3 min read
Hello Jumbo, Goodbye Margins?
Floris van der Pijl published on April 15, 2022
Food retail companies are a hot topic over the last few years as they were the go-to-shop for consumers during COVID. More recently negotiations between retailers and their suppliers are driving the headlines: are suppliers abusing cost inflation for profit? Or are they negotiating cost price increases? One of the retailers claiming difficulties in these negotiations is the Dutch private supermarket Jumbo1 (22% market share). Let’s have a look at how they faired through recent years.
- Net sales development (2021): below average
- Operational profit (2021): below average
Jumbo's Net Sales Development vs. the Industry
From 2017 to 2021 Jumbo has grown twice as fast as the industry average with 36% (compared to the industry's 17%). In the last year growth was pressured because of a book year difference (2021 contained one less week) but more importantly a slowdown of in-store growth, which was the main growth driver in the years before (Same-store growth increase: 2019: +14%; 2020: +9%; 2021: +4%).
Beyond this organic growth, Jumbo acquired foodservice provider La Place and retailer Emté which increased revenue by + €400 in total and has recently included Belgium2 in its acquisition strategy.
Figure 1: Jumbo's Net Sales Development vs. The European retailer landscape. For the European retailer landscape, A-INSIGHTS has analyzed the 55 largest retailers in Europe, with a net sales of €1 billion and more. All retailers are located in the European Union, combined with a few retailers from the Nordics.
Jumbo's % EBIT vs. the Industry
This growth has come at the expense of margins because besides a strong COVID-related increase in 2020, margins have been dropping consequently and are now below the industry average in 2021. Margins are mainly under pressure because of its ‘Everyday Low Prices’-model which is very successful but makes it so that Jumbo has to react to promotional/discount activities of competitors (which are up to 28% in 2021, from 23% in 2018)3.
Margins in the Dutch markets are seemingly not under pressure overall, as Ahold Delhaize, the company's biggest competitor, realizes an EBIT of +4% throughout the period.
Figure 2: Jumbo's %EBIT vs. The European retailer landscape. For the European retailer landscape, A-INSIGHTS has analyzed the 55 largest retailers in Europe, with a net sales of €1 billion and more. All retailers are located in the European Union, combined with a few retailers from the Nordics.
Can Jumbo recover its margins?
Margin recovery will not come easy as Jumbo is also heavily invested in E-Commerce and highlighted its focus on omnichannel in its new strategy.4 In 2021, Jumbo’s E-commerce segment grew by 30%, reaching €650 million in sales.
Furthermore, the company recently reached an agreement with on-demand delivery company Gorilla’s, making Jumbo products available within 10 minutes across multiple cities in the Netherlands. Given that both segments are not known for their profitability; is Jumbo again choosing growth over profitability?
Comparing your own performance with the industry?
Comparing your own performance with that of your key competitors and the industry as a whole, gives you an objective view of your performance. Only by benchmarking your results with that of the competition, you truely know whether or not you performed well and you can adjust your strategy accordingly.
This analysis focused on Net Sales Development and %EBIT, but there are many more KPI's which can be used for benchmarking. With the Performance Monitor of A-INSIGHTS, you can easily benchmark your competitors and get extensive insight into all of the important financial metrics and the performance of the top-50 most important companies in your industry. Are you curious about how the Performance Monitor can work for your company? Let's get in touch!
Curious about the performance of key players in the food retail industry?
Want to know more about the importance of having a clear online strategy? Are you interested in the key drivers behind profitability and growth? Find out more about trends and developments in the retail industry in our trend report.
1 Distrifood, January 2022. ‘Interview with CFO Ton van Veen ‘you cannot absorb a 5% price increase with a net margin of 2%’
2 Distrifood, January 2022. ‘Jumbo acquires 4 additional Belgium supermarkets’
3 Distrifood, August 2021. ‘Jumbo is working on profitability recovery plan’
4 Jumbo, March 2022. ‘Jumbo is ready for the future with a sharper strategy and new board members’