The Netherlands: An overview of food retailing

(continued)

The past two years have been marked by rapid growth. A combination of better feeling amongst Dutch consumers from the price wars and more importantly, the population and wage trends described earlier, have led to one of the strongest retail environments in Europe. Dutch consumers remain amongst the most positive in Europe and are readily spending across categories.

Following the price wars of 2003-2005, Dutch retail price inflation has remained below the European average of 2%. On one hand this means that some retail prices in the Netherlands remain among the lowest in Europe. On another hand, this means that Dutch consumers have seen their waged grow faster than prices for more than 2 years further boosting their desire to spend and drive the retail market.

Regulation impacting retail
Zoning laws are relevant for all stores and are the responsibility of municipalities. In general, Dutch municipalities severely restrict the opening of new grocery stores. As a result, incumbent retailers have an advantage with competition limited to a few grocery shops in a given area. This system has supported strong regional retailers and slowed the process of national consolidation in the grocery market. Barring any changed in regulation, consolidation in the Netherlands will only happen via acquisition rather than through organic expansion.

Opening hours for shops in the Netherlands are between 6am and 10pm from Monday to Saturday. The regulation also allows stores to open on 12 Sundays during the year. Stores may open for a maximum of 96 hours per week. The Netherlands has one of the most restrictive regulations in Europe around opening hours, along with Belgium, Finland and Norway (stores opened for a maximum of respectively 101, 90, and 81 hours). This contrasts sharply with Ireland, the UK, Poland and Hungary where stores can be opened up to 168 hours per week (i.e., 24 hours/day, 7 days/ week).

Grocery retail market snapshot
In 2007, the top 5 grocery retailers in the Netherlands captured 50% of the total grocery market. This number is slightly below the average for the Western European countries. A particularity of the Dutch market is the gap in market share between the market leader-Ahold- and its competitors.
 
Independent retailers are usually members of a buying groups. This allows them to gain scale and get extra support from the organization.

Due to the zoning regulation and the population density, it is difficult to find potential new store locations in the Netherlands. Increasing market share is therefore a challenge and existing retailers rely heavily on acquisitions or gaining franchisees to consolidate their position. This explains the high proportion of franchisees in the country. Even the supermarket leader, Albert Heijn, has to rely on the franchise model.

  Top grocery retailers ranked by 2007 sales in € mln

 

Retailer

2007

2008
CAGR**
03-07
CAGR**
08-12

1

Ahold

10,538

11,096

3.1%

4.5%

2

Aldi Nord

1,923

1,961

2.0%

1.5%

3

Sligro Food Group N.V.***

1,734

1,651

6.8%

2.4%

4

Laurus

1,621

1,642

-20.8%

2.2%

5

Sperwer (excl. Spar)

1,539

1,571

14.8%

3.7%

6

Metro Group

1,490

1,489

1.3%

0.0%

7

AS Watson

1,449

1,533

7.2%

4.3%

8

Dirk van den Broek

1,218

1,266

5.3%

2.7%

9

Van Eerd

1,165

1,313

15.7%

3.4%

10

Schwarz Group (Lidl)

924

1,040

17.7%

6.7%

11

Spar Holding BV

310

457

3.1%

3.4%

*Estimated
** Compounded annual growth rate
*** excluding Spar, Meermarkt & Attent that are consolidated in Spar Holding BV from 2008
(Source: MVI database)

In the past five years, the Dutch grocery retail market has been destabilized by a price war. Albert Heijn was the catalyst, announcing massive price cuts across its whole range, from September 2003.

Laurus, number 2 in the Dutch market, has been unable to sustain the pressure on its margins and has had to downsize its operations by divesting some chains and closing down stores. However, the slow break-up of Laurus has rebalanced the grocery space in the market. Several SuperUni members and Aldi have been the man beneficiariesm acquiring many old Laurus sites. With better pricing, Albert Heijn has restored a value message and, thanks to a new business model, the chain is not only the market leader in the supermarket channel but also one of the best performing chains in the Netherlands.

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Grocery retail leaders

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