A national focus and a strong, independent position at home. Limited, or no ambitions to expand across borders, and a sixth sense for local customers' preferences. That is what "local heroes" are all about. Who are they, these local heroes?
Elsevier Food International, Vol. 5, Number 4, November 2002
Vincent Hentzepeter

Consolidation brings down the number of local heroes. Only a minority of independent European retail companies are left that foster a national strategy: Colruyt (Belgium), Coop Italia (Italy), Edeka (Germany), Eroski and Mercadona (Spain), Leclerc (France), Morrison's and Safeway (UK) and SPAR (Austria).
It is interesting to discover that many of the "locals" perform above average in their home country. A fact that is reflected by the high rate of new outlets, impressive market shares in specific regions of the country, rapid expansion into regions that have low store coverage and the percentage of customers who cite the specific store as being their favourite. A fact that also raises many questions. What makes these retailers local heroes? How successful will their strategy be in the long run? Are there any similarities concerning policy and success? Is there a future for local heroes in their current independent roles? Do they need to merge with other organisations in order to compete with international food retailers, or will they fall prey to (multinational) predators?

Mercadona and Eroski

Eroski is dominant in northern Spain and seek to increase its influence beyond this stronghold.

In the fragmented retail markets in Spain and Italy, foreign players have increased their grip on the local market tremendously over the last few years. In Spain, Carrefour has become first and in Italy second in the market. Nevertheless, larger national players are taking over many small supermarket organisations and family businesses. Grupo Eroski and the Valencia-based Mercadona have successfully pursued a national policy of takeovers. From their strong bases in respectively northern and eastern Spain, they have opened hundreds of new stores allover the country.
Eroski currently ranks third in the market, while Mercadona is fifth. Both can be considered dominant players in certain regions of the country and are working hard to increase their influence beyond their operational areas. For instance, Mercadona is to invest € 150 million before 2007 in opening 50 markets in Galicia (the Northwest) where it has no stores at present and Eroski opened no less than 42 supermarkets throughout the country during the first half of this year.
Part of the success of these two local heroes can be attributed to their focus on fresh and regional products, in order to create customer loyalty. Furthermore, it is difficult to copy for multinationals that are trying to gain a stronghold in the Spanish retail sector. Mercadona takes its local focus very seriously. Customisation instead of standardisation is reflected by a product range that includes 7,000 standard items and 11,000 regional ones. Eroski promotes its regional products through the "Tienda Royale Department". Moreover, Mercadona and Eroski pay a great deal of attention to food safety, quality and attractive pricing. Mercadona combines its total quality management approach with "Always Low Prices", while Eroski has launched the "Quality and price satisfaction" slogan that promises discounts of up to 20 per cent.
Cross border expansion plans of both companies are modest. Mercadona has announced plans to enter the Portuguese market by 2004. Eroski opened its first stores in France in 2000 as part of the "Altis" joint venture with Carrefour. Late September '02 Eroski announced that it would engage in a strategic buying alliance with French retailer lntermarche. Both partners also hinted that a more ambitious long term plan exists to create a pan European network of voluntary groups.

Coop Italia and Colruyt
In Italy leading retailer Coop Italia may well join this longer term initiative, as it recently started to collaborate with Eroski. This contact with Eroski can be seen as part of a survival strategy for the cooperatives. The collaboration includes joint procurement of food, fresh products in particular, furthermore exchange of know-how respecting private label and category management. In this way, local heroes in southern Europe may form a strong pact against increased pressure from international food retailers.
Over the years Coop Italia has emerged as the leading supermarket organisation in north eastern and central Italy. By turning to large area stores and by merging cooperatives into larger units in order to become more economically viable, Coop Italia has become the leading Italian retailer. According to president Vincenzo Tassinari of Coop Italia, the mission of the company "( ... ) is based on a fundamental principle: consumers are to be given centrality and sovereignty. To be consistent with the mission, a Coop product must be: 'good', 'safe', 'ethically guaranteed', 'non-genetically modified', 'convenient' and 'environmentally-friendly'. "
In 2001 Colruyt was the most profitable retailer in its domestic market Belgium. Colruyt  post ions itself as a "full range discounter", offering some 17,000 sku's in a stores that reflect the retailer's cost efficient operations.
M + M Planet Retail reports that Colruyts expansion plans - that rely primarily on organic growth - are hampered by Belgian legislation which protects smaller retailers to the detriment of the large retail surfaces. In Belgium, Colruyt therefore aims at the development of smaller scale formats, such as its neighbourhood store banner Okay. Abroad, Colruyt has a relatively limited operation in France, mainly aimed at foodservice.

SPAR Austria
In Austria, the structure of the food retail market is entirely different from the Mediterranean scene. Here SPAR Austria is the only purely Austrian retailer of any significance left. Because of the strong consolidation process, the Austrian market has almost completely been taken over by German retailers. Rewe subsidiary Billa is market leader, closely followed by SPAR with a market share of 20 per cent. Over the years, SPAR Austria has not pursued becoming a truly international expansion company. The takeover of Julius Meinl significantly increased the company's national market share. Currently two-thirds of its turnover is realised within Austria, while foreign interests are restricted to Italy, Hungary and to a lesser extent Slovakia and the Czech Republic. According to managing director Gerhard Drexel, SPAR is to open 30 new markets in Austria and ten new outlets in Hungary. So, the SPAR-strategy does include foreign operations, however, at the present rate and in percentage of total turnover, this can hardly be considered as a break from the national focus.
Naturally, these facts alone do not make SPAR a local hero. It is the strategy of the company that contributes to this classification. SPAR Austria has worked hard to become more competitive and more "Austrian" over the last years. Low pricing has become part of a survival strategy since the invasion of German retailers. SPAR especially experiences severe competition from discounter Hofer (an Aldi subsidiary). With a selection of strategic (partly private label) products, SPAR wants to stop customers from shopping at Aldi's Hofer.
Besides competitive pricing, SPAR tries to attract visitors by offering a competitive assortment. Here the food retailer shows a strategy that resembles the approach of Eroski and Mercadona; namely its commitment to be the customer's favourite in the retail market by offering an increasing range of regional and organic products.

Edeka
In Germany, Edeka is the only large retailer with a primarily national focus. Being third in the market behind Metro and Rewe, Edeka's domestic market accounts for some 93 per cent of total sales. Recently, managing director Hermann Ruetz commented that Edeka can in the long term not be satisfied with a foreign turnover share of just seven per cent, as with these figures, the company will not be able to claim a leading place in European food retailing. He added, however, that Edeka still has to make its mind up about its future role in the European market.
It may be concluded that Edeka - in its role as local hero - is more successful than as an international operating organisation. The company's food turnover is the largest in Germany and the retailer recently strengthened this position by an agreement on close cooperation with hypermarket operator Globus. This move also rules out a takeover of Globus by Wal-Man. It put a stop to one of the few realistic options for the American retail giant to create a breakthrough in the highly regulated and competitive German market.
Further significant growth from new takeovers cannot be expected for Edeka in the near future. The static, highly competitive, German market leaves little room for adventure. All hopes are therefore focused on CEO Hermann Ruetz's proposed changes to the company's operating structure. Trimming down the number of cooperatives from 12 to 7 and creating a corporate head office acting as a central purchasing point for regional cooperatives, may raise profits in the coming years.

Safeway
When it comes to local heroes in the UK, two retail chains appear at the forefront: Safeway (nation's fourth retailer) and Morrison's that ranks tenth. Both are highly popular in specific regions of the UK. Safeway scores very highly in Englands most northern region (the Tyne Tees area) and in Scotland, while Morrison's peaks in England's northwest (Lancashire) and northeast region (Yorkshire). An important difference is that Safeway has a wide distribution network that ranges from Northern Ireland, through Scotland and all parts of England. By contrast, Morrison's is virtually absent in southern England, Wales and Scotland.
Safeway has redefined its role as local hero by refocusing its location policy since 1998. More priority is given to medium-sized outlets and opening new stores in towns with 100,000 to 200,000 inhabitants. The emphasis on a local level strategy goes hand in hand with a change in the advertising/sales promotions strategy. Instead of national campaigns, individual households are approached by weekly promotional leaflets. What is more, the decision in 1991 to give local store managers more influence on product ranges and sales promotions within their stores shows the company's ambition to impress locally. However, Safeway's struggle to become the first choice retailer for those customers who have the opportunity to shop locally, is seriously jeopardised. In September, the Daily Mail reported that Wal-Marts UK subsidiary ASDA is plotting a US$ 4.4 billion takeover of its sector rival. Also Sainsbury's is rumoured to be involved as it would have discussed with ASDA the opportunity to divide the Safeway portfolio in case of an acquisition. Asda is more interested in the larger stores, while Sainsbury's would be eager to acquire the smaller high street outlets. All this raises the question: is Safeway a local hero or local prey?

Morrisons
Morrison's popularity in the north of England is partly explained by the fact that the chain is traditionally deeply rooted in this region. Competition among the Top 3 UK retailers is very fierce in both Lancashire and Yorkshire, prompting Morrison's to constantly distinguish itself from the giants. Morrison's is currently regarded as one of the most competitively priced retailers of own-brands. These contribute to 50 per cent of turnover. Within this private label range, the emphasis on fresh food private labels seems to be a winning card. Given that the supplier base of fresh produce is much more fragmented than that for grocery items, Morrison's is able to reduce larger retailers' purchasing clout. It is this strategy that enables the company to stay ahead of the competition.
The company foresees a bright future as national retailer. Quoting from CEO Morrison's pep talk at the last annual meeting: "Our shoppers know they can rely on us for consistently good value, outstanding customer service and the freshest foods available. Morrison's are always opening new stores around the country, giving more people the chance to buy the very best for less. So we remain keen to expand into new areas of the country currently dominated by the bigger operators."