermarket chains with turnover of NIS 6,642 per square meter – approximately triple the amount registered by the two top chains.
Moving up one notch into fourth place in 2012, with a 27% surge in annual revenues to NIS 1.65 billion, Yenot Bitan ended the year with 31 stores, 2,583 employees, and a 4% market share among surveyed chains.
In January Yenot Bitan bought out the Zim brothers to acquire the Kimat Hinam chain of discount supermarkets, which ranked fifth in sales in 2012 with NIS 1.35 billion, a 6.5% increase over the previous year. The purchase added Kimat Hinam's 32 stores and 4,500 employees to Yenot Bitan's operations.
Merav MazonKolbeats Tiv Ta'am
Sixth in the rankings for 2012 with an estimated NIS 1.2 billion in sales – unchanged from 2011 – was the Hatzi Hinam chain. Merav Mazon Kol, with eight outlets and 750 employees, chalked up NIS 1.18 billion in sales to jump from ninth place into the seventh slot.
Tiv Ta'am, numbering 30 branches and 1,316 employees, dropped from seventh to eighth place in sales in 2012 with NIS 1.04 billion turnover.
In ninth place, down from eighth the year before, was Co Op Israel with NIS 835 million in sales. The chain has 47 branches and 1,300 employees.
Closing out the top 10 was Victory Supermarket Chain with NIS 708 million in sales, a 16% improvement from 2011, when it ranked 11th. The chain now has 20 stores and 1,200 employees.