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Italian Large-scale distribution after the 2020 bubble

The Mediobanca research area presents the new edition of the observatory

Lidl Italia is the sales growth champion between 2015 and 2019; in terms of ROI Eurospin stands out; Supermarkets Italiani (Esselunga) is confirmed as the queen of cumulative profits.

The Mediobanca research area presents the new edition of the observatory on Italian and international food-based large-scale distribution which aggregates the economic and financial data of 117 national companies and 27 major international players for the period 2015-2019. For Italy, coverage is estimated at 93% of the market. The study includes an in-depth study of 32 Italian drugstores and a focus on the sustainability of large-scale distribution in Italy and abroad. 

Lidl Italia is the sales growth champion between 2015 and 2019: + 8.7% annual average, followed by Eurospin and Agorà paired with + 7.6%. This is followed by the trio Lillo-MD (+ 6.9%), VéGé (+ 5.3%) and Crai (+ 5.2%). In terms of return on invested capital (Roi) Eurospin stands out (20.2%), followed by Lillo-MD (16.5%), Agorà and Lidl Italia at 12.9% and Crai at 11.9%. All the remaining operators are below the double digit, led by VéGé at 9.1%. Supermarkets Italiani (Esselunga) is confirmed as the queen of cumulative profits between 2015 and 2019: 1,340 million, followed by Eurospin at 1,016 million, Conad at 879 million and VéGé at 839 million. Carrefour accumulated losses of 603 million, Coop of 252 million. Coop Alleanza 3.0 is the largest Italian cooperative with sales in 2019 of 4,043 million, followed by PAC 2000 A (Conad Group) at 2,851 million and Conad Nord Ovest at 2,586 million, preceding Unicoop Firenze at 2,320 million. The Coop system shareholder loan appears to be in constant decline from 11.1 billion in 2014 to 8 billion in 2019. Over the last 5 years, the Coop has achieved net financial income of 1,233 million and suffered financial write-downs of 845 million.

2020 of modern distribution is expected to close with a 5% progress, of which 1% attributable to the explosion of the online channel. Very marked increases for discounters (+ 8.7%), supermarkets (+ 6.8%) and drugstores (+ 6.6%). The entire system should fall back by 1.6% in 2021, cumulating an increase of 3.3% over the two-year period. The crisis of large surfaces continues, which is expected to lose 4.8% in the two-year period 2020-21. E-commerce (+ 60% in 2021) could reach 3% of the market as early as 2021, two years earlier than the 2023 expected before the pandemic. However, this is a segment that continues to record negative margins of over 10%. In 2020, the concentration of the Italian market is increasing: the market share of the top five retailers is 57.5% from 52.8% in 2019.

The Italian market thus exceeds that of Spain (50%), but remains fragmented compared to France (78.1%), Great Britain (75.3%) and Germany (75.2%). In 2020 Conad holds the largest market share with 14.8%, followed by Selex at 13.7% and by Coop at 12.9%. In 2011, Coop was the first group with 15.3%, followed by Conad at 10.6% and Selex at 8.1%. 8.3%, with very positive effects on industrial margins (+ 17.1%) and on net income (+ 42.4%).

The Roi of the system dropped to 4.9% in 2019 from an average 5.6% in 2015-2017. The downward trend affects all segments which also show very different levels: discount stores from 20.1% to 16.6%, organized distribution from 8.8% to 7.8% and large-scale distribution from 6.7% to 4%. Similar dynamics for the EBIT margin: from 2.5% in 2015-2017 to 2.1% in 2019, with discount stores in this case slightly up from 4.7% to 4.9%, organized distribution decreasing from 2.8% to 2.4% and large-scale distribution down from 2.9% to 1.9%. For Conad, the trajectory is from 2.5% to 1.8%, while Coop mark a negative margin over the entire five-year period that is fixed at -1.4% in 2019. The 32 Italian drugstores they built in 2019 grow sales of 3.6 billion + 5.1% on the previous year. The EBIT margin is 4.6%, the Roi is 12.3%. The total workforce is close to 13 thousand units.

Large-scale distribution companies deal extensively with sustainability in dedicated sections of their websites. This is 87.3% of Italian groups and 96.5% of foreign ones. Sporadic in Italy is the presence of dedicated reports involving 62.5% of the total against 96.4% recorded in international groups. With regard to some of the issues subject to analytical measurement, Italian retailers appear essentially aligned with the major international players. As for human resources, in 2019 the female workforce amounted to 62.9% of the total in Italy against 60.3% abroad; in terms of training, the annual hours dispensed to eligible employees amount to 16.3 in Italy and 21.6 abroad; the use of part-time work involves 52% of the workforce in Italy, 43.8% abroad. On environmental issues: the share of differentiated waste is equal to 75.1% in Italy and 71.7% abroad. Energy intensity is aligned: about 450 kWh per square meter, but Italian retailers have less impact in terms of carbon intensity: 136 kg of CO2 per square meter compared to 208 kg.

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