Super Sol (NYSE: SAE; TASE:SAE) lost 3% of its market share in the past year. AC Nielsen Israel reports in a survey commissioned by "Globes" that Super-Sol's market share fell from 29.8% in the second quarter of 2002 to 26.8% in the second quarter of 2003. The survey also indicates that independent chains captured 3% market share from Israel's leading chains in the second quarter of 2003.
According to food industries suppliers, Israel's food market totals NIS 18 billion. 1% market share therefore equals NIS 180 million.
Blue Square Israel (NYSE: BSI; TASE:BSI) lost over 1% of its market share, from 27.4% in 2002 to 26.2% this year. Only ClubMarket increased its market share from 13% in 2002 to 14% this year.
ClubMarket was the only one of Israel's top three supermarket chains to increase its market share in the second quarter of 2003 thanks to the increased market share of subsidiary, Jumbo, from 2.9% in the second quarter of 2002 to 4.5% in the second quarter of 2003.
By contrast, Super-Sol's superstore subsidiary, Cosmos, saw its market share fall almost a full percent to 4.5%. The competing superstores, Jumbo and Cosmos, now have almost the same market share. Blue Square's superstore subsidiary, Mega, increased its market share from 10.8% in 2002 to 12.1% in 2003, as part of Blue Square's strategy to invest the bulk of its resources in this brand. Mega has by far the highest brand recognition among superstore brands, including Blue Square's other brands Super Center and Super Center City.
Co-Op is vanishing
Blue Square's Co-Op brand supermarket chain did not even make the top ten, and as "Globes" has reported, it is on its way out, since Blue Square is focusing on developing Mega instead.
Clubmarket's discount brand supermarket, Hatzi Kupa, rose from 12th place in 2002 to eighth place in 2003 in the chart, with a 6% market share
Super-Sol is Israel's leading supermarket brand
Despite the weakening of the Super-Sol and Cosmos brands, Super-Sol is still Israel's leading supermarket brand. Super-Sol has 26.8% market share, closely followed by Blue Square, with 26.2%. ClubMarket is still a distant third, with 14% market share. The independent chains have an aggregate market share of 14.3%, and the convenience stores 14.9%.
Among the leading independent chains, Hatzi Hinam increased its market share in the past year by 1.3% to 5.8%, to become the only independent chain in the top-ten list. Other independent chains include Supermarket Haviv, Tiv Taam HaCarmel, Yad Itzhak Food Wholesalers, Metropolitan Distributors (Israel) (MetroMarket), Stop Market, Hashikma Marketing Credit and Financing, Co-Op Jerusalem - Supermarket Chain, Falcon Meat Delicatessen, Menia Delicatessen Trade Networks, M. Yohananov & Sons, Bitan Wines, Birkat Haaretz, Chen & Hesed (Degel HaTorah) Hachi Kedai, and Ezra Hadadit (RAM).
The second quarter of 2003 was not the first in which the independent chains increased their market share - it has been steadily growing for two years. The main reason is that their overhead is lower than leading supermarkets. Hatzi Hinam, with four stores, has only 30 people staffing its headquarters, including secretaries. The independents also are not burdened with weak branches, since they locate their stores in high-demand areas. They are also able to focus resources on specific niche markets, often upscale. Another competitive edge over the leading chains is better service.
The rise of the independent chains is partly because they relay on added value that differentiates each one from the others. Tiv Taam offers a range of non-kosher foods, a shopping as entertainment, and is open on Saturday. Stop Market is a 24-hour chain of convenience stores that offers a variety of premium products. Other independent chains have very low prices, thanks to their high productivity per sq.m. and low overhead.
Another possible reason for the independent chains' success is that the leading chains are perceived by the public as part of the country's establishment. The independent chains know how to exploit this distaste, and they play on nostalgia for the groceries of yesteryear. Another factor behind the leading chains' loss of market share is over-capacity and consequent low productivity per sq.m. The leading chains had already opened stores in high-demand areas, and the later stores were in less desirable locations, or faced strong competition. Expansion translated directly into lower productivity. An area that once supported two stores, now boasts five or six competing branches of different chains.
The AC Nielsen Israel survey of market share does not add up to 100%, since it does not include the pharmacy chains, which are included in a separate list of cosmetics and houseware stores.
AC Nielsen Israel is a subsidiary of VNU (AEX; XETRA:VNUN), which operates in 110 countries.
| Comment: How to kill a brand by Lilac Sigan If anyone wants to learn how not to develop a brand and how not to exploit the assets of existing veteran brands, they should study the policies of Israel's supermarket chains in recent years. Of particular interest is that all three chains chose the same path and none thought to try going against the flow. Advertising agencies traditionally consider supermarkets heavy advertisers and desirable accounts, but the supermarkets are in no hurry to spend millions of dollars on advertising this year, probably because of their dismal financial results and the halt in market share growth. Super Sol (NYSE: SAE; TASE:SAE) has spent $9 million in advertising since January 2003, and it is the largest advertiser among Israel's top three supermarket chains, at least according to Ifat Advertising Monitoring. It's hard to pinpoint which factor had precisely what effect on braking the leading supermarkets' growth. It's easy to blame the recession, but there can be no doubt that branding problems are also hindering them. For years, they invested heavily to spin off and establish subsidiary chains, each under different brand names. Virtually every year, one of the leading chains decided that it did not want to emphasize a particular format, and switched its emphasis to a different subsidiary brand. For instance, ClubMarket invested millions in its brand, before switching recently to emphasize its Jumbo subsidiary. Super-Sol made a similar switch to Hyper-Netto and Co-Op, and Blue Square Israel (NYSE: BSI; TASE:BSI) decided at some point to put all its eggs in the Super Center basket. While the present market climate forces the supermarkets to emphasize their discount brands, that is not the issue. The chains long ago reach that conclusion, and sought ways to reduce the number of brands and even choose an umbrella name for each of the different types of stores. Even now, they are seeking brand names that will encompass several types of stores. In practice, that means a complete rebranding, with the attendant costs. Wouldn’t that waste the assets of the existing brands, such as Super-Sol, Co-Op, and ClubMarket, as well as being a waste of money? After all, these are well-established and well-known brands that appear in the press and stock exchange reports. Everyone knows that its preferable nowadays for a company to have one brand name that sends a uniform media message on every channel. The supermarket chains ought to consider how to exploit what remains of their veteran brands. |
Published by Globes [online] - www.globes.co.il - on August 20, 2003