Jerónimo Martins: The successes of a globe-trotting grocer from the struggling small country Portugal

Jerónimo Martins: The successes of a globe-trotting grocer from the struggling small country Portugal

Mar 1st 2014 | LISBON | From the print edition

THE Pingo Doce supermarket in Rua Tomás Ribeiro is hard to spot, tucked among white-and-blue tiled houses and crumbling stucco facades. But inside trade is brisk as shoppers move from mounds of produce to man-sized slabs of bacalhau (dried cod).

Portugal is emerging from recession and food sales inched up by less than 1% in 2013, according to early figures from the local retail association. At Pingo Doce stores they rose 3.9%, thanks mainly to extensive price-cutting. Jerónimo Martins, which owns half of the supermarket chain, all of a cash-and-carry group and other bits and pieces, is Portugal’s biggest food-distribution group. It is also Poland’s.

The family-controlled firm, founded in 1792, realised in the 1990s that little Portugal was a good place to be from but not a great place to rely on. It made two sorties. One, to Brazil, a former Portuguese colony, flopped: the country was too big, the company too small, and despite speaking the right language, Brazilians proved too different. The other—to Poland, just opening to foreign investment—was a master stroke, or maybe a stroke of luck.

In 1995 the company picked up a cash-and-carry chain there, and got to know the market. It decided that frill-free discounting was the way to go. In 1997 it bought Biedronka, with 243 discount stores, adding outlets in small towns at first and seeking the kind of customers who run out of cash before the end of the month.

Many bigger rivals—Tesco, Carrefour, Metro, Ahold (Jerónimo Martins’s partner in Pingo Doce, as it happens)—bet on hypermarkets instead. Neither the Poles, who like to shop often and locally, nor their government, which worries about the health of the high street and has to approve new hypermarket sites, shared their enthusiasm. Biedronka now has 2,393 stores and around 14% of the market, thinks Andrew Gwynn of Exane BNP Paribas, an investment bank, making it Poland’s biggest food retailer. (Other discounters like Lidl, Netto and Aldi are doing well too.)

Though Poland’s economic growth has slowed, Biedronka now accounts for 65% of the group’s €11.8 billion ($15.7 billion) turnover and 77% of its €777m in earnings before interest, taxes, depreciation and amortisation. Biedronka has softened its approach, making stores cosier and adding the odd bakery, but low prices for decent grub is still the name of the game.

If the goal in the 1990s was to diversify away from Portugal, today it is to hedge exposure to Europe. In March 2013 Jerónimo Martins started up in Colombia, a fast-growing country with underestimated institutions where food retailing is aimed mostly at the well-heeled. Once the group has figured out how to make money there, says Pedro Soares dos Santos, its chairman and chief executive, the operation may serve as a platform for nearby markets.

At the moment Jerónimo Martins is sitting pretty. Its 2013 results, announced on February 25th, showed only a small sacrifice in operating margins to achieve a 10.7% increase in sales. The secret, says its boss, is to cut prices and launch promotions quickly when customers start drifting away; to look after your suppliers and to go into each market as if you were local.

The going may well get tougher now. The company’s share price has fallen by a third since April. That is partly because an investor halved its 10% stake in May but also because competition in Poland is growing. Hypermarket rivals have been cutting prices and many are branching out into smaller stores. Mom-and-pop shops are getting organised into chains.

Mr Gwynn thinks investors are waiting to see whether Jerónimo Martins can maintain its momentum. He is bullish. Like-for-like sales growth in Poland is still over 4%. The firm should meet its target of 600 new stores by 2016, as around half of the grocery market is still in the hands of smaller retailers, according to PMR, a market-research firm focusing on central Europe. And if not? The Portuguese have been discovering new lands for centuries. Jerónimo Martins will be no exception.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: