\f2/18/2015 Euromonitor International Analysis McDonald's Corp in Consumer Foodservice (USA) Local Company Profile | 12 Nov 2014 STRATEGIC DIRECTION McDonald's is the leading fast food restaurant in the US, and has only widened its lead over the competition in the past few years, despite seeing a slight decline in profit margins for the first quarter of 2014. The restaurant's emphasis on quality has been showcased in the past few years, notably with the introduction of the popular McCafe element. This effort to attract customers at all times of day, particularly breakfast, is continuing, as the restaurant tests new pastries and even offered free coffee for some of 2014. KEY FACTS Summary 1 McDonald's Corp: Key Facts Full name of company: McDonald's Corp Address: One McDonald's Plaza, Oak Brook, IL 60523, USA Tel: +1 (630) 623 5004 Fax: +1 (630) 623 5004 www: www.mcdonalds.com Activities: Burger fast food Source: Euromonitor International from company reports, company research, trade press, trade sources Summary 2 McDonald's Corp: Operational Indicators 2011 2012 2013 Net sales US$27,006 million US$27,567 million US$28,106 million Net profit US$5,503 million US$5,464 million US$5,603 million Number of employees 420,000 440,000 440,000 Source: Euromonitor International from company reports, company research, trade press, trade sources COMPANY BACKGROUND McDonald's Corp, headquartered in Oak Brook, Illinois, US, is a publiclyheld company and the leading consumer foodservice company in the US. The company has over 34,500 global restaurants, 41% of which are located within the US. Despite this concentration in the company's domestic market, the brand is truly global in scope, operating in 119 countries. In the US, McDonald's operates entirely within burger fast food, serving the iconic Big Mac sandwich alongside a wide variety of other options. Although it began as strictly a hamburger chain, the company has since significantly diversified its menu, offering breakfast sandwiches, chicken sandwiches, chicken nuggets, salads, desserts, coffeebased beverages and, most recently, oatmeal, fruit smoothies and snack wraps. With over 14,267 US outlets (both company and franchiseowned), McDonald's has achieved a widespread national footprint. In addition to a large number of standalone outlets, McDonald's units are located within shopping centres, airports and travel plazas, among other alternative locations. As the largest fast food chain in the US, McDonald's became an early target for proponents of the healthy food movement. As such, the brand received criticism for serving food that was perceived as unhealthy in the midst of a rising national obesity epidemic, particularly after the release of the 2004 documentary, Super Size Me, in which the documenter ate nothing but McDonald's for 30 days. In response, McDonald's became an early adopter in the growing national trend towards healthier menu items in fast food. The company has publicly stated its commitment to promoting balanced, active lifestyles and adding healthier menu options. McDonald's was the first fast food brand to print nutritional information on its packaging and has greatly expanded its offer of \"better for you\" menu items in recent http://www.portal.euromonitor.com/portal/analysis/tab 1/4 2/18/2015 Euromonitor International Analysis years, which include grilled chicken sandwiches, apple slices and premium salads. In 2011, the company added to this list, launching Fruit and Maple Oatmeal and new flavours for its Real Fruit Smoothies line. Still, as the brand maintains iconic status as the leader in American fast food, it continues to face negative publicity and the possibility of future legislation as a result of rising obesity rates. In 2012, McDonald's also implemented calorie counts alongside menu boards nationwide, doing so before being mandated by the healthcare reform law of 2010. McDonald's places a strong emphasis on attracting young consumers (and their parents) to its restaurants. The company introduced the Happy Meal in 1979, thus pioneering the concept of marketing specifically to children by giving away toys and games alongside meal purchases. This strategy suffered a blow in 2010 when the City of San Francisco, California, passed legislation banning the inclusion of free toys with meals that failed to meet certain nutritional standards. McDonald's was able to bypass the legislation by instead offering the toys for a small fee with purchase, but the healthiness of fast food children's menus continues to be a government focus in many regions. McDonald's recent strategy can be defined as a focus on improvements to all aspects of the brand's offered dining experience. This includes offering everyday value to customers in the form of lowpriced core menu items, as well as higherpriced premium items (such as burgers with larger patties and speciality toppings) to those looking for a more indulgent meal. It also includes upgrades to service that maximise the accessibility of McDonald's outlets, including extended hours (many outlets are now open 24 hours, seven days per week) and a faster, doublelane drivethrough system. Outlets have been subjected to extensive aesthetic upgrades as well, as the chain has aggressively remodelled new and existing outlets to reflect a more modern, comfortable, highend dining experience. Finally, McDonald's focus has also been on menu innovation. The chain launched McCaf, its iced coffee and espresso based beverage programme, in the US as well as other speciality beverages such as smoothies, premium milk shakes and frozen lemonade. It also focused on adding healthier menu items, such as salads and oatmeal, premium burgers, and those items designed to drive traffic throughout the day, such as snack wraps, fish and chicken bites, coffee and baked goods. In 2012, the company sought to further promote its popular discounted Dollar Menu to continue attracting consumers with a variety of valuebased goods, much to the dismay of some franchisees. SUPPLIERS McDonald's relies heavily on a network of suppliers for both food and packaging. Supplies and services are distributed to US outlets by over 40 independentlyowned and operated distribution centres, which are strategically positioned to be accessible to the 14,267 restaurants in the US. These suppliers provide a diverse range of products and services, including baked goods, produce, new/promotional products, training, development, chemical products and temporary services. McDonald's maintains close and longstanding ties with its largest US suppliers. As the US is McDonald's domestic market, many of its suppliers grew with the company. As such, much of its success is directly tied to mutually beneficial relationships with the brand. For example Simplot, now a US$4.5 billion potato producer, first began supplying McDonald's with frozen French fries after company scientists invented the product in the 1950s. Likewise, boneless chicken nuggetinventor Keystone Foods also remains a major McDonald's supplier. McDonald's is able to capitalise on these loyal relationships to attain favourable pricing as well as flexibility in new product development, quality and sourcing. The company's supply chain is horizontally integrated (meaning McDonald's does not own its suppliers), though many of its suppliers manufacture goods exclusively for McDonald's. In addition to these companies, McDonald's sources from major US companies such as Otto and Sons, Inc (beef), Tyson Foods (chicken), Sunny Fresh Farms (eggs), Fresh Express (produce), Kraft Foods (dairy) , Dean Foods (dairy), General Mills (dairy), Newman's Own (salad dressings) and CocaCola (soft drinks). Despite the vastness of its network, McDonald's maintains very stringent quality and food safety controls. Suppliers of baked goods, for example, must adhere to strict guidelines involving shape, colour, thickness and consistency, and suppliers are encouraged and expected to share product samples and best practices with others within the network. http://www.portal.euromonitor.com/portal/analysis/tab 2/4 2/18/2015 Euromonitor International Analysis Its supplier network has come under scrutiny in recent years as US consumers become more concerned with the healthfulness and quality of its foodservice meals. In November, 2011, for example, an animal rights group released a video alleging abusive treatment at an egg processing centre operated by Sparboe Farms, one of McDonald's' egg suppliers. Amidst considerable public outcry, McDonald's immediately cut ties with the supplier. McDonald's has also taken other recent steps to improve the quality of its meat, including promising in early 2012 to discontinue the use of boneless beef trimmings (a controversial product dubbed \"pink slime\" by the media) in its hamburgers. In 2014, McDonald's responded by releasing a video from a Canadian production facility showing how Chicken McNuggets are actually made, starting with a chicken breast similar to those found in grocery stores. However, response to the video debunking the \"pink slime\" accusations was not entirely positive. Although the video showed that McDonald's does in fact use relatively natural ingredients in its products, many viewers were put off watching meat being ground and reshaped into nugget moulds (Boot, Ball, BowTie, Bell are the four distinct moulds). The media outlet Gawker responded with the sentiment, \"The process is not \"pink slime\" gross, but it's still sort of disgusting.\" Recently, McDonald's has vowed to replace all polystyrene beverage cups with paper cups at all of its US outlets. The switch was prompted by a proposal filed in 2011 by a shareholder activist group called As You Sow, demanding a switch to a more ecological cup alternative. In 2012, McDonald's tested the paper cups in select units to positive results. The concerted change from McDonald's comes just in time, as former Mayor of New York Michael Bloomberg proposed a ban on polystyrene packaging in early 2013, which was approved by the New York City Council under Mayor Bill DeBlasio in December of that year. COMPETITIVE POSITIONING McDonald's is the leader in overall US consumer foodservice with a 7.3% value share (in GBO terms) in 2013, more than double that of Yum! Brands, its closest competitor. The company controls 17% of fast food value sales, and a commanding 36% of burger fast food. Due to its leading position, McDonald's faces diverse and intense competition from brands in various categories, including Wendy's, KFC, Burger King, Starbucks and Subway. There were times in the company's history during which it experimented with diversified concepts, including entering into partial ownership of both the Chipotle Mexican Grill and Boston Market brands. McDonald's divested both in 2006, however, and has since focused exclusively on its eponymous burger fast food brand. This focus on the core burger fast food operation has allowed the company to be very agile in terms of innovation and new trends in US fast food. As the brand has already achieved national coverage in terms of outlet expansion, its recent focus has been on improvements to comparablestore sales through service optimisation, menu innovation, and outlet remodelling with a focus on the latter two in recent years. Despite its loyalty to burger fast food, McDonald's offers an expansive menu that allows it to compete for business with a number of other consumer foodservice categories. When Starbucks became a threat to its breakfast business in 2009, for example, McDonald's launched its premium McCaf coffee programme that has since become a major source of sales growth. Furthermore, the brand's menu includes such items as baked goods, premium salads, chicken sandwiches, fried fish sandwiches, snack wraps, desserts and speciality beverages that appeal to a wide range of potential consumers. In fact, McDonald's sold more chicken than firstranked chicken fast food player KFC at the end of the review period and more fish sandwiches than the top fish fast food retailer, Long John Silver's. Due in part to its vast resources, widespread national footprint and strategic menu innovation, McDonald's has demonstrated the ability to dominate any category it enters. McDonald's current strategy for menu innovation focuses on a dual strategy in terms of menu offerings. First, it has focused on developing quick, inexpensive foods, often highlighted on its Dollar Menu, that boost value offerings and attract consumers who are still price sensitive. These items also attract customers throughout the day and during offpeak times such as midmornings and afternoons. Second, it offered more premium items sold at marginally higher price points, and featuring larger portions and highend ingredients. These items appeal to those consumers who are still trading down from fullservice restaurants and are looking for a premium dining experience at a value price. One example of these offerings was its 2012 cheddar bacon onion burger. http://www.portal.euromonitor.com/portal/analysis/tab 3/4 2/18/2015 Euromonitor International Analysis In 2014, McDonald's entered the race for breakfast dominance. In response to attack ads by Taco Bell, McDonald's CEO Don Thompson struck back, arguing on behalf of the company's allegedly relatively natural and healthy ingredients, saying, "We actually crack eggs in the restaurant and cook sausage and bacon and toast muffins and we place cheese on muffins." Waging its part in the \"breakfast war\2/18/2015 Euromonitor International Related Analysis Starbucks Corp in Consumer Foodservice (USA) Local Company Profile | 12 Nov 2014 STRATEGIC DIRECTION After essentially inventing the channel, Starbucks has become the leading specialist coffee shop brand in the US with a value share of 60% in 2013. The company closed hundreds of locations during the recession but reversed tactics in 2011, returning to outlet expansion and launching a number of new initiatives intended to drive traffic throughout offpeak dayparts (including lunchtime and late afternoons) and boost average sales. The brand continued pursuing expansion in 2013, adding up to 315 new locations in the US throughout the year. Starbucks also purchased Evolution Fresh in 2011, a fresh juice brand that it plans to leverage into a national footprint of juice/smoothie bars. Starbucks opened its first Evolution Fresh outlet in California in March 2012. The company also purchased Teavana tea shops and La Boulange Bakery in 2012, further upgrading its noncoffee restaurant components. KEY FACTS Summary 1 Starbucks Corp: Key Facts Full name of company: Starbucks Corp Address: 2401 Utah Avenue South, Seattle, WA 98134, USA Tel: +1 (206) 447 1575 Fax: +1 (206) 447 0828 www: www.starbucks.com Activities: Specialist coffee shops, juice/smoothie bars Source: Euromonitor International from company reports, company research, trade press, trade sources Summary 2 Starbucks Corp: Operational Indicators 2011 2012 2013 Net sales US$11,700.4 million US$13,299.5 million US$14,892.2 million Net profit/(loss) US$1,728.5 million US$1,997.4 million (US$325.4 million) Number of employees 149,000 160,000 200,000 Source: Euromonitor International from company reports, company research, trade press, trade sources COMPANY BACKGROUND Starbucks Corp is a publiclyheld company based in Seattle, Washington, US. The company operates a large chain of specialist coffee shops and is the dominant player. It also operates a smaller chain of specialist coffee shops under its Seattle's Best Coffee, which it also sells wholesale to other foodservice concepts (including Subway and Burger King) to be sold in fast food outlets. In the US, Starbucks has become synonymous with the idea of specialist coffee shops, and the company has a growing international presence as well. More recently, Starbucks Corp also entered juice/smoothie bars with its Evolution Fresh brand. The brand had only one outlet in operation due to being opened in March 2012, but the company has expressed plans to build a national footprint over the longterm. The company continued its ambitious expansion plan by purchasing both Teavana branded tea shops and La Boulange Bakery. For the former, the company plans on expanding these shops throughout the nation. In terms of La Boulange, Starbucks will use its baked goods to replace its current offerings starting in 2013. In 2010, the company embarked on a mission to renew its focus on the customer experience, seeking to pay special attention to service, beverage quality and store appearance. Starbucks sought to redefine its place as a coffee specialist, with an improved focus on bringing highquality coffee to the US. It continues to promote its stores as a \"third place\" a location between home and work (or school), http://www.portal.euromonitor.com/portal/analysis/relatedtab 1/3 2/18/2015 Euromonitor International Related Analysis where consumers can relax or spend time with friends. While US consumer foodservice has witnessed an expanding number of outlets with drivethrough locations, Starbucks's emphasis on being a \"third place\" remains an integral part of its efforts to expand its penetration. Starbucks outlets in the US typically feature soft, muted tones and a variety of seating options, from communal tables to lounge style couches and chairs. Outlets also offer free WiFi to those with laptop computers or other internet enabled devices. Starbucks expanded upon this premium experience through a new experiment in 2012 in which the company began to serve select beers and wines alongside its own interpretations of classic appetisers after 16.00hrs in certain locations. Titled Starbucks Evenings, the programme is not only an expansion into a daypart that has been weak for the company, but is a continued commitment to the \"third place\" theme, attracting singles looking to read or work with a glass of wine, or groups of people looking to share a few appetisers and drinks in a smart and familiar space. As of mid2014, 12 million Starbucks customers in North America had downloaded the Starbucks mobile ordering app, accounting for 15% of total transactions. Starbucks likely believes that mobile ordering is the payment platform of the future, and it is anxious to be ahead of the curve. Almost half of domestic Starbucks outlets have drivethroughs, and more than half of the new stores planned to open in 2014 will have drivethroughs. In late 2012, Starbucksowned chain Seattle's Best Coffee tested a new drivethrough only format, and then opened several drivethrough only units in 2013. The 600 sq ft units, originally tested in Seattle, are claimed to leave a smaller ecological footprint while still offering the same quality coffee and food as eatin units, in addition to being highly profitable with low overheads. McDonald's has reported in the past that more than half of its US value is derived from drivethroughs, indicating the potential benefits this service can provide. In addition to participating in consumer foodservice, Starbucks Corp sells branded products through various retail channels, including within its own network of stores and in grocery stores and mass market retailers. The company added many products to its consumer packaged goods line over the review period, including branded KCup products for use in singlebrew coffee machines, Via instant coffee and, most recently, Evolution Fresh juice blends. The company has also expressed plans to make further forays into greater health and wellness, though it had yet to release specifics as to which brands or products at the end of the review period. SUPPLIERS Starbucks roasts its own coffee, which is ground, brewed and served at its outlets. Both company owned and franchised locations use Starbucks as the sole provider of coffee for their beverages. Starbucks Corp, in turn, sources its coffee from a variety of growers around the world. It is known for its role as the largest buyer of fair trade coffee in the world. The company also roasts coffee for its Starbucks brand, which is then sold as a consumer packaged product at retail locations throughout the country. In addition, the company roasts coffee for its Seattle's Best Coffee brand, which is available at retail locations as well. Evolution Fresh products are available mainly in independent retail outlets, although they can be found in larger chains such as 7Eleven and various large, regional grocery brands. COMPETITIVE POSITIONING Starbucks's share in specialist coffee shops declined throughout much of the review period, as the brand suffered growing competition from lowerpriced players. When the recession hit, many consumers dropped their daily Starbucks habit, opting instead to brew coffee at home or purchase from other outlets, including local independents and fast food chains. Its own retail business, while helpful for the company, has also helped cannibalise its foodservice share, as consumers can now just brew their favourite Starbucks roast in their own home. Furthermore, many fast food players realised specialist coffee shops were stealing their breakfast traffic and began improving their coffee offerings to entice customers back. McDonald's McCaf programme has been incredibly successful selling espressobased beverages at lower prices than Starbucks, and the brand was quickly followed by other fast food players such as Dunkin' Donuts and Burger King. While Starbucks does benefit from this trend through partnerships with various fast food http://www.portal.euromonitor.com/portal/analysis/relatedtab 2/3 2/18/2015 Euromonitor International Related Analysis brands that sell Seattle's Best Coffee, these are typically licensed deals and therefore result in relatively small revenue streams. To counter this rising competition, Starbucks used a number of strategies, including adopting an even more premium positioning with new coffee roasts and highend brewing techniques. Starbucks now offers pourover coffee in some locations during certain hours, capitalising on a gourmet trend that has become popular among independent coffee shops. The technique is timeconsuming and involves handbrewing by baristas, adding an air of personalisation and indulgence to the consumer experience. Starbucks also implemented a number of initiatives designed to drive traffic throughout the day rather than just during peak breakfast hours. The brand launched Bistro Box lunches in July 2011, lowcalorie meals made with fresh, healthy ingredients. It also launched a line of miniature desserts made to be paired with beverages and encourage higher average checks. The line includes miniature brownies, pies, cupcakes and bites of frosted cake served on a stick, each of which is less than 200 calories and sold for around US$2. The line has been very successful, appealing to both those consumers looking to watch their calories and those looking to add an indulgent treat to their morning coffee or afternoon snack. Finally, the brand experimented with \"Happy Hour\" promotions, designating a few hours during the afternoon in which consumers could purchase blended frappuccino drinks at half price. The Starbucks Evenings rollout was the next step in this daypart expansion, and proved successful enough after experimentation to be implemented nationwide at the very end of 2012. While Starbucks maintains a sizeable lead over its chained competitors, it still faces significant competition from independent coffee shops and local chains which maintained a 36% share of sales in 2013. There is a thriving culture among independent specialist coffee shops in the US, especially in larger metropolitan areas, and many consumers are very loyal to their local brands. Starbucks attempted to tap into this demand in recent years with the opening of a handful of new store concepts designed to fit within the specific neighbourhoods in which they were located. While the new outlets generated considerable media buzz, the venture was largely unsuccessful and the outlets have since been converted to standard Starbucks locations. The company remains highly dependent upon beverage sales for the majority of its revenues. In the company's fiscal year of 2013, 75% of retail sales at companyoperated stores stemmed from beverage purchases. This figure was unchanged from the previous year, though Starbucks continues to highlight new food offerings and encourage higher attachment rates of food and beverage items with the goal of increasing food share. The nationwide expansion of Starbucks Evenings introduces a larger variety of food options which could shift this share in the future however this coincides with the introduction of more expensive wines and beers, which could maintain the balance or even shift it further in favour of drinks. Convenient sodamaking technology has emerged in recent years, as exemplified by the popularity of the carbonated beverage maker Sodastream, and it has become a powerful tool for restaurateurs. In June 2014, Starbucks launched a line of handcrafted sodas, which are, again, designed to complement the food menu. Flavours include Spiced Root Beer, Golden Ginger Ale and Lemon Ale, giving familiar flavours but with an added spice or kick. Summary 3 Starbucks Corp: Competitive Position 2013 Product type Foodservice value share Specialist coffee shops 59.9% Rank 1 Source: Euromonitor International from company reports, company research, trade press, trade sources, trade interviews Euromonitor International 2015 http://www.portal.euromonitor.com/portal/analysis/relatedtab 3/3 2/18/2015 Euromonitor International Analysis WalMart de Mxico SAB de CV in Packaged Food (Mexico) Local Company Profile | 27 Nov 2014 STRATEGIC DIRECTION WalMart de Mxico is expected to continue leading modern grocery retailers throughout the forecast period as well as having a substantial influence on Mexico's packaged food industry. WalMart continues to experience strong growth thanks to its strategy of relentless expansion and consumer segmentation. Bodega Aurrera, WalMart's discounters chain, offers a wide variety of products in small packaging sizes at very low prices, catering mainly to Mexico's many lowincome consumers, the majority of whom would otherwise shop at independent small grocers, where they would be faced with a much more limited range of products. WalMart is developing a massive private label portfolio in an attempt to keep unit prices down for lowincome and middleincome Mexican consumers. Private label is becoming increasingly popular in Mexico as the country faces very difficult economic times, a situation which is leading many consumers to prefer to save money on staples so that they have more to spend on affordable. WalMart's supermarkets chain Superama caters to higherincome consumers, offering an ever expanding portfolio of health food items, gourmet food, fine wine and other types of premium products. These strategies have so far been extremely successful and are expected to continue performing very well throughout the forecast period. KEY FACTS Summary 1 WalMart de Mxico SAB de CV: Key Facts Full name of company: WalMart de Mxico SAB de CV Address: Manuel Avila Camacho 647, Col. Periodistas, Delegacin Miguel Hidalgo, CP 11220, Mxico City, Mexico Tel: +52 (55) 5283 0100 www: walmart.com.mx Channels of operation: Hypermarkets, supermarkets, discounters, warehouse clubs, apparel and footwear specialist retailers Source: Euromonitor International from company reports, company research, trade press, trade sources Summary 2 WalMart de Mxico SAB de CV: Operational Indicators 2012 2013 2014 Net sales MXN300,147.8 million MXN307,753.7 million MXN321,547.5 million Outlets 1,982 2,199 2,248 Selling space 5,625,910 sq m 6,023,260 sq m 6,179,570 sq m Number of employees 204,887 203,892 n/a Sales of grocery n/a n/a n/a Source: Euromonitor International from company reports, company research, trade press, trade sources INTERNET STRATEGY As of 2014, three of the WalMart's business divisions in Mexico participated in internet retailing: the Superama supermarkets chain the WalMart Supercenter hypermarkets chain and the Sam's Club warehouse clubs chain. Superama and Sam's Club are known to target more affluent consumers in the highincome and middle/highincome segments, while WalMart Supercenter targets middleincome consumers. The company's bodegastyle grocery retailers which target lowincome consumers do not offer internet retailing, and this situation is not expected to change at any point during the foreseeable future, as Mexico's lowincome consumers are not usually computer literate and tend not to have access to the internet. http://www.portal.euromonitor.com/portal/analysis/tab 1/6 2/18/2015 Euromonitor International Analysis Superama Movil, the supermarket chain's internet retailing application for smartphones and tablets, was successfully launched in 2012, winning an ebusiness award from Expansin business magazine in the process. By the end of 2012, the application had reached 60,000 downloads and mobile sales already represented 20% of all Superama internet retailing value sales. Also in 2012, WalMart launched an online video club called Vudu, although media streaming and rental services are outside the scope of Euromonitor International's internet retailing research. By mid2013, WalMart had already launched its ecommerce website for its WalMart Supercenter hypermarkets chain. Unlike the Superama website, this website did not initially offer packaged food or any other grocery items, focusing mainly on consumer electronics, leisure goods, personal accessories and various other items of general merchandise. Nevertheless, by the end of 2014, the WalMart Supercenter website had also started retailing groceries, including packaged food. The company signed an agreement with FedEx Mxico for the provision of delivery services and another with Mercado Libre for the provision of electronic and alternative online payment methods. Summary 3 WalMart de Mxico SAB de CV: Share of Sales Generated by Internet Retailing 2012 2013 2014 Net sales: Retailing MXN300,147.8 million MXN307,753.7 million MXN321,547.5 million Net sales: Internet retailing MXN120.9 million MXN593.8 million MXN938.1 million Internet retailing share of total company net sales 0.04% 0.19% 0.29% Source: Euromonitor International from company reports, company research, trade press, trade sources COMPANY BACKGROUND WalMart de Mxico is a division of USbased WalMart Stores Inc. WalMart arrived in Mexico in 1993 with the acquisition of leading Mexican retailer Grupo Cifra, a company which was already a publically listed company on the Mexican Stock Exchange. Since the company's Aurrera retail brand was already widely recognised among the Mexican population, WalMart decided to keep this name for its discounters chain as well as for one of its private label product lines. The subsequent acquisition of Cifra provided WalMart de Mxico with an instant presence in hypermarkets, a channel in which it operates under the WalMart Supercenter brand, supermarkets, where it is present with the Superama chain, discounters, a channel in which it operates bodegatype outlets, apparel and footwear specialist retailers, where it operates the Suburbia chain, and warehouse clubs, a channel in which it is present through the Sam's Club chain. In addition, WalMart de Mxico is also present in the Mexican consumer foodservice industry through the VIPs and El Portn chains. In 2005, WalMart became the largest private employer in Mexico. In 2007, the company launched its Medimart private label line of consumer health products. During 2008, WalMart was recognised as the company with the best corporate management in Mexico. Banco WalMart began operations in 2007 and from the outset was intended as a practical option for those Mexican people looking for consumer credit. As less than a quarter of the Mexican population has access to credit, retailers including WalMart previously lost instinctual sales due to the high proportion of the Mexican population without access to credit would otherwise have been happy to purchase durable goods and pay in instalments. With the situation in mind, WalMart de Mxico decided to offer credit to consumers with no credit history, as well as offering them access to various useful financial services such as basic savings accounts and cheque accounts. Since 2009, WalMart de Mxico has been the secondlargest public company traded on the Mexican Stock Exchange, with total value sales of MXN491.7 billion, slightly behind the telecommunications company America Movil. WalMart has continuously outperformed the average growth of the ANTAD index several years. The company has a network of over 15,400 suppliers, of which 93% are companies with production facilities located within Mexico. During the third quarter of 2009, WalMart announced a strategic alliance with Corporacin GEO, the secondlargest construction company in Mexico. This alliance involves a deal for the construction of new WalMart retail outlets close proximity to 10 apartment building complexes set to be constructed by http://www.portal.euromonitor.com/portal/analysis/tab 2/6 2/18/2015 Euromonitor International Analysis GEO within the Mexico City Metro area. In addition, similar deals were closed for the construction of WalMart outlets in close proximity to residential developments in other Mexican cities such as Guadalajara, Monterrey and Puebla. During 2010, the Mexican and Central American divisions of WalMart began merging their operations. There are five countries in the WalMart Central America division: Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. WalMart Central America comprises 519 outlets with 11 distribution centres located across these five countries. WalMart Central America serves 280 million consumers and generates an average of US$3.3 billion in annual retail value sales. Future projections suggest that there is potential for WalMart Central America to serve 33 million more consumers over the coming 15 years, which could result in an increase in the company's revenues of US$240 million. The acquisition of WalMart Central America will allow WalMart de Mxico to record 20% growth over the next 10 years. Given the ample financial resources of the company, it would be possible for the company to acquire WalMart Central America without the need to fall into debt. Finally, the merger between WalMart de Mexico and WalMart Central America makes sense for practical reasons including the various similarities between Mexico and its close neighbours in Central America, the geographical proximity of Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua to Mexico, the possibility of commercial synergies due to the various freetrade agreements which subsist between all of these countries, the fact that Spanish is spoken in all these countries and the similarities in the business cultures throughout Central America, including Mexico. During 2011, WalMart implemented a new concept of standalone chemists/pharmacies outlets under the Medimart Farmacia facia, which offer 24hour service seven days per week. The aim in locating these chemists/pharmacies outlets in standalone premises outside of larger WalMart outlets is to make the purchasing process more convenient for those consumers who do not want to trek through a huge largeformat grocery retailers or mixed retailers outlet in order to purchase medicines and other consumer health products. In 2012, WalMart de Mexico became embroiled in a scandal regarding allegedly corrupt practices involving the bribery of Mexican authorities to the tune of US$24 million. The bribes involved currying favour among various officials in order to have the expansion of the company's retail chains through illegal construction licenses rubberstamped without any fuss. This situation caused concern among the company's shareholders, although no negative impact on the company's sales has been reported, nor has its leading position in grocery retailers in Mexico being affected. During 2013, the company's warehouse clubs chain Sam's Club launched Horeca VIP, a new kind of membership scheme involving hotels, restaurants and specialist coffee shops, which offers members access to more personal attention when visiting participating businesses. Also during 2013, WalMart initiated the process of divesting its consumer foodservice division, which includes the VIPs, El Portn, Ragazzi and La Finca chains, to Alsea, one of the leading players in the Mexican consumer foodservice industry. This move allowed the company to remain strongly focused on its core business, which is retailing. During 2014, the company continued expanding through the opening of new retail outlets, including standalone Medimart chemists/pharmacies. The company also place more of a focus on its Internet retailing division, with positive results. PRIVATE LABEL WalMart de Mxico offers a wide and comprehensive range of private label products, most of them covering basic groceries and apparel. The Great Value line is its most popular private label line in Mexico, with over 500 different products, most of them groceries and home care products. In 2009, the company launched its ecological private label Great Value Terra, which was announced as a product line which is more environmentallyfriendly, mainly as many of the products offered under the line are biodegradable. Great Value Terra was launched with five products: multipurpose cleaner, powder detergent, bathroom cleaner, descalers and plastic refuse bags. Being such a large retailer, WalMart can afford to offer a substantial and growing number of private label products covering a number of retail divisions. Its private label lines offer a wide variety of products ranging from basic groceries and clothing to consumer electronics under the Atvio name, http://www.portal.euromonitor.com/portal/analysis/tab 3/6 2/18/2015 Euromonitor International Analysis automotive accessories under the name Super Tech, generic medicines under the Medimart line and even pet food. WalMart's private label portfolio is expected to continue growing and the retailer's already quite sophisticated private label strategy is set to focus even more on meeting the increasingly stringent demands of Mexican consumers. The retailer uses a combination of its strong brand name and fantasy brands for this purpose. For example, the Aurrera private label, which is available mostly at the company's bodegatype discounters outlets, covers a number of staple packaged food items such as rice, beans and vegetable oil. Great Value is a fantasy brand offering a broad range of products which are usually positioned in prime locations on retail shelves in WalMart Supercenter outlets, while Member's Mark is a private label offered exclusively in warehouse clubs within the Sam's Club chain. Summary 4 WalMart de Mxico SAB de CV: Private Label Portfolio Private label brand Categories Notes Great Value Packaged food, home care, tissue and hygiene Over 500 budget range products Equate Consumer health, tissue and Vitamins, medicine supplies, sanitary protection and hygiene dietary supplements Medimart Consumer health Budget range of OTC consumer health products and generic Rx medicines Aurrera Packaged food Staple products Ol'Roy Pet food Things Contempo Apparel Clothing and footwear La Mode Apparel Clothing and footwear Metropolis Apparel Clothing and footwear Super Tech Automotive products Cozies Nappies/diapers Persona care Handi Work Home improvement Tools CRX Consumer health Rx drugs and consumer health products Atvio Electronics products Via Verde Packaged food Organic range of jams and spreads, honey Extra Special Packaged food Premium positioning, generally imported products Member's Mark Packaged food Staple products Bakers & Packaged food Product line for foodservice businesses Non Stop Apparel Clothing and footwear Weekend Apparel Clothing and footwear Vips Packaged food Frozen processed food, instant coffee Chefs Source: Euromonitor International from company reports, company research, trade press, trade sources COMPETITIVE POSITIONING WalMart de Mxico has been the overall leader in storebased retailing in Mexico for a number of years and in 2014 the company is expected to account for 11% of total value sales in retailing and storebased retailing. Most importantly, in grocery retailers, the company is expected to account for an outstanding 17% of total retail value sales in 2014. WalMart is expected to lead modern grocery retailers in 2014 with a 31% value share. WalMart de Mxico manages a very wide range of outlet formats across numerous different grocery retailers channels, covering demand among lowincome consumers through its three bodegatype Aurrera outlets, middleincome consumers with its WalMart Supercenter hypermarkets and Suburbia http://www.portal.euromonitor.com/portal/analysis/tab 4/6 2/18/2015 Euromonitor International Analysis apparel and footwear specialist retailers outlets, while more affluent consumers are served by the Superama supermarkets chain and the Sam's Club chain of warehouse clubs. The company avoids selling excessive amounts of important products as it wishes to remain careful to avoid being placed at a disadvantage in the event of a sudden substantial devaluation of the Mexican peso. It is important to note that the negotiating power of the company is very strong, and suppliers usually comply with the demands of the company, not only in financial terms, but also in terms of delivery conditions and even packaging demands. For example, WalMart demands small packaging for many products sold at its bodegatype retailers as many of Mexico's lowincome consumers can only afford products when they are in small packaging. As one of Mexico's leading retailers, WalMart de Mxico continuously seeks new locations and new outlet formats in order to accommodate the specific shopping needs of particular consumer segments. An excellent example of this practice is the recent deal struck between WalMart and the Constructora GEO construction company to build new WalMart retail outlets in close proximity to new apartment building complexes. Another example of WalMart's innovative approach to the location of its outlets is that its discounters outlets are often located in places with excellent public transport links as the majority of consumers shopping at Bodega Aurrera outlets are unlikely to own a car or have access to. As previously mentioned, the company is active in terms of placing discounters in small cities and towns with fewer than 100,000 residents which have been largely ignored by chained grocery retailers in the past. It is almost guaranteed that the company will continue expanding strongly in Mexico over the forecast period, although some concerns are being raised about the company's dominant position in retailing in Mexico. It is thus possible that the company could face censure from Mexico's competition authorities at some point during the forecast period, especially if any of the country's current grocery retailers chains declare bankruptcy or decide to merge with one of their rivals. In order to become more competitive, during 2014 Superamaa chain which was previously positioned as a premium grocery retailerdecided to change its pricing strategy, reducing the prices of more than 5,00 items. The publicity campaign which accompany this was conducted under the slogan \"Decidimos ser tu tienda\" (We decided to be your store) in an attempt to attract a wider range of consumers. Summary 5 WalMart de Mxico SAB de CV: Competitive Position 2014 Channel Retail Value Share Rank Retailing 10.6% 1 Storebased retailing 11.3% 1 Grocery retailers 17.4% 1 Modern grocery retailers 31.4% 1 Discounters 47.9% 1 Hypermarkets 38.7% 1 Supermarkets 11.4% 3 Nongrocery retailers 1.5% 4 Apparel and footwear specialist retailers 12.5% 1 Health and beauty specialist retailers 0.1% 23 Parapharmacies/drugstores 0.3% 11 Mixed retailers 12.4% 3 Warehouse clubs 72.4% 1 Nonstore retailing 0.5% 22 Internet retailing 2.0% 1 Source: Euromonitor International from company reports, company research, trade press, trade sources, trade interviews http://www.portal.euromonitor.com/portal/analysis/tab 5/6 2/18/2015 Euromonitor International Analysis Euromonitor International 2015 http://www.portal.euromonitor.com/portal/analysis/tab 6/6