MERCADONA ANNUAL REPORT 2008
Table of contents
INTRODUCTION
RELEVANT DETAILS 2008
‘THE BOSS’
Geographical presence: 46 provinces, 15 autonomous communities
Local supermarkets: 737 more stores than in 2007, 92 openings, 19 closures, 4 million households trust Mercadona daily
Shopping Cart Menu: Satisfying the grocery needs of our ‘Bosses’ with the highest-quality products and the lowest prices on the market, recommending to them the best value for each product and giving them the ability to choose right.
12.6% market share
12,500,000 m2 total shopping surface area of organised distribution in Spain
THE EMPLOYEE
61,500 employees, all with permanent contracts
67% female employees
1,500 new permanent employment positions created
Employees perform their functions at the same position and changes are avoided, which facilitates specialisation and allows them to do what they know best: satisfy ‘The Boss’.
Training:
52 training courses
2.8 million hours
58 million euros of investment
An average of 1,000 hours per employee.
Professional development:
753 employees promoted
753 employees promoted
190 million euros in performance-related bonuses disbursed among employees
Work-family compatibility:
Working mothers – 4,300 employees enjoyed a one-month maternity-leave extension in 2008. The percentage of working women who decided to become mothers came in at 10%, which is 2.5% higher than the Spanish average. Continuous morning or afternoon schedules available, and stores closed on Sundays and on holidays.
THE SUPPLIER
More than 100 integrated suppliers
More than 2,000 commercial and service suppliers
Average payment time to suppliers: in two years, the average time period for payment to suppliers was cut by 15 days.
500 million euros invested to support their productive activity throughout the country
14 billion euros in purchases from Spanish suppliers, equivalent to 1.4% of the Spanish GDP
90% of all the company's purchases
8 active logistics blocks
3 logistics blocks at planning stage / under construction: Villadangos del Páramo (León), Guadix (Granada) and Pla-Za (Zaragoza)
SOCIETY
Social productivity: Commitment to the efficient use of natural resources, contributing to the development of the areas where the company operates
Contribution to the Spanish GDP: 2.681 billion euros
Promotion of local commerce: 16 supermarkets in local town markets, 4 new, 7 in progress
Sustainable transportation: transporting more with fewer resources
The combined use of trucks, trains and ships to transport merchandise, as well as our additional initiatives in sustainable transport, allows us to reduce our environmental impact: 50,000 fewer tons of CO2 emissions.
203 Spanish cities now enjoy silent night-time unloading.
Dialogue and cooperation with the company: active participation in merchant associations and business federations.
3,000 students have visited company facilities.
Environmental investment: 22 million euros
CAPITAL
Figures in millions of euros
Turnover: 2007 13.986, 2008 15.379
+10% in turnover
Net profit: 2007 336, 2008 320
-5% of revenue
EBITDA trend, 2007 850, 2008 838
-1.4% of EBITDA
Sustained investment over time:
1.174 billion euros invested between 2007 and 2008, an approximate average of 600 million euros annually.
Equity capital evolution, 2007 1.350, 2008 1.641
A commitment to the long term.
Reinvesting profits meant that in 2008 our equity capital figure rose to 1.641 billion euros.
Productivity (figures in thousands of euros):
+6% turnover/employee ratio compared to 2007. Since 2005 Mercadona has increased its productivity by 27%.
MESSAGE FROM THE PRESIDENT
Once more, let me take advantage of our 2008 Annual Report to look back at the year which is now behind us. Perhaps, rather than trying to assess an entire year, it would be best to examine two different situations which arose during this period.
Over the first nine months of 2008, one of our mistakes was to be more concerned with analysing the indicators reflecting the quickly-worsening economic situation before us rather than on taking action. But beginning in September, when a sharp drop in consumption was recorded, we realised that our ‘Bosses’ were telling us that we had “fallen asleep” and that we had to react. There was a recession, but we were also obligated to conduct our own internal analysis.
It was precisely this obligation which helped us to wake up and to realise what we weren’t doing well. Although it came late, we recognised that we had strayed from our business model, the Total Quality Model, becoming distracted from our main activity as a local grocery store: endorsing and recommending top-quality products at the lowest prices for our ‘Bosses’, thereby creating the highest-quality and most economical grocery outlet on the market.
That is why the company’s Board of Directors decided to review everything we weren’t doing right, and our conclusion was that we had to bring Mercadona back into line with its Total Quality Model. From that moment on, we decided to hold meetings with our integrated suppliers, executives and employees, in order to commit ourselves to getting out of the comfort zones to which we had become accustomed during better economic times, and to now think in terms of necessities. We did this in order to adapt to the new reality and what our ‘Bosses’ were demanding of us as we asked and observed them.
Of the many hours we dedicated together to analysing the situation we were up against, many ideas for action came up which we are implementing at the company’s 1,210 supermarkets, steps which have led to a significant drop in prices in our ‘Bosses’’ overall grocery purchases. Nevertheless, from our work over these last few months, the main lesson we drew from the project was that, thanks to the recession, we have woken up, and change doesn’t just come about if we wait for someone else to create it. It’s better to take action and to lead the way, always striving to ascertain the behavior and preferences of the more than four million households which place their trust in us.
The challenges posed by change are more of a mental, rather than economic nature. In fact, change has more to do with our motivation and the conviction among all of us at Mercadona about the need to work more and better, to reconsider everything we do, to optimise our costs and processes, and to strive to be more and more productive. This always leads us to turn our focus to our store shelves and to review the 9,000 products in our selection, eliminating everything that increases process costs without offering our customers any additional value. Without any doubt, all our improvements should be designed to cut prices without ever sacrificing top quality.
We have already undertaken the mental change necessary, and even though we have a long way to go, we are on the right track. Although the medicine will be tough to swallow, we have no choice but to take it, as it is our responsibility as a company to safeguard and sustain the Mercadona project.
Businesses are made up of people, and it is our dedication which allows us to carry out our various projects. The Mercadona Project, thanks to the steps taken, closed out 2008 with a turnover exceeding 15.379 billion euros, up 10% from 2007, and net profits of 320 million euros, 5% down from last year. These figures, to which we must add our steady increase in sales in proportion to surface area above 3%, demonstrate the stability of our business model even during adverse economic times such as today, when we should be much more concerned with promoting sales than with obtaining profits.
Moreover, in 2008 we invested close to 600 million euros, mainly on construction and the refurbishment of our logistics blocks, along with the opening of new stores, winding up the year with 1,210 supermarkets.
In 2009 we should focus intensely on applying our business model to all our decisions, and on basing our actions on the universal truth upon which our company is based: give, request and demand, in that order.
Having adopted a change in mentality, and as we strive to apply that universal truth, we have to redirect Mercadona, always putting ‘The Boss’ first. Profits are secondary at this point and what is important is to contribute to reactivating consumption, centering our efforts on sales while recommending to our customers only those products which guarantee an overall grocery purchase of the highest quality and with the lowest prices on the market: the Shopping Cart Menu.
We are facing difficult years ahead – a time of recession – and to help our country overcome this crisis, as members of society we have to act: earning less, working better and more, lowering prices... The age of plenty is over and I am convinced that by meeting these commitments as we go about our daily work, our company and its over 61,500 employees will succeed over the coming years in making Mercadona the company we all want it to be, continuing to create wealth and employment in our country. On behalf of all of them, I thank you for your support, which helps us to remain committed.
Juan Roig
MANAGEMENT COMMITTEE
Juan Roig, Chairman
Rafael Berrocal, Managing Director of Administration
José Luis Blanes, Managing Director of Stores
Julio Bragado, Managing Director of Purchasing: Petroleum Byproducts and Chemical Products
Pedro Corraliza, Managing Director of Logistics
Francisco Espert, Managing Director International
Juan Antonio Germán, Managing Director of External Affairs
Héctor Hernández, Managing Director of Finances and Human Resources
José Ramón Illán, Managing Director of Rural Purchasing
José Jordá, Managing Director of Recommendations and Maritime Purchasing
Francisco López, Managing Director of Construction and Maintenance
BOARD OF DIRECTORS
President, Juan Roig Alfonso.
Vice-president, Hortensia Mª Herrero Chacón.
Members: Fernando Roig Alfonso, Rafael Gómez Gómez, Hortensia Roig Herrero, Amparo Roig Herrero, Juana Roig Herrero.
Member – Board Secretary, Carolina Roig Herreroa
MERCADONA: OUR MODEL
WHAT IS MERCADONA?
Mercadona is a Spanish family-owned supermarket company whose objective is to fully satisfy the grocery and home-cleaning and hygiene products’ needs of its ‘Bosses’, as customers are referred as by the company. To this end, the company controls 1,210 stores averaging between 1,300 and 1,500 square metres of shopping area, representing a market share of 12.6% of total food store surface area in Spain.
Mercadona bases its business model on its Always Low Prices (SPB) formula, which allows ‘The Boss’ to enjoy a Total Shopping Basket and to fill their cart with products of the highest quality at the lowest prices on the market, in keeping with the company’s motto that “quality doesn’t have to be more expensive”.
Mercadona works with more than 2,000 suppliers, between commercial suppliers and service providers, among which over 100 are integrated suppliers, committed to the total customer satisfaction philosophy which characterises our company, and dedicated to quality at the lowest prices through their Recommended Products, which for years have allowed brands such as Hacendado, Bosque Verde, Deliplus and Compy to enjoy our ‘Bosses’’ trust.
THE MERCADONA MODEL
Mercadona’s management model has been based since 1993 on a Total Quality Model. Through this method, Mercadona satisfies the company’s five components with equal dedication: ‘The Boss’, The Employee, The Supplier, Society and Capital.
In the company’s management, Total Quality is based on the premise that “in order to be satisfied, you have to satisfy others first”. This commitment has made Mercadona a leader in the distribution sector, with a clearly defined mission: to be “prescribers of the necessary solutions so that ‘The Boss’ can enjoy a Total Shopping Basket”, satisfying their needs with the market’s highest quality and most economical grocery shopping experience: the Shopping Cart Menu. Every member of our staff contributes with their efforts to this goal, along with the involvement of our suppliers in this project and their determined and firm commitment to innovation which allows them to stay ahead of changes in customers’ eating habits and needs.
Society’s satisfaction is also important to Mercadona. That's why our stores help to modernise urban commerce in the neighbourhoods where they operate. Our supermarkets promote commercial dynamism, generated by the four million households which place their trust in Mercadona daily. In fact, by focusing exclusively on the sale of food, beverages, cleaning products, personal-hygiene products and pet food, the company promotes synergy with nearby commerce through a greater involvement in their development.
As part of its voluntary commitment to promoting initiatives which benefit society, Mercadona gets involved in bolstering the Spanish food and agriculture industry through measures which improve the social and economic environment of the places where it operates. This makes it a groundbreaking company in the area of corporate social responsibility in the distribution sector in Spain. All in all, it’s about following through on what our management model calls for: “satisfying the company’s five components with equal dedication”.
Mercadona also satisfies the company’s fifth component: Capital. It does so by satisfying ‘The Boss’, The Employee, The Supplier, and Society, which it achieves through the application of the Total Quality Model. The implementation of this particular management model is responsible for Mercadona's positive results since its inception, as well as its solid and sustained growth, a result of the implantation of objectives and strategies which add value to the company's five components, the results of which can be appreciated above all in the mid and long term.
15 years of the Total Quality Model
1993. Implantation of the SPB (Always Low Prices) business strategy, the cornerstone of the Total Quality Model.
1995. Start of the project to make all staff permanent employees.
1996. Birth of Recommended Products (Hacendado, Bosque Verde, Deliplus and Compy).
1997. Under the principle of “same responsibilities, same salary” Mercadona implants its remuneration policy.
1998. Development of the New Mercadona Model - integrated suppliers.
1999. 100% of staff are permanent employees.
2000. Inauguration of the first free creche for employees and implantation of the first performance-based bonus system (employee profit-sharing).
2003. First company to complete an ethical audit.
2004. Mercadona decides not to open its supermarkets on Sundays as a measure designed to help its employees make their work and family lives compatible.
2005. One extra month of maternity leave for working mothers.
2007. Fourth-ranked company in the world in Corporate Reputation according to the New York Reputation Institute.
2008. Realigning Mercadona with its Total Quality Model, introducing the concept of the Shopping Cart Menu.
Building our relationships on commitments:
‘THE BOSS’
Promoting dialogue and direct communication with our ‘Bosses’.
Maximum quality at the lowest price: recommended products.
Shopping Cart Menu: The highest quality and most economical grocery shopping experience on the market, to offer ‘The Boss’ the chance to choose right when shopping.
Closeness and proximity.
Innovation oriented towards their needs.
THE EMPLOYEE
Stability and professional development.
Fixed responsibilities. Employees carry out their functions in the same position and changes are avoided; this facilitates employee specialisation so that they can do what they know best: satisfy ‘The Boss’.
Work and family-life compatibility
Not opening stores on Sundays.
Permanent dialogue.
Profit sharing.
THE SUPPLIER
Stability / contracts for life.
Long-term agreements and open books.
Bolstering productive activity to promote development and wealth.
R&D plus ‘double I’ (Research and Development plus Innovation, supported by Investment as a tool).
Rewarding innovation (Mercadona Sorolla Innovation Award).
SOCIETY
Commitment to the social and economic development of the areas where we operate.
Producing more with fewer natural resources. Sustainable transport.
Permanent dialogue.
Active participation and attentiveness.
CAPITAL:
Constant and sustainable growth.
Reinvestment of profits.
Innovation as a factor for competitiveness.
Focusing on the long term.
Increasing productivity through reengineering and process standardisation.
‘THE BOSS’
SATISFYING ‘THE BOSS’
2008 was a year during which Mercadona made special strides to realign its efforts with its Total Quality Model and the company’s mission: prescribing and recommending products of the highest quality and the lowest prices possible to ‘The Boss’.
Over these twelve months, all of our processes have been reviewed and newly adapted to the needs and demands of our customers. The objective was clear: giving them, through our recommendations, the chance to choose right and to do their shopping with the highest quality products at the lowest prices on the market: the Shopping Cart Menu.
To achieve all this, the company previously conducted an important communication campaign with its ‘Bosses’, asking and watching them until we reached the conclusion that, just like at a restaurant, where people rarely remembers the exact price of the dishes they order but do remember the final bill, supermarket customers also don´t know what each product costs exactly, but they do remember and are able to identify the total price of their total purchase at checkout. This insight allowed the company to realise that its responsibility is to recommend the highest quality, lowest-price products on the market, given that our choice of the products to line our supermarket shelves also determines whether overall shopping prices for our customers ultimately increase or drop.
To this end, over the course of the year, and especially during the last quarter, the company worked on eliminating all elements which generated unnecessary costs in our processes through four different initiatives which, through January 2009, led to savings of over 100 million euros monthly for the more than four million households which shop at Mercadona.
Through this effort to improve, and determined to constantly better our productivity, not only were prices slashed on different products while maintaining their high quality, but our entire selection of over 9,000 different products is undergoing review. Thanks to this analysis we were able to detect various products which either did not meet our sales rotation criteria, or were redundant. Far from offering our customers value, they added costs to our overall process because products already on display were satisfying the same need. As a result, we have dropped more than 800 products - 400 Recommended Products and 400 brand names - which has allowed us to pass the savings on to our ‘Bosses’ and to encourage spending. Mercadona sees clearly that its responsibility as a company is to make a firm commitment to the long term through initiatives which, like those adopted, allow us to continue to grow and to serve daily those who in 46 different provinces and 15 autonomous communities place their trust in the 1,210 stores with which we closed out the year 2008.
LEARNING FROM ‘THE BOSS’
In order to find out what our ‘Bosses’ really prefer (a genuine obsession at Mercadona), we have to ask and watch extensively, turning our close relationship with the four million households which trust our company daily into an extraordinary competitive advantage. Thanks to this direct communication we were able to find out our customers' concerns and needs first hand; this information represents one of our most valuable instruments to offer our ‘Bosses’ the right solutions, such as our 2008 commitment to the Shopping Cart Menu, a response to something our ‘Bosses’ were asking for: “the highest quality and most economical shopping experience on the market”.
Customer Service Center:
Our customers’ opinions represent one of the cornerstones upon which Mercadona rests. In order to stay in touch as closely as possible with its ‘Bosses’, the company maintains a Customer Service Center with a staff of over 75. Every day these employees receive the suggestions and demands of customers and channel this information internally in order to provide them with the most efficient and prompt responses possible.
Over the course of 2008, the members of Mercadona’s CSD were able to respond, whether by phone or over the Internet, to the suggestions, ideas, doubts, requests for information and questions, of a total of 900,000 ‘Bosses’. This figure illustrates the importance which the company assigns to its customers, the close ties it develops with them, and its commitment to customer service excellence, kept year after year.
QUALITY, SAFETY AND NUTRITION
Mercadona's selection is made up of a wide variety of products whose main characteristics and priorities are quality, safety and price. These concepts are an obsession for the company, which works daily to develop new tools to eliminate hazards and to continue to enjoy the trust and support of our ‘Bosses’.
The company’s commitment in this regard is so strong that Mercadona features its own Quality Assurance Model, made up of 31 specific methods, complemented by its Hazard Prevention Protocol introduced in 2006. The implantation of both tools allowed the company to introduce in 2008 improvements to safety measures already in place, such as the automation of critical integrated supplier manufacturing processes, systems for the detection of foreign objects (such as X-rays and Computer Vision systems), and raw material certification processes carried out by integrated suppliers.
Mercadona continued to work throughout 2008 on the certification of primary-sector products (beef, lamb, pork, chicken, milk, fish, oil, fruits and vegetables, and eggs), which is one of the requisites under its Quality Assurance Model, which this year was extended in many cases to encompass farms, lots and ships.
In the area of safety it is worthy of mention that many of the company’s integrated suppliers have obtained International Food Safety Certifications, such as the IFS Version 5, the BRC, or the ISO 22.000. In the same area, over the last twelve months, certified thermographs and GPRS telecommunications systems were installed in over 1,000 trucks operating for the company. Through this TFI system, which represents a 3.2 million euro investment, the company is assured an immediate on-line tracking and registration capability for product temperatures during transport, which allows it to easily meet the requirements of CE 37/2005 regarding temperature control in frozen-product vehicles.
In 2008 Mercadona continued to strengthen its commitment in the area of food safety and to those ‘Bosses’ who suffer certain allergies or intolerances. This joint effort by integrated suppliers and Mercadona was undertaken in a two-fold manner: in the industrial area, by eliminating all possible allergens from manufacturing processes as well as from product composition; and in the informative realm by listing on labels the possible presence of trace quantities of allergens whenever required.
In line with the development of these initiatives, and based on the NAOS strategy (National Nutrition, Physical Activity and Obesity Prevention Strategy), over the course of 2008 we continued to advance in the development and the continued improvement of our food selection so that ‘The Bosses’ can enjoy healthy products of the highest intrinsic quality and safety, remaining faithful to the principle that health and nutrition, just like quality and safety, “doesn’t have to be more expensive”.
Over the last twelve months we continued to increase the presence of gluten-free and coeliac-friendly products on our grocery shelves, closing 2008 with 550. In this regard, the company’s commitment is so strong that “gluten-free” labels are only allowed on those foods which are produced in blocks featuring the strictest guarantees and which, as required by recent European regulations, contain no more than a 200 ppm (parts per million) of gluten. This demonstrates that the health and safety of its ‘Bosses’ are a top priority for Mercadona.
Food Safety Workshops held at Mercadona
In order for Mercadona to share its Food Safety Model with its integrated suppliers, in 2008 the second edition of the company’s Food Safety Workshops was held in Valencia. The three monographic events featured the presence of different government officials, distinguished professionals, and media outlets, which together shared their experiences to help and to improve this area. They addressed the need for united efforts in order to raise standards. In addition, they agreed on the need for food safety to form part of routine work in the industry, and for ‘The Bosses’ to be made aware of the efforts being made in this area.
CONTINUOUS INNOVATION AND RENOVATION - REINVENTION OF THE MODEL
Innovation is one of the forces driving Mercadona’s development, and a fundamental tool to respond adequately to the demands of its ‘Bosses’. That’s why it is not just approached through ‘R&D and Double I,’ but also as a dynamic instrument which allows for the achievement of Total Quality, aligning Mercadona every day with its Model and providing customers with solutions that give them value and which truly respond to and satisfy their expectations.
All Mercadona initiatives related to innovation are designed to satisfy its ‘Bosses’, which calls for a constant effort to review and renovate its selection in order to meet customer needs. Placing the satisfaction of customer needs first, “adding value” is the key criteria applied when determining the products which remain on shelves, respecting the premise that this is the best way to satisfy the real needs of ‘The Bosses’ with the best-value products available.
Along with the criteria of customer needs, rotation is the second criteria which allows the company to select an appropriate and up-to-date selection which includes solutions to concepts related to food and hygiene, a fundamental principle to gain the trust and support of ‘The Bosses’. To this end, Mercadona works closely with its suppliers, committed to giving customers the chance to select the right products for their needs, as opposed to the chance to choose from among an infinity of products and formats.
As part of this campaign to give its customers the opportunity to choose right, Mercadona made a major effort in the last quarter of 2008 which led to 800 products being removed from its selection, with close to 400 of them being Recommended Products. Besides their sales rotation, different criteria were taken into account, such as format redundancy and, above all, offering added value for the meeting of needs, which ever since its implantation has constituted the basis of the company’s Total Quality Model.
All this work led to the launch of the strategy which the company calls Shopping Cart Menu. Through these initiatives, today Mercadona features a complete selection which allows its ‘Bosses’ to do their shopping with the highest quality and most economical products on the market.
The shift from a distributor to a Totaler, that is, prescribing to customers the products necessary for a Total Shopping Basket, represents the concept innovation which sets Mercadona apart. This is a concept innovation whose success stems from constant improvement. One result of this was the implantation of Stores laid out by ‘by atmospheres’, launched in 2000 to provide our customers with stores that were more comfortable, spacious and well-organised, optimising their shopping experience. This initiative was bolstered in 2008 with the incorporation of 115 new stores ‘by atmospheres’, closing the year with a total of 1,107 supermarkets employing this model.
Its commitment to new technologies is a key element allowing the company to adapt more efficiently to customers’ new needs and to maintain at all times the high quality standards which distinguish Mercadona from the rest. This has been the company’s outlook since its foundation, as year after year it has made major investments in innovation, totaling over 29 million euros in 2008.
In addition to promoting the use of the electronic billing portal, on which more than 700 suppliers have registered, in 2008 the Web Accessibility Project was set in motion. At Mercadona we are firmly committed to improving accessibility for our customers, regardless of their physical or intellectual condition, age, or of their need for adapted technologies to access our webpage. That is why we modified our webpage in keeping with the standards outlined by the W3C (World Wide Web Consortium) and the WAI1.0 Accessibility Guidelines at their AA intermediate level. We have also made it possible to add the Digital Signature of Spain's National Mint to communications which our customers send to us through our webpage.
At the same time in 2008, work was completed to develop and implant bioptic scanners which, thanks to their greater reading capacity, allow for the optimisation of the product checkout process. This innovation delivers a more responsive and higher-quality experience to the four million households which regularly do their shopping at the company’s supermarkets. In addition, it reduces taxing efforts and repetitive movements at supermarket checkout lines, at the same time preventing mistakes and extra charges as products pass through the checkout area.
Responding to what our ‘Bosses’ request is about offering them the highest quality and most economical shopping experience on the market:
the Shopping Cart Menu
In recent months Mercadona has cut the cost of its ‘Bosses’’ total grocery purchases by an average of 10%.
THE EMPLOYEE
PROFESSIONAL AND PERSONAL DEVELOPMENT
More than 61,500 people comprise the company’s current workforce, on the heels of the net addition in 2008 of 1,500 employees. All of them are essential to fulfilling Mercadona’s vision and mission. Their high degree of commitment and involvement allows them to get on board with the goals and objectives of the company, a key factor for Mercadona’s present and future development.
INTERNAL TRAINING AND PROMOTION
Talent is the main driving force behind a company’s growth, and it is the responsibility of the human resources department to develop and maintain it, contributing to employees’ personal and professional growth. In 2008 Mercadona designated over 58 million euros to this commitment, equal to an average investment of close to 1,000 euros per employee. Thanks to this effort, the company's workforce has benefitted from more than 2.8 million hours of training.
Training at Mercadona is specifically targeted at developing and strengthening the skills and capacities of employees so that they can do what they know best. To this end they are given the tools, information, training and resources they need to be more efficient and to successfully take on the responsibility which each employee has: to satisfy ‘The Boss’, prescribing the best solution for their needs.
In line with the training work undertaken in previous years, over the last twelve months a range of training efforts were carried out in the perfume, delicatessen and fish sections. In addition, at the close of 2008, specific training was begun on the new Prescription Sales Model in perishable goods sections, with training also provided on the handling of new orders. In both cases the objective pursued was to supply employees with the simplest tools to help manage the product stream necessary for the flow of customers at each store, optimising resources and cutting out waste.
Mercadona is particularly interested in close relationships with its ‘Bosses’, which allows it to keep them duly informed, quickly and specifically, of the activities at its supermarkets. In this area it is worth mentioning that over the last twelve months, Courses for Prescription Monitors were initiated through which students are trained and given the necessary information to be able to handle and coordinate the improvements made by the company, regarding both products and business management.
To all the aforementioned should be added the different training tools which have been used for years. Examples which stand out include:
Leadership training. In 2008, 305 company executives perfected their skills in this area.
Certified licenses. This has continued to be implanted in order to guarantee the training which employees require for the full performance of their positions’ responsibilities.
Reincorporation plan. A training plan specifically developed for those employees who have been out of the workforce.
Computer training. Designed to improve employees’ mastery of computer skills. At the same time, specialised training was provided to project supervisors, analysts, designers and programmers, to allow them to brush up on their knowledge and skills.
English training. Aimed at those employees who use this language on the job.
2008 also saw the development of a computer tool, Knowledge Management, which allows the company to better manage training invitations, confirm attendance, and register the knowledge transmitted to employees, all while automating the planning of training efforts, student selection and credit assignation.
In 2008, as in previous years, the work of the company’s maintenance school in the training of future maintenance managers was also worthy of note. Over these months all of them received the necessary training to maintain supermarket machines and blocks in perfect working order, with preventive maintenance designed to have them working just like on the very first day, even though we are aware that there is still much to improve.
The company’s firm commitment to its employees’ personal and professional development is reflected in their career paths, as all its executives achieved their positions of responsibility through internal promotion. In 2008, 753 employees rose, based on their merits, to positions of greater responsibility.
WORK AND FAMILY-LIFE COMPATIBILITY
Helping employees to balance their work and family lives is of particular concern to Mercadona, as one of the company's primary objectives is to increase the quality of life of each and every member of its workforce, both at work and at home.
To this end, in 2008 steps in this direction continued to be taken. One of the clearest examples in this area are the 4,300 women who opted to extend by 30 days the four months of maternity leave guaranteed them under the law, in this way taking advantage of an initiative which Mercadona began in 2005. In a company in which 67% of employees are women, the promotion of this measure and the warm welcome which it receives from female employees year after year demonstrate that supporting steps to balance family and work life is a reality at Mercadona.
This reality is further evidenced by other initiatives which, groundbreaking at their time, now form part of the company’s culture and have contributed to Mercadona approaching work relations with a high value placed on making work and family-life compatible.
Through all these measures, even though there is much still to do, the company strives to be that which best treats its employees, with complete work options so that its employees can enjoy entire careers within Mercadona.
Work and Family-life Compatibility: Measures Taken:
PROFESSIONAL STABILITY Permanent contracts
Not opening supermarkets on Sundays HONOURING WORK POSITIONS
Standard workforce HOMOGENEITY OF SCHEDULES AND BETTER PERSONNEL PLANNING
Creches at some logistics blocks WELLBEING FOR FATHERS, MOTHERS AND CHILDREN
An additional month of maternity leave MORE TIME WITH THEIR CHILDREN
Working near home REDUCING UNNECESSARY COMMUTING TIME
REMUNERATION POLICY
Maintaining a fair and coherent remuneration policy which provides work incentives to all staff members and which really compensates the efforts of those who excel, is one of the challenges that the company accepts. This remuneration policy at Mercadona is based on the Fairness Principle: “same responsibilities, same salary” at a company in which salaries exceed sector standards.
Mercadona also encourages its employees’ efforts through variable remuneration policies, an initiative which allows it to secure individual dedication to collective projects. It was specifically in order to reinforce and to reward the efforts made during this past year, and in the interest of a collective commitment during a time of economic crisis that caused great uncertainty, that the company’s Board of Directors announced last September, amidst great expectation, that all Mercadona employees who met their individual objectives and passed their annual assessment interview, would receive this bonus. This decision served to strengthen ties with employees even more. In fact, their response has demonstrated once again that investing in human resources, in this case a total of 190 million euros on bonuses for objectives met, is a sure way to grow and, above all, to bolster the Total Quality Model.
HEALTH AND SAFETY ON THE JOB
In 2008, joint efforts in health and safety by Mercadona’s workforce were focused once again on prevention, through the continuous improvement of work conditions at the company's positions and in its production methods.
In order to shore up these improvements, employees were reminded once again of the important role which dialogue, training and proactivity play in the prevention of hazards on the job. In addition, different prevention methods were specified and announced, such as Ergonomic Method of Pallet Preparation Methods in Logistics Blocks, The Shelf Restocking Method at Stores and the Method for Working at Heights for maintenance managers at the Ciempozuelos logistics block. Specific training modules were also devised, such as Preventive Resources at Construction Sites, or Emergency Response Bosses.
At the same time, the company’s prevention service, made up of 52 doctors and advanced technicians specialised in different areas, has worked proactively on the design, supervision and reinforcement of the hazard prevention methods to be employed in the execution of the company's regular tasks. To this end a range of evaluations were carried out of employees in particularly sensitive posts; individual health campaigns were launched regarding tobacco use, diet and exercise; the industrial hygiene checks mandated by regulations in effect were completed; initial hazards at new centers opened were evaluated, and periodic, specific medical evaluations were conducted.
In addition to the work completed in 2008 regarding work health and safety by Mercadona’s prevention service, cooperation and support were also received from the following mutual organisations: FREMAP, UMIVALE, ASEPEYO, Mutua de Accidentes de Canarias (MAC), Mutua Balear, Mutua de Accidentes de Zaragoza (MAZ), Ibermutuamur, and Mutua Montañesa.
THE SUPPLIER
THE SUPPLIER: A MUTUAL COMMITMENT
More than 10 years ago, Mercadona initiated the development of its integrated supplier model, a system based on long-term relationships, cooperation and trust allowing both parties to work together towards a two-fold goal: having the products with the best value on the market, and constantly focusing on how to meet ‘The Bosses’’ needs better.
After 10 years, our collaboration continues to be made possible because we share the same mission and the same values. This commitment makes Mercadona value especially the importance and transcendence which its initiatives have from a socio-economic point of view as they stimulate the development of the regions where its integrated suppliers are based.
In this area, in 2008, company integrated suppliers made a major investment effort totaling over 500 million euros. In this way they have continued to fortify their productive activity throughout the country through land purchases, the construction of new factories, and the expansion of new manufacturing lines, along with the jobs created as a result of these activities.
At Mercadona, for years we have maintained medium- and long-term agreements with fruit and vegetable suppliers who are assured that they are always going to recover their production costs, in addition to turning a profit. Through this innovative commercialisation system the company agrees to pay a stable price for each kilo of fruit and vegetables, in this way mitigating the potential consequences for suppliers of possible general price drops or losses from poor quality harvests. Meanwhile, farmers commit to meeting a series of growing and quality standards while maintaining the strictest oversight of their crops, from the moment when their lands are prepared for sowing until their products reach consumers.
This model of mutual collaboration and joint commitments has allowed Mercadona to build stable ties with its integrated suppliers, as evidenced by the “contracts for life” which it signs with them through its Sound Business Practices Framework Agreement which governs the relationships between both parties. This allows them to plan for stable and sustained growth, as commitment and trust follow as the results of close cooperation and from a shared dedication to a common mission: satisfying the needs of ‘The Bosses’ with the best value products.
ANNUAL MERCADONA INTEGRATED SUPPLIER MEETING
In January of 2009, the tenth integrated suppliers meeting was held in Valencia. This meeting served to wrap up the different work sessions which Mercadona maintained with its integrated suppliers over the last quarter of the year. At the meeting, the current economic situation was analysed in order to define the strategies needed to allow Mercadona to realign itself with its Total Quality Model, prescribing the best value products and giving ‘The Boss’ the highest quality and most economical shopping experience on the market: the Shopping Cart Menu. It was decided to grant the Mercadona Sorolla Innovation Award, in a generic fashion, to the joint effort to lower prices, as this is the best way for businesses to behave in a socially responsible way during this time of economic crisis.
LOGISTICS BLOCKS
One of the main challenges facing Mercadona’s logistics network from its beginnings has been to deliver supplies in an efficient and timely manner at the lowest possible costs to stores. This obsession, always present in the daily work of the over 5,200 employees working in the company’s logistics blocks, is now coupled with an effort to reduce the environmental impact of their activity as they strive to leave no environmental trace behind. All of this while protecting decent and attractive work positions at warehouses, eliminating excessively strenuous tasks and hazards.
All these efforts form part of the company's major investment effort which will total over 1.6 billion euros over the upcoming years to build and refurbish its logistics blocks. Examples of this campaign are the construction, finalised in October of 2008, of the new automated freezer warehouse in Riba-roja del Túria, which represented a 30-million euro investment. Another indication of the efforts made in this area in 2008 was the continuation of work on the future logistics block in Villadangos del Páramo (León), whose completion, scheduled for 2011, will provide stable employment to more than 400 people. For the construction and start-up of this block, which will feature 80,000 square metres of platform built on a lot covering 255,000 square metres, Mercadona will invest a total of 200 million euros.
Inauguration of the Ingenio logistics block.
Last June 18th, Canary Islands President Paulino Rivero, accompanied by different regional and municipal authorities, inaugurated the logistics block in Ingenio, in Gran Canaria island. At this act Mercadona President Juan Roig spoke about what its opening meant to Mercadona and how proud all company members were of being able to actively contribute to the development of the islands, especially the more than 3,300 Mercadona employees in the Canaries. At the same time he recognised the support which Canary Islands’ society has showed the company for more than 18 years, which has allowed Mercadona to take advantage of its opportunities and to keep growing. A clear indication of that support is precisely the Ingenio logistics block, which focuses on innovation and development to completely prevent employee overexertion and overworking, thus helping to reduce the risk of accidents.
Logistics block in operation
RIBA-ROJA DE TÚRIA – Valencia,
ANTEQUERA – Málaga,
SANT SADURNÍ D’ANOIA - Barcelona,
SAN ISIDRO – Alicante,
HUÉVAR – Sevilla,
GRANADILLA DE ABONA – Tenerife,
CIEMPOZUELOS – Madrid,
INGENIO - Gran Canaria.
Logistics block in planning stage / under construction
VILLADANGOS DEL PÁRAMO – León,
GUADIX – Granada,
PLA-ZA – Zaragoza.
Satellite warehouse
MERCAPALMA - Palma de Mallorca,
HOSPITAL DE ÓRBIGO – León.t
SOCIETY
Listening to what society wants from Mercadona and aligning our management model to meet those specific needs is an exercise in responsibility which the company carries out constantly. This responsibility, shared by both the company’s employees and suppliers, makes us maintain an open and communicative attitude in which all efforts are aimed at continuous improvement, even as we are conscious of the long road we still have ahead of us.
That is why it is of special relevance that in 2008 we ranked among the 25 most highly-valued brand names in Europe according to a report issued by Interbrand, and that we were one of the top companies in the world in corporate reputation, as documented annually in the reports drafted by the prestigious New York Reputation Institute.
Although both honours show that society appreciates the job that Mercadona is doing, they are above all a spur to remain committed to responsiveness, proximity and the creation of wealth.
Conscious of the fact that a business model based on proximity such as Mercadona’s carries with it an obligation to be extremely sensitive-to, and to operate in harmony-with, the residents and the area surrounding each supermarket, Mercadona works hard to develop methods which guarantee that the company does not disturb them in any way. These methods have allowed the company to continuously advance in this area, but despite the constant efforts we have made, there is still much room for improvement.
DEVELOPMENT OF THE COMMERCIAL AND LOCAL ENVIRONMENT
One of Mercadona’s main contributions to the development of society is how it helps to make urban commerce more dynamic in the neighbourhoods and cities in which its supermarkets operate. In fact, Mercadona does not just exist alongside traditional commercial formats, but also foments their development and preservation through specific initiatives.
The clearest example of this is the increasing presence of local town markets where the company currently maintains a total of sixteen supermarkets after inaugurating four new stores in 2008, specifically in the local town markets of Orcasitas in Madrid and in Castellar de Vallès, Sitges and Abrera, these last three in Barcelona province.
Mercadona’s contribution to the development of society is clear from the figures: along with its integrated suppliers, in 2008 it invested a total of 1.1 billion euros. Through this initiative, once again efforts were made to bolster productive activity throughout the country, with the aim of contributing to the development of a potent and modern food and agriculture industry.
In addition to all this, Mercadona’s commitment to society also led to the creation of 1,500 new permanent jobs, bringing its total workforce to 61,500. At the same time, its contribution to Spain’s GDP, which directly impacts the development and growth of our society, has also risen, reaching 2.681 billion euros in 2008, up 6.5% from 2007.
MERCADONA’S PRESENCE AT LOCAL TOWN MARKETS
Sant Salvador Market (Vilafranca del Penedès – Barcelona) ,
De l’Olivar Market (Palma de Mallorca),
Fort Pienc Market (Barcelona),
Salt Market (Salt – Girona),
Onze de Setembre Market (Barberà del Vallès – Barcelona),
As Travesas Market (Vigo),
La Unió Market (Barcelona),
Santa María de la Cabeza Market (Madrid),
Puente de Vallecas Market (Madrid),
Benidorm Market (Benidorm – Alicante),
Ripollet Market (Ripollet – Barcelona),
San Enrique Market (Madrid),
Castellar Market (Castellar del Vallès – Barcelona),
D’Abrera Market (Abrera – Barcelona),
Sitges Market (Sitges – Barcelona),
Orcasitas Market (Madrid).
IN PROGRESS
Los Filtros Manises Market (Manises - Valencia),
Cubert de Inca Market (Inca – Illes Balears),
Montcada Market (Montcada - Valencia),
Fondo Market (Santa Coloma de Gramanet – Barcelona),
San Pascual Market (Madrid),
Canet de Mar Market (Canet de Mar - Barcelona),
Sant Fost Market (Sant Fost de Campsentelles - Barcelona).
A STRONG COMMITMENT TO SOCIETY
Mercadona’s involvement with society is not only conveyed in figures, but is also evidenced by the communicative and participative attitude which distinguishes the company. Over the course of 2008, the promotion of dialogue and transparency led to the transmission of the company’s values at numerous forums in which corporate executives shared their experience and knowledge with social agents regarding corporate social responsibility, leadership, environmental respect and, obviously, Total Quality.
As in previous years, in 2008 Mercadona reached out to society in the area of education, with over 3,000 vocational and university students visiting company premises. Through these visits, Mercadona enjoyed the opportunity to explain its Mission and its way of interacting with the company’s five components, at the same time taking advantage of this chance to make contact with this sector of the population and to listen to their expectations.
In his relationship with society, it is worth noting the role that Juan Roig played from October 2005 until November 2008 when he served as president of the Family Enterprise Institute (Instituto de Empresa Familiar), a non-profit organisation which brings together some one hundred family businesses which are leaders in the industrial and service sectors. In this capacity, as he expressed in his farewell address, Juan Roig defended the values of family businesses as a vital economic force and the need for the voice of entrepreneurs to be heard by officials in order to continue generating employment and wealth in Spain.
Mercadona also participates regularly in a range of institutions and associations such as:
Spanish Association of Commercial Codification (AECOC),
Spanish Association of Distributors, Self-service blocks and Supermarkets (ASEDAS),
University of Alicante Family Business Chairship,
San Telmo Food & Agriculture Institute Board of Trustees
Board of Trustees of the Master’s Degree in Commercial Distribution Business Administration (Ministry of Industry, Tourism and Commerce)
Board of Trustees of the Advanced Training Program for managers of food & agriculture chain businesses
EDEM Business School,
ERRT (European Retail Round Table),
Terrasa Superior School of Commerce,
Food & Agriculture Forum,
COTEC Foundation
Knowledge and Development Foundation (Fundación CyD),
Mobility Foundation (City of Madrid).
The work completed over these past years and the daily efforts of the 61,500 people who make Mercadona’s project a reality were rewarded in 2008, recognised by Forinvest which last April granted the company its Social Corporate Responsibility Award. According to its panel, Mercadona earned this award because it demonstrated that “a company's internal growth can be made compatible with continuous improvement in its relationship with its employees”, once again demonstrating that favouring human development is a sure way to develop companies at the same time.
In this area we ought to mention His Majesty Don Juan Carlos’s gracious reception of the companys Board of Directors and the support shown by him to Mercadona over its 25-year history. The company was privileged to visit His Majesty at the Zarzuela Palace, an honoúr which represents the best incentive possible to continue working with the same kind of effort and dedication which have allowed us to achieve the goals we set for the company a quarter of a century ago.
The achievement of our goals and the perseverance and dedication we have shown, also led to Mercadona’s President Juan Roig being honoured in 2008 with the Gran Cruz de la Orden de Jaume I el Conqueridor for his contributions to growth in the Community of Valencia. This award also represents a commitment for the company president, as Generalitat Valenciana president Francisco Camps underlined at the award ceremony the need to “keep making our society great”.
THE ENVIRONMENT
In 2008 Mercadona continued applying its Environmental Management System, whose main objective is to produce more with less, that is, to optimise the consumption of natural resources. Over the course of the year, a special effort was made throughout the company to reduce as much as possible the unnecessary use of electricity and fuels, as in the end, the energy that pollutes the least, and protects the environment most, is that which is never used in the first place.
In 2008 Mercadona continued to launch initiatives that reduced energy consumption while at the same time minimising the environmental impact of its activities. All this was made possible by the introduction of measures which have rendered the company’s processes more efficient, an attitude which has been a key component of Mercadona's environmental policies.
ENVIRONMENTALLY-SUSTAINABLE TRANSPORT
A project carried out by the department of logistics to “transport more using fewer natural resources”.
In 2008, the combined use of lorries, trains and ships, and the loading-dock purchasing project, allowed us to reduce the environmental impact of our transport: 90 million fewer kilometres per year, a reduction of 12,000 lorries on the road, and 82,000 tons of CO2 emissions.
BY LORRY: Loading-dock purchasing: picking up goods directly at our suppliers' locations means avoiding wasteful trips with no loads and the need for direct supplier vehicles at stores.
78 million kilometres per year.
Silent night-time unloading: reducing noise pollution and traffic congestion in our cities.
203 Spanish cities already enjoy silent night-time unloading.
Natural-gas lorries: Reducing CO2 emissions by 30% and noise pollution by 50%.
BY TRAIN: 419 trains and four different routes yearly.
CO2 emissions cut by 12,000 tons.
In 2008, two weekly Seville-Madrid-Seville trains were added to the routes already established between Córdoba, Tarragona, Seville and Valencia.
BY SHIP: New maritime routes.
2,400 containers.
53,000 tons of goods transported by ship.
CO2 emissions reduced by 3,000 tons.
OPTIMISING THE CONSUMPTION OF NATURAL RESOURCES
A reduction of 390 tons of plastic by refining the processes used for
different packaging.
110 million litres of water saved in 2008 through the installation of
systems to optimise the consumption of refrigeration circuits.
55,000,000 Kw/h saved after investing in training on responsible consumption
at work positions and the implantation of technological improvements
in stores.This figure is equal to the consumption of a city with a population
of over 40,000 for one year.
Reduction of 90 tons of paper (1,600 trees) and 270 tons of CO2 emissions by promoting the electronic exchange of invoices and the use of digital signatures for credit card transactions.
108,400 tons less CO2 yearly due to reductions in electricity and transport from not opening on Sundays or on holidays.
RECYCLING
Toneladas recicladas:
114.000 paper and cardboard
7.600 paper and cardboard
1.500 wood.
1.100 polystyrene.
OTHER INITIATIVES.
Silent night-time unloading: In 203 localities in 35 provinces, more than 900 technological steps were taken to enact the recommendations of the AECOC for the Urban Transport of Goods.
Natural gas lorries: Last May, Mercadona introduced the first lorry fueled by pressurised natural gas for urban distribution, which through its logistical operator Acotral, as part of a trial period, supplies three stores in the city of Madrid. This vehicle represents yet another step forward in the company’s commitment to reducing the consumption of natural resources, in keeping with its Environmental Management System. The goal is to produce more while using fewer resources, given that this type of fuel cuts CO2 emissions by 30%, other gases and contaminating particles by 80%, and reduces noise pollution by 50%.
Eco-friendly designs: Mercadona is aware that there is still much room for improvement when it comes to ecologically-efficient designs for product packaging. Nevertheless, we ought to note that the use of plastic trays allowed the company to avoid consuming more than 5,000 tons of food paper (used to wrap fresh products) annually, as well as saving more than 2,100 tons of plastic bags into which wrapped products were placed. Due to its uncleanliness, this packaging ended up in the rubbish bin at home, so these 7,100 tons of packaging were replaced with trays which, by contrast, can be placed in yellow, plastic-recycling skips; an eco-tax is paid toward the cost of this recycling system.
bestLog European Project: We should also mention Mercadona’s participation in the bestLog European Project, after having been selected among more than 100 companies to appear in the Sound Logistical Practices catalogue produced by the Technological Institute of Packaging, Transport and Logistics (ITENE). Through this project, launched by the European Commission, Mercadona brings to bear its experience in the transport of goods by rail, with the aim of sharing the improvements it has identified and applied in the practical management of logistical chains.
Eco-friendly supermarkets: In 2008, Mercadona continued to work towards making its supermarkets eco-friendly, introducing groundbreaking systems at more than 240 supermarkets, leading to energy savings, both in climate control at stores as well as in lighting.
Environmentally-sustainable products: Mercadona’s Bosque Verde household Recommended Products meet AISE regulations and also include on their labels the Sustainability Charter, demonstrating the commitment made, by both the company and its suppliers, to environmental protection. Among concrete steps taken was the commitment made by integrated supplier Persán, a manufacturer of cleaning and clothing-care products, to adhere to the Laundry Sustainability Project 2. This project, sponsored by the National AISE Associations to promote the compacting and concentration of powder detergents, manages to make significant reductions in the environmental impact caused by the use of chemical substances and packaging materials, as well as by the energy consumed on the production lines and in the transport of these products.
In addition, all the paper the company consumes enjoys FSC certification and comes from sustainable forests, once again illustrating Mercadona’s commitment to the conservation of our natural resources.
CAPITAL
CORPORATE ACTIVITY
Founded in Tavernes Blanques (Valencia) in 1977, Mercadona’s mission is “The sale of all manner of articles in the grocery sector, with the possible opening of establishments for retail or wholesale selling of said products; the providing of transport services for all kinds of goods, and carrying out studies, programs, reports and any other activities which are directly or indirectly related to computers, and the management, accounting, administration and oversight of businesses”. Mercadona is dedicated to the distribution of food, household products and cosmetics through its 1,210 supermarkets supplied by a series of logistics centers which the company has strategically located throughout the country.
COMPANY TRENDS
2008 was a year during which Mercadona made a special effort to realign itself with its management model based on Total Quality. The results achieved over these twelve months were possible thanks to the trust of more than four million households which shop with us, the efforts of over 61,500 employees, the commitment of 2,000 suppliers, 1,000 service providers, and 1,000 sales representatives, more than 100 of them integrated suppliers, and thanks to society’s positive reaction to our activities.
Their involvement and commitment to the management model not only allowed the company to be one of the Spanish businesses generating most permanent jobs, but Mercadona also continue to advance in the development of mid- and long-term efforts designed to find solutions which satisfy with equal dedication the needs of the company’s five components.
With this goal in mind, over these twelve months the company has carried out a thorough review of all its processes in order to adapt once more to the needs and demands of its ‘Bosses’. The company's clear objective is, by recommending products, to give customers the chance to choose right, doing their grocery shopping at Mercadona with the highest quality products and the market's most economical prices: the Shopping Cart Menu.
Key figures (millions of euros)
Turnover: 2007 13.986, 2008 15.379. % variation 08/07, 10%
Achievement: 2007 549, 2008 430. % variation 08/07, - 6%
Pre-tax results: 2007 472, 2008 444. % variation 08/07, - 6%
Results after taxes: 2007 336, 2008 320. % variation 08/07, - 5%
These figures reinforce the validity of a management system based on the Total Quality Model.
Over this year Mercadona made a major effort to reduce payment times to suppliers, cutting it from 69 days in 2007 to 66 days in 2008.
As in previous years, the company’s annual accounts were audited by Deloitte, S.L., which on 29th January, 2009 issued its report without any reservations, as usual. Said report, along with the annual accounts, is duly deposited in Valencia’s Mercantile Registry.
SALES
As in previous years, the Total Quality management model and a development policy based on internal corporate growth, allowed Mercadona to generate a turnover of 15.379 billion euros in 2008. This figure represents a total increase of 10% over the previous year.
PROFITS
Pre-tax profits stood at 444 million euros in 2008, as compared to 472 million the previous year, which represents a 6% drop. Meanwhile, after-tax profits in 2008 came in at 320 million euros, 5% down from 2007, a year in which Mercadona posted net results of 336 million euros.
These figures reinforce the company president’s message, which underlines that our top priority must be to respond to society’s demand for companies to assume their responsibilities in the reactivation of consumption, and that profit figures must take a back seat to this effort.
EBITDA
Mercadona’s capacity to produce revenue was in line with the remainder of its business figures, with the company's EBITDA standing at the end of 2008 at 838 million euros, a figure similar to that posted in 2007 when it came in at 850 million.
INVESTMENTS
As of 31st December 2008, Mercadona boasts a total of 1,210 supermarkets located in 46 provinces and 15 autonomous communities, continuing to expand throughout the country through its ‘oil stain’ strategy.
Over these twelve months Mercadona made investments totaling 572 million euros on the construction of new stores and the expansion and refurbishment of 40 supermarkets to upgrade them to the chain’s comfort standards. 2008 also saw the launch of the second phase and the bread production line at the Ciempozuelos logistics block in Madrid, work on the freezer warehouse, and the two bread production lines at the logistics block in Riba-roja del Túria (Valencia); and work on the Villadangos del Páramo (León) logistics block was continued.
The company’s fixed assets grew in 2008 by 7%, reaching a book value of 2.297 billion euros.
EQUITY CAPITAL
The capitalisation of almost all profits obtained meant that, at the end of 2008, the company’s equity capital figure rose to 1.641 billion euros.
Worthy of note is the constant evolution in the ratio of equity capital relative to total assets, which went from 35% in 2007 to 38% in 2008.
PRODUCTIVITY
The company’s sustained investment efforts and its commitment to innovation, both in processes as well as products, technologies and concepts, allowed it to increase its productivity by 6%. Annual average turnover by employee went from 220,000 euros in 2007 to 234,000 euros in 2008. These figures illustrate that, the company's vision of innovation as one more business process and as an instrument that helps to create a competitive advantage, allows Mercadona to guarantee a constant and sustainable level of growth.
MERCADONA, S.A
2008 Statement of profits and losses (in euros)
CONTINUING OPERATIONS
Net business turnover 14.283.643
Sales 14.283.643
Procurement (10.816.816)
Consumption of goods (10.816.816)
Other operating income sources 25.043
Ancillary income and other ongoing income 19.398
Operating subsidies included in the result for the financial year 5.645
Personnel expenditures (1.747.386)
Salaries, pay and similar costs (1.342.302)
National Insurance contributions (405.084)
Other operating expenses (908.627)
External services (885.821)
Taxes (19.551)
Losses, deterioration and variation
in provisions due to commercial operations
(201)
Other ongoing expenses (3.054)
Depreciation of fixed assets (387.614)
Cost of subsidies for non-financial investments and others 1.141
Deterioration and total result due to disposal of fixed assets (19.841)
Deterioration and losses(20.075)
Total result from disposals and other items 234
OPERATING INCOME 429.543
Financial income 51.659
From stakes in third-party equity instruments 555
From trading securities and other third-party financial instruments 51.104
Financial expenses (28.902)
Debts to third parties and other financial expenses (28.902)
Deterioration and total sum of disposals of financial instruments (8.256)
Deterioration and losses (8.256)
FINANCIAL RESULTS 14.501
PRE-TAX RESULTS 444.044
Taxes on profits (123.580)
FINANCIAL YEAR RESULTS 320.464
Notes 1 to 18 contained in the Report form an integral part of the balance sheet as of 31st December 2008.
MERCADONA, S.A
Balance sheet as of 31st December 2008 (in euros)
ASSETS
Non-current Assets 2.428.822
Intangible assets
Concessions 39.085
Computer applications 25.369
Other intangible assets 20.942
85.396
Fixed assets
Properties and construction projects 1.256.607
Technical blocks and other fixed assets 968.717
Assets in progress and advances 72.099
2.297.423
Investments in group businesses and businesses associated with L.P. --
Long-term financial investments
Equity instruments 2.400
Debt securities 25.187
Credits and other financial assets 10.156
37.743
Deferred tax assets 8.260
CURRENT ASSETS 1.895.395
Stock 531.096
Commercial debtors and other payable accounts
Sundry debts 47.256
47.256
Short-term financial investments
VDebt securities 2.263
Other financial assets 53
2.316
Short-term accruals 12.379
Cash and other equivalent liquid assets
Treasury 1.242.348
Other equivalent liquid assets 60.000
1.302.348
TOTAL ASSETS 4.324.217
LIABILITIES
NET EQUITY 1.641.114
Equity capital
Declared capital 15.921
Declared capital 1.736
Reserves
Legal and statutory 3.184
Other reserves 1.305.071
1.308.255
Equity capital shares (6.968)
Result of the financial year 320.464
Subsidies, donations and bequests received 1.706
NON-CURRENT LIABILITIES 47.487
Long-term provisions 22.891
Long-term provisions
Debts to financial institutions 12.893
Other financial liabilities 10.559
23.452
CURRENT LIABILITIES 1.144
CURRENT LIABILITIES 2.635.616
Short-term debts to financial institutions 2.238
Commercial creditors and other accounts to pay
Suppliers 1.955.349
Sundry creditors 336.017
Personnel 151.362
Current tax liabilities 52.625
Other debts to government entities 138.025
2.633.378
TOTAL NET EQUITY AND LIABILITIES 4.324.217
TOTAL NET EQUITY AND LIABILITIES
1977 The couple formed by Mr. Francisco Roig Ballester and Mrs. Trinidad Alfonso Mocholi (1911-2006) initiate Mercadona's activity within the Cárnicas Roig Group. What were then family-run butcher shops become grocery stores.
1981 Juan Roig and his wife, along with siblings Fernando, Trinidad and Amparo, buy Mercadona from their father. The business has 8 stores and approximately 300 square metres of shopping area. Juan Roig assumes control of the company, which initiates its activity as an independent business.
1982 First company in Spain to use scanners to read bar codes at point of sale.
1986 Implantation of store shopping cards, free of charge for ‘Bosses’.
1988 Inauguration of the Riba-roja del Túria (Valencia) logistics block, a breakthrough in Spain for its total automation.
Acquisition of Superette Supermarkets which featured 22 stores in Valencia.
1989 Acquisition of Cesta Distribución y Desarrollo de Centros Comerciales, which allowed the company to establish a presence in Madrid.
1990 Juan Roig and Hortensia Mª Herrero become the company's majority shareholders.
1991 Acquisition of Dinos and Super Aguilar.
Electronic Data Interchange (EDI) is initiated with suppliers.
1992 The company reaches figures of 10,000 employees and 150 stores.
1993 Implantation of the Always Low Prices (SPB) commercial strategy, which will later evolve into the Total Quality Model.
1996 The birth of recommended products: Hacendado, Bosque Verde, Deliplus and Compy. Opening of supermarket number 200, in Segorbe (Castellón).
The first labour agreement is signed for all employees.
1997 Alliance signed with Gómez Serrano stores.
Antequera (Málaga).
1998 Acquisition of Paquer stores and Vilaró supermarkets in Catalonia.
1999 The process of making all staff permanent employees (a process started in 1995) is completed; at that time, the number of employees was 16,285.
Inauguration of the logistics block in Antequera (Málaga)
The project for a new design and model for the cosmetics section is initiated.
2000 Construction of the logistics block at Sant Sadurní d’Anoia (Barcelona).
Inauguration in Massanassa (Valencia) of the first store ‘by atmospheres’.
Celebration of the first meeting with integrated suppliers.
Signing of collective labour agreement (2001-2005).
2001 Inauguration of the first free creche for the children of employees at the logistics block in Sant Sadurní d’Anoia (Barcelona).
Mercadona reaches 500 stores when it opens its first supermarket in Linares (Jaén).
2003 First business to carry out an Ethical Audit.
First store without a meat display in Alcañiz (Teruel).
Inauguration of the logistics block in San Isidro (Alicante) and the company’s second creche.
Launch of the new Hortensia H. perfume line.
Opening of a supermarket in the Mercat de l’Olivar’s blocks in Palma de Mallorca.
2004 Opening of the logistics block in Huévar (Seville) and the company’s third creche.
The Board of Directors decides not to open supermarkets on Sundays, except on special occasions.
All stores in the peninsula and in the Balearic Islands without meat counters.
2005 Implantation of the new Mercadona uniform.
First edition of Mercadona Sorolla Innovation Awards.
With the implantation in the Canary Islands of the new butcher-shop model, all the chain’s stores lack a meat display.
Opening of the logistics block in Granadilla de Abona (Tenerife).
Signing of the new collective labour agreement for the next four years (2006-2009).
2006 The company’s 25th anniversary
Opening of the company’s 1000th store in Calp (Alicante).
Relaunching of the Mercadona store card with a new image.
2007 Start-up of the first phase of the 21st Century Warehouse logistics block in Ciempozuelos (Madrid).
The company reaches the figure of 60,000 employees, all of them with permanent contracts.
Ranked fourth in the world in corporate reputation, according to a study by the prestigious New York Reputation Institute.
2008 Realignment of Mercadona with its Total Quality Model fifteen years after its implantation.
Shopping Cart Menu to offer ‘Bosses’ the highest quality and most economical shopping experience on the market.
Inauguration of the Ingenio logistics block (Gran Canaria Island).
The Mercadona Project continues to move forward.
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