MERCADONA ANNUAL REPORT 2010

Introduction
Mercadona: Our Model
1. What is Mercadona?
2. The Mercadona Model: a model of responsible enterprise
History of the Mercadona Project 1977 - 2010

INTRODUCTION

RELEVANT DETAILS 2010

“The Boss”

Geographical presence: 46 Provinces; 15 Autonomous Communities; 4.4 million households trust Mercadona daily.

Local Supermarkets: 46 more stores than in 2010; 60 openings; 14 closures. 2009: 1.264 supermarkets

2010: 1.310 supermarkets

Market share: 1.704.000 m2 of shopfloor; 13.1% market share; 12.922.000 m2 total shopping surface area of organized distribution in Spain.

Shopping Cart Menu: Satisfying the grocery needs of our ‘Bosses’ with a Total Shopping cart of the highest quality and with the lowest prices on the market 14% drop in prices since 2009; 4% cheaper than in 2010; 2,200 million euros in savings for “The Boss” in 2010.

The Employee

Stable employment: 1,500 new permanent positions created; 63,500 employees, all with permanent contracts; 67% female employees.

Professional development: 577 employees promoted; Percentage of promotions in 2010: 44% men and 56% women.

Remuneration policy: 210 million euros in variable incentive bonuses disbursed among our workforce in 2010.

Training: 30 million euros invested; 471 euros average on training per person; 14 training courses; 1.2 million hours.

Work and Family-Life Compatibility: working mothers 3,749 enjoyed one month extra maternity leave in 2010. The percentage of working women who decided to become mothers was 8.8%, which is 4.5% higher than the Spanish average.

In general, uninterrupted morning or afternoon schedules and stores closed on Sundays and holidays.

The Supplier

Creating wealth and employment:

Over 100 integrated suppliers. Hacendado, Bosque Verde, Deliplus and Compy brands, among others.

Over 2,000 trade and service suppliers.

Over 9,200 contributing SMEs and raw material producers.

Over 2,000 jobs created by the integrated suppliers.

15,052 million euros in purchases from national commercial and service suppliers, over 90% of the company’s purchases and equivalent to over 1.4% of Spain’s GDP.

Average payment time to suppliers: 2008, 66 days; 2009, 65 days; 2010, 63 days.

420 million euros invested by our integrated suppliers to spread their production activities throughout Spain.

Logistics blocks: 9 logistics blocks in operation; 2 logistics blocks in planning stage/under construction.

Society

Social productivity: Do + with –; Commitment to the efficient use of natural resources, doing more with less.

Contribution to the Spanish GDP: 3,059 million euros.

Joint generation of wealth and employment by Mercadona and its integrated suppliers. Combined investment in 2010 of 1,000 million euros, 3,500 new jobs created in 2010, a combined workforce of 104,000 employees.

Sustainable Transport: Transport more with fewer resources. Combined use of trucks, trains and ships to reduce environmental impact.

407 stores with Silent Nighttime Unloading.

Mercadona was recognized in 2010 by the European Commission as an example of a company that fosters good environmental practices.

Environmental investments: 23 million euros.

Promotion of local commerce: 19 supermarkets in local town markets; 2 new and 7 planned.

Capital

Kilos and liters sold: 2009, 8,000 millions of kiliters; 2010, 8,532 millions of kiliters.

We achieved 7% growth in 2010.

Net profit: 2008, 320 million euros; 2009, 270 million euros; 2010, 398 million euros. In 2010, Mercadona saw a 47% increase in profits over 2009, returning to figures similar to those of 2008.

Productivity: 2009, 10,724 in kiliters / person / month; 2010, 11,286 in kiliters / person / month. +5% productivity.

Turnover: 2009, 15,505 million euros; 2010, 16,485 million euros. +6% increase.

EBITDA: 2009, 725 million euros; 2010, 1.000 million euros. +38% increase.

Equity capital: 2009, 1,885 million euros; 2010, 2,255 million euros. Committed to the long term. Reinvesting over 90% of the profits meant that in 2010, equity capital rose to 2,255 million euros.

Sustained investments over time: 2,300 million euros invested from 2007 to 2010, an average of almost 600 million euros a year.

MESSAGE FROM THE PRESIDENT

It is with great pride that I take this opportunity to address you on behalf of everyone that forms part of Mercadona, this time to assess our performance for 2010. The results that are presented in detail below stem from the commitment that everyone of us who make the Mercadona Project a reality every day has taken to heart. This commitment is none other than to apply ourselves fully and to work better and more, making whatever decisions are necessary, even if they are unpopular or bothersome, so as to grow in the current environment. It is only by giving the most of ourselves in our daily jobs, by being demanding in everything we do and understanding that nothing is untouchable, that we will be able to pull through this recession, since the only true remedy is for us all to return to the Culture of Endeavour that always served us so well in the past.

Thanks to this conviction, and in spite of the recession, over these past twelve months we’ve managed to prove that if it is we who create change and lead it, that we can move forward and grow in difficult times, as we have done. In 2010 we focused even more on what Mercadona could do for Spain. We decided to swing into action, leading the change, instead of waiting to see what Spain could do for Mercadona or for each of us.

This commitment to the Culture of Endeavour, to prescribe those products with the best price to quality-ratio on the market for the more than 4.4 million households that place their trust in us, and to chasing after every cent in every one of our decisions, is what has allowed Mercadona to increase its turnover in these past twelve months to 16,485 million euros, 6% more than in the previous year. Thanks to this, the growth in sales per unit of shopfloor was 2%, a fact that serves to highlight the consolidation of our business model and proves that, on occasion, we must adapt quickly to our surroundings and make risky decisions so that others do not end up making them for us.

As with the turnover, the sales volume in kilos and liters (kiliters), a particularly relevant indicator in our decision-making process since late 2008, exhibited very strong performance, finishing out the year at 8,532 million kiliters, a 7% increase over the previous year.

Another significant piece of information that made us very proud in 2010 was job creation: 1,500 direct, permanent jobs were created over these twelve months, bringing our total workforce to 63,500 employees, all of them permanent. Though this commitment to creating quality jobs is a consequence of the pledge that Mercadona has had with society from its inception, it is worth noting that what we achieved in 2010 is a clear step forward in this direction, given the seemingly unfavorable climate for these measures.

Over these twelve months we continued our investment efforts, which in 2010 totaled almost 600 million euros, most of which was earmarked to opening and refurbishing new supermarkets, the final outcome being that we had 1,310 stores at the end of the year. We also pressed forward with the construction of new logistics blocks.

These figures as a whole, a consequence of the individual and collective involvement and commitment of the 63,500 people who are developing their careers at Mercadona, have allowed the company to attain a net profit of 398 million euros. This is also a testament to the effort demonstrated by our employees, who have managed to boost the company’s productivity. This effort was rewarded in 2010 by the support we received from all of our “Bosses” who do their shopping every day at Mercadona, and without whom this project would not have been possible, and by the paying out of 210 million euros in incentive bonuses to all of those workers who fulfilled their commitments.

I am convinced that this year we are entering now is also going to be a difficult one. Now more than ever we have to realize that the future of Spain is going to depend on the decisions we make and on how far we are willing to go to make good on our commitment. That is why our obligation as a company is to continue improving our productivity, to invest as much as necessary in our people so that we can have employees that lead and who make decisions and take risks in keeping with our business paradigm: the Total Quality Model. Because in order for a project to be successful, a company must encourage leadership at every level, and it must also know how to pass its dreams, motivations, efforts and hard work on to its employees.

The situation facing us is complicated. I humbly believe that Spanish civil society must understand that the only road ahead of us, if we are to pull through this crisis, which will not end until the country’s level of productivity matches its standard of living, must entail every one of us returning to a Culture of Endeavour. All of us in the Mercadona Project - employees, suppliers, integrated suppliers and shareholders - firmly believe this. That is why, we are aware of how much we still have to improve, we will keep working better and more, becoming actively involved in Spain’s future, because if we are convinced of one thing it is that as Spain improves, so will Mercadona.

On behalf of them all, I thank you for having taken the time to read this message. I sincerely hope that I have been able to convey that by making brave and risky decisions, even if they are unpopular and bothersome, and by applying the Culture of Endeavour to everything we do, it is possible to move forward and to grow even in these difficult times.

Juan Roig

COMITÉ DE DIRECCIÓN

Juan Roig, President
José Jordá, Managing Director of Stores and Prescription of Perishables
José Ramón Illán, Managing Director of Crop Purchasing, Dairy Products and Byproducts
Héctor Hernández, Managing Director of Human Resources and Finances
Juan Antonio Germán, Managing Director of External Relations
Francisco Espert, Managing Director of International Purchasing and Petroleum Byproducts
Rafael Berrocal, Managing Director of Meat and Seafood Purchasing
Francisco López, Managing Director of Logistics, Construction and Expansion
Julia Amorós, Managing Director of Dry Products Prescription
Félix Peña, Managing Director of Administration

BOARD OF DIRECTORS

President: Juan Roig Alfonso
Vice-President: Hortensia Mª Herrero Chacón
Members: Hortensia Roig Herrero, Amparo Roig Herrero, Juana Roig Herrero, Rafael Gómez Gómez, Fernando Roig Alfonso
Board Member Secretary, Carolina Roig Herrero

Mercadona: Our Model

WHAT IS MERCADONA?

Mercadona is “The Boss”, The Employee, The Supplier, Society and Capital.

Mercadona is a Spanish family-owned supermarket company whose objective is to fully satisfy the grocery, home cleaning, hygiene and pet product needs of its customers and their pets. To this end the company has 1,310 local stores averaging between 1,300 and 1,500 square meters of retail space, representing a market share of 13.1% of the total food store retail space in Spain and contributing to the business dynamics of the areas in which they are located. Every one of these supermarkets has an ample and efficient selection that includes up to 8,000 different items located within easy reach of the over 4.4 million households that place their trust in the company every year.

Mercadona bases its business model on its Always Low Prices (SPB in Spanish) formula, which allows “The Boss”, which is how the company refers to its customers, to enjoy a Total Shopping with products of the highest quality at the lowest prices on the market, in keeping with what has been our company’s motto for over 17 years: “quality doesn’t have to be more expensive.”

Mercadona works with more than 2,000 trade suppliers and service providers, over 100 of which are Integrated Suppliers, manufacturers of the Hacendado, Bosque Verde, Deliplus and Compy brands, among others, and with which the company has a long-term mutual cooperation and commitment relationship regulated by way of a Sound Business Practices Framework Agreement and which results in “contracts for life.” They are all committed to the total customer satisfaction philosophy that characterizes the company and are dedicated to both quality services and products. As part of their daily activities, both Mercadona and its integrated suppliers rely on the support and services of over 9,200 SMEs and raw material producers throughout Spain, all of whom have a visible impact on the creation of wealth and employment in the local economy of the cities and towns where Mercadona supermarkets are located and where the integrated suppliers manufacture their products.

The company encourages the ongoing training of its workforce, one of its most valuable assets, and has developed a Human Resources policy that focuses fully on the professional fulfillment and personal satisfaction of its over 63,500 employees. Likewise, through its Quality Department, the Hacendado, Bosque Verde, Deliplus and Compy line of products, as well as other store brands, have had “The Boss’s” trust for years. All of them have the full backing of the integrated suppliers, who are clearly identified on each product’s package and who, through innovation, guarantee the food safety and quality of their products.

THE MERCADONA MODEL

A model of responsible enterprise.

Since 1993, Mercadona’s management model has been based on Total Quality. Through this method, Mercadona satisfies the company’s five components in equal measure: “The Boss,” The Employee, The Supplier, Society and Capital.

Within the company’s management, Total Quality is based on the universal premise that “in order to be satisfied, one must first satisfy others.” This commitment has made Mercadona a leader in the distribution sector and given it a clearly defined mission: to be “prescribers of the solutions necessary so that ‘The Boss’ can enjoy a Total Shopping.”

The search for the total satisfaction of what Mercadona considers its most valuable asset, its employees, is relentless. To this end, and with the intent to become the company that best treats its workforce, the Mercadona Human Resources model is based on leadership and relies on self-realization, permanent employment, ongoing training and striking a balance between work and family life for everyone at the company. This makes it possible for the person who has to satisfy “The Boss” to in turn be satisfied.

The Total Quality Model oriented towards the third component of the company, “The Supplier”, is summarized as a joint effort for a common goal: the satisfaction of “The Boss”. To achieve this goal, Mercadona establishes close ties with its suppliers based on a stable relationship that often leads to the signing of indefinite agreements and to the creation of synergies that are always to the advantage of the “Bosses” who turn to the company’s supermarkets for their daily purchases.

Society’s satisfaction is also important to Mercadona. That is why its stores help to modernize urban commerce in those neighbourhoods where they operate. Their supermarkets promote commercial dynamism, generated by the 4.4 million households that place their trust in Mercadona. In fact, by focusing exclusively on the sale of food, beverages, cleaning and personal hygiene products and pet food, the company foments synergies with local businesses through a greater involvement in their development.

As part of its voluntary commitment to promoting initiatives that benefit society, Mercadona is involved in bolstering the Spanish food and agriculture industry through measures that better the social and economic environment of those places where it operates. This makes it a groundbreaking company in the area of corporate social responsibility in Spain’s distribution sector, and one of the most reputable internationally. All in all, it is about following through on what our management model stipulates: “satisfying the company’s five components,” while being mindful of all the potential for improvement that remains.

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 has been responsible for Mercadona’s positive results since 1993, as well as for its solid and sustained growth, a result of the individual and group efforts of everyone involved in this Project to implement the objectives and strategies that add value to the company’s five components, the results of which can be appreciated above all in the medium and long term. It is this Model that helps every member of the Mercadona team to make decisions over the course of their daily work activities: “He who has a Model has a treasure.”

TRANSPARENT INFORMATION: Since the development of its Recommended Product model with the Hacendado, Bosque Verde, Deliplus and Compy brands, as well as other product lines, Mercadona has clearly identified on the label the name of the integrated supplier that manufactures the product.

TOTAL QUALITY MODEL: A MODEL OF RESPONSIBLE ENTERPRISE: Satisfying the company’s five components equally. This Model helps everyone in the company to make the decisions involved in their daily work: “He who has a Model has a treasure.”

MERCADONA’S MISSION: Prescribers of solutions necessary for ‘The Boss’ to do the Total Shopping. A business model focused on satisfying the needs of 4.4 million households through five product lines (Home Cleaning, Food, Beverage, Pet food, Personal hygiene).

TOTAL QUALITY MODEL: A MODEL OF TRANSVERSAL RESPONSIBILITY

“THE BOSS”:
Promoting dialogue and direct communication with our “Bosses.”
Maximum quality at the lowest price: Recommended Products.
A return to basics so as to reduce prices with a quality, efficient selection.
Shopping Cart Menu: The highest quality and lowest priced Total Shopping on the market.
Closeness and proximity.
Innovation across the board oriented toward their needs (product, technology, concept and processes).
Always Low Prices (SPB): Price stability, without sales or promotions.
Prescription: to inform “The Boss” and recommend those products with the best price to quality ratio on the market.

THE EMPLOYEE:
Stability (permanent contract), professional development and promotion from within.
Fixed responsibilities. Employees carry out their functions in the same position and changes are avoided; this facilitates employee specialization so that they can do what they know best: satisfy “The Boss.”
Work and Family Life Compatibility by, among other measures, not opening on Sundays.
Human Resources management model based on individual and collective leadership.
Permanent dialogue.
Profit sharing.
Necessary and continuous training for the conduct of their job functions.

THE SUPPLIER:
Stability/Contracts for life.
Long-term agreements, communications and transparency in the relationship.
Bolstering productive activity to promote development and wealth.
R&D plus ‘double I’ (Research and Development plus Innovation, supported by Investment).
Promoting innovation and process optimization so as to offer the product with the best price quality ratio on the market.

SOCIETY:
Commitment to the social and economic development of those areas in which we have an established presence.
Social productivity: Produce more with fewer natural resources. Sustainable transport.
Striving to “be invisible” in the setting where we carry out our activity.
Permanent dialogue, active participation and closeness.
Training and reporting on the company’s Model and on activity and decision planning.

CAPITAL:
Constant and sustainable growth.
Reinvesting profits.
Innovation as a factor in competitiveness.
Focusing on the long term.
Increasing productivity through reengineering and process standardization.
Building our relationships on commitments.

TOTAL QUALITY MODEL. Building a reputation through example and deeds.

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 and of the Hacendado, Bosque Verde, Deliplus and Compy brands.
1997: Under the principle of “same responsibilities, same salary” Mercadona implants its Remuneration Policy.
1998: Development of the New Model Mercadona - Integrated Suppliers.
1999: 100% of staff are permanent employees.
2000: Inauguration of the first free nursery for employees and implementation of the first performance-based bonus system (employee profit-sharing).
2004: As a general rule, Mercadona decides not to open its supermarkets on Sundays, to help its employees reconcile their work and family lives.
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: Realignment of Mercadona with its Total Quality Model, introducing the concept of Shopping Cart Menu.
2009: A return to basics so as to have an efficient selection and do only that which adds value to the five components.
2010: Human Resources management model based on Leadership and the Culture of Endeavour: keys to being a high-performing and productive company.

“THE BOSS”

AT THE HEART OF EVERY DECISION

Having a model aimed at satisfying our customers’ needs provides the foundation for our growth.

The year 2010 was one in which, thanks to the trust and loyalty shown by “The Boss,” as our customers are referred to internally, Mercadona managed to progress in consolidating the initiatives that we launched in order to realign itself with its Total Quality Model. We continued to work on “chasing every cent” in an effort to cut prices with a singular purpose: to adapt the company’s offerings to the needs of our “Bosses,” and to offer them the highest quality at the lowest possible prices.

All of this required a return to basics, enhancing our efficient selection, committing ourselves to innovation and the efforts made by everyone at the company to be more productive every day by making good products at a lower cost. The recession has helped us to recognize the importance of every cent: one euro cent saved on a product means saving 100 million euros along the supply chain.

The realignment with the Total Quality Model effected over these months was possible thanks to the change in mindset that has taken place within the company and that has put “The Boss” once again at the heart of every decision we make.

Proof of this is our strategy to return to basics and our renewed prescribing efforts, both of which were a constant in 2010. These months saw us continue working to do away with anything that does not add value to the process, that raises product prices and that directly affects the grocery budgets of our customers, who are only willing to pay for real improvements.

THE IMPORTANCE OF SAVING A CENT AT MERCADONA

1 cent in product savings = 100 million euros in savings along the supply chain.

+ productivity – costs.

Doing only that which provides value to “The Boss” and for which he is willing to pay.

SAVINGS FOR “THE BOSS”: 2,200 million euros in savings in 2010.

While maintaining quality and ensuring food safety, in 2010 Mercadona was able to reinforce the commitment acquired when it adopted the Shopping Cart Menu strategy by continuing to offer the highest quality and lowest priced shopping cart on the market. And this was all achieved in a year in which the company decided not to raise prices on its “Bosses” following the increase in the VAT last July, an increase that was offset by optimizing internal processes.

This search for excellence in each and every one of our processes allowed Mercadona to offer its customers savings in excess of 700 million euros in 2010, stemming from a 4% price reduction in the Shopping Cart Menu. To this we must also add the 1,500 million euros in savings in 2009, and which we continued to pass on in 2010, raising the total savings to 2,220 million euros. None of this would have been possible without the proven dedication of the company’s integrated suppliers.

COST DISCIPLINE: MERCADONA COMMITMENT: Competitiveness = avoiding unnecessary costs through cooperation, by committing ourselves to optimizing processes so as to avoid unnecessary costs while maintaining profitability in the value chain.

SPECIFIC MEASURES THAT TRANSLATE INTO SAVINGS FOR OUR “BOSSES”.

Some of the more than 800 actions taken to avoid unnecessary costs, and thus to reduce prices, while maintaining quality.

EGGS: Reduction of the amount of ink used to print the packages and eliminated cardboard in the display box. ANNUAL SAVINGS: 370,000€.
VIENNA FRANKFURTERS: Process improvements. Product is sold as a two-pack. ANNUAL SAVINGS: 570,000€.
FRESH PIZZAS: Logistical improvements, converted shipping boxes into display boxes. ANNUAL SAVINGS: 3,229,215€.
FROZEN FISH: Improved logistics by changing the product packaging. ANNUAL SAVINGS: 1,328,931€.
BURGOS CHEESE : Eliminated cardboard in 2x250g pack. ANNUAL SAVINGS: 225,000€.
STYLIUS SHAMPOO: Changed bottle format and reduced labeling. ANNUAL SAVINGS: 126,627€.
MEAT: Improved logistics. Changed shipping box into foldable box. ANNUAL SAVINGS: 360,000€.
SLICED BREAD: Transport more with less, from 12 to 15 units per box. ANNUAL SAVINGS: 3,400,000€.
SUNFLOWER SEED OIL: Reduced cap size. ANNUAL SAVINGS: 200,000€.
SAUSAGES AND GROUND BEEF: Optimized tray size, allowing for more units to be transported per pallet. ANNUAL SAVINGS: 414,000€.
WINE: Reduced bottle models from four to one. ANNUAL SAVINGS: 344,000€.
V.A.T.: Absorbed increase in V.A.T., SAVINGS: 80,000,000€.
CINNAMON AND LEMON FLAVORED MILK: Reduced thickness in bottles. Changed sleeve to paper label. ANNUAL SAVINGS: 631,923€.
FROZEN SHELLFISH: Reduction of packaging weight and gloss finish, eliminating recipe. ANNUAL SAVINGS: 90,787€.
ANCHOVIES: Changed from metal to plastic container. Eliminated cardboard box. ANNUAL SAVINGS: 3,000,000€.
HAMS: Improved processes. Invested in new lines and improved productivity. ANNUAL SAVINGS: 2,700,000€.
TRANSPORTATION: Improved logistics and optimized transportation capacity. ANNUAL SAVINGS: 31,000,000€.
RABBIT: Increased productivity through process cost efficiencies. ANNUAL SAVINGS: 1,128,000€.
TEAS: Elimination of wrapping film. ANNUAL SAVINGS: 132,000€.
CHICKEN: Optimized tray size, allowing more units to be transported per pallet, saving resources. ANNUAL SAVINGS: 914,000€.
TOOTHPASTE: Changed formula and container to 125 ml. ANNUAL SAVINGS: 1,800,000€.
2L WATER BOTTLE: Improved logistics to transport more units per pallet. ANNUAL SAVINGS: 1,125,000€.
COLD CUTS: Adapted lines to package directly at the display case, thus improving restocking and saving cardboard. ANNUAL SAVINGS: 542,950€.

EFFICIENT SELECTION

“Less is More” as a basis for contributing to the better and faster identification of our selection.

In 2010, Mercadona continued to put significant efforts into offering its customers the best possible answers in terms of what it regards as its responsibility as a company: to prescribe and recommend to “The Boss” the highest quality products at the lowest possible price. And it did so through the Lower Cost, Lower Price and Same Quality motto, which allowed it to increase its competitiveness and to pass on all of the improvements to the Shopping Cart Menu: the highest quality, lowest price shopping cart on the market.

In order to be able to prescribe the solutions necessary so that “The Boss” can create a Total Shopping, the following elements are key to determining which products go into the Mercadona selection: need and rotation; adding value that the customer is willing to pay for; satisfying real needs; having efficient processing costs and high customer acceptance. These criteria, along with the company’s efforts to listen to and communicate with its customers, mean that Mercadona can still count on an efficient selection: the 8,000 products that make up its selection, chosen from among the over one million food and hygiene products available in our country, meet the needs of the 4.4 million households who do their shopping at Mercadona.

This commitment to efficiency and to having a sensible product range that is based on a search for simplicity also helps Mercadona draw closer to its customers, and for them to more quickly identify with the company’s offerings. In fact, the positioning attained by Mercadona in terms of the choice and distribution of the products on its shelves presents a clear competitive advantage by offering a quality and varied selection that is in line with what the company refers to internally as “Less is More:” a stable range of products that translates into a complete range of simple, more efficient and more competitive solutions for “The Boss” and which contributes to a faster, more intuitive and more pleasant shopping experience.

COLLABORATION THROUGH PRESCRIPTION.

Informing and recommending to “The Boss” those products with the best value on the market, regardless of the brand, and selected based on the following criteria.
They add value that the customer is willing to pay for.
They must satisfy a real need.
Rotation.
High degree of customer acceptance.
Efficient internal process costs.

In 2010 there were numerous collaborative efforts between Mercadona and its suppliers and integrated suppliers to adapt to the needs demanded by customers, which included projects with Bonnysa Agroalimentaria, Lacasa, Verdifresh, L’Oréal, Pescanova, Ubesol-Maverick, Chocolates Valor, SCA Hygiene Products, Apisol, Nestlé, RNB Cosméticos, and others.

ACROSS-THE-BOARD INNOVATION

At Mercadona, the biggest constant is change, and change, driven by innovation, provides a competitive advantage that helps to set us apart.

Yet another pillar that saw continued reinforcement in 2010 was that of innovation as a source of productivity and efficiency, and which Mercadona views as across-the-board innovation, since it involves every process at the company. Over the course of the year, under the premise of incorporating only those products and services that add value and that the “Bosses” are willing to pay for, the company continued to set itself apart by introducing improvements in every area through product innovation, process innovation, technical innovation and concept innovation.

MERCADONA INNOVATION MODEL
CONCEPT INNOVATION
PROCESS INNOVATION
PRODUCT INNOVATION
TECHNICAL INNOVATION

For years Mercadona has been committed to “R&D & Double I,” in which the second “I” stands for investment and is the most important, since achieving success depends on it. Over the course of the year, this commitment solidified in the area of product innovation through numerous initiatives launched after ensuring that the improvements made provided solutions to the customers, solutions that they not only valued, but that they were willing to pay for. As a result of this, and also of observing the customers’ behavior, of listening to their suggestions and needs, Mercadona with its suppliers and integrated suppliers, improved some 600 articles in its product line, both generic and brand-name products.

We also continued to optimize our processes, achieving significant reductions in the use of resources. An example of this is the advances in pallets, improved packaging, reductions in product losses, improvements in the shelf life of various products and bringing the factories of our integrated suppliers closer to our logistics blocks. Many of these initiatives also allow us to “transport more with fewer resources.”

In 2010, the company also continued with its commitment to technology as a distinguishing characteristic, as evidenced most clearly by the opening of its intelligent logistics block in Villadangos del Páramo (León). In addition, over 35 million euros were invested in the last year in various initiatives intended to improve the company’s computer systems. Examples of this are the implementation of a single document management system, and the significant time savings this represents; the development of a new Employee Portal, which was set up to offer an alternative channel of communication with the company’s workforce; and taking advantage of the portal infrastructure developed for the Employee Portal to also create a Customer Portal for Online Billing, which will gradually see the addition of information and services of interest to the “Bosses.”

As part of the work involving the online platforms, it is worth mentioning the recognition received by the company in 2010 from the Spanish Committee of Representatives for the Disabled (CERMI in Spanish). In its “Observatory’s Second Report on the Accessibility to the Internet Pages of Spain’s Leading Companies,” CERMI lists Mercadona’s webpage as being among the best in any sector, leading for the second year in a row the ranking of the distribution sector.

This recognition of the improvements achieved throughout 2010 in terms of Web Accessibility encourages us to keep working along these lines, while at the same time it confirms Mercadona’s commitment to ensure its “Bosses” can access the company’s website, regardless of whatever adapted technologies they may need.

During these months Mercadona also continued to reinforce the fourth pillar of its across-the-board innovation, concept innovation, by investing various resources in an effort to introduce improvements that provide value to the “Boss’s” shopping experience. The best example of this is the Ambience Stores, launched by the company in 2000 with the goal of offering its customers larger supermarkets with more pleasant atmospheres and a more logical product arrangement.

Mercadona’s commitment to “R&D & Double I” as the engine of growth and as a tool to offer the best solutions is a responsibility that the company shares with its integrated suppliers, who are equally convinced that investing in innovation is investing in the future, and that in order to innovate it is essential first and foremost to listen to the real needs expressed by the customers.

MERCADONA’S INNOVATION COMMITMENT: DO ONLY THAT WHICH PROVIDES VALUE: 40% increase in sales/year. “The Boss” is willing to pay 1 cent more to have a plastic lid on make up removal towelettes. 60% increase in sales/year. “The Boss” is willing to pay 5 cents more to put plastic lid and an easy-open tab on a 1kg can ot tuna.

FOR MERCADONA, INVESTING IN INNOVATION IS INVESTING IN THE FUTURE.

STORES BY AMBIENCE MODEL: TEN YEARS OF ECO-FRIENDLY STORES, 1,253 Ambience Stores in 2010, designed to optimize the shopping experience of the “Bosses”: Lower consumption and better energy efficiency, More room for the “Bosses” and employees, More rational product arrangement, Larger parking areas and more fluid circulation.

INNOVATION IS THINKING EVERY DAY ABOUT WHAT “THE BOSS” NEEDS. Noting their preferences and listening to their opinions is what helps us advance and grow.

FOOD SAFETY AND QUALITY

Key attributes of Mercadona’s Golden Rule.

At Mercadona, food safety is an essential feature that is shared by every product in its selection. Each item on its shelves must adhere to the company’s Golden Rule, which states that every product must ensure food safety first, quality second, then service, be competitively priced and, fifth and finally, generate profits.

To guarantee the highest safety and quality of its products, Mercadona has had its own Quality Assurance Model for years and, in keeping with its Food Safety Monitoring Plan, conducts periodic and numerous checks of both its integrated suppliers’ and suppliers’ processes as well as of its own internal processes. In 2010, the facilities of over 200 companies were evaluated and inspected, companies that in turn audited their own raw material suppliers as part of their specific control plans.

Within this Food Safety Model, we should note that, additionally, all of the company’s integrated suppliers have continued with their efforts to comply with every relevant requirement. As a result, several of the most renowned Food Safety certifications were obtained or renewed, such as the IFS v-5, ISO 22000 and 9001 and the BRC. Along these lines, the fresh products and the suppliers of beef, lamb, pork, chicken, milk, fish, oil, fruit, vegetable and egg products were also audited by reputable outside firms to ensure once more that traceability can be certified from the farm or feed lot to the “Boss’s” table.

ALL OF THE COMPANY’S PRODUCTS MUST ADHERE TO THE GOLDEN RULE.

The internal efforts made in the area of Food Safety were also significant in 2010. The year saw, in addition to the various satisfactory Health Inspectors audits, the company engaged in detailed reviews of all its facilities. It also reviewed the transportation processes along more than 300 different routes. All of these initiatives allowed the company to contrast the self-monitoring systems it has in place, systems that are based on a Hazard Analysis and Critical Control Point (APPCC in Spanish), which serve to ensure that the company’s facilities offer the highest guarantees in terms of Food Safety.

NUTRITIONAL MANAGEMENT SYSTEM

For years now Mercadona has also had its own Nutritional Management System, whose goal is to be “prescribers of the solutions necessary so that ‘The Boss’ enjoys Healthy Products with the Highest Intrinsic Quality and Safety.” The main reference used by Mercadona in this regard is the NAOS strategy (National Strategy on Nutrition, Physical Activity and Obesity Prevention), which Mercadona, through its integrated and other suppliers, complements with various initiatives, all bound under the same motto: good nutrition, like quality and safety, “does not have to cost more.”

Transparency is another of the commitments that Mercadona makes to its “Bosses,” which in the area of nutrition translates into including all relevant information on its product labels, clearly identifying the ingredients, even those present at trace levels, which is particularly important to those customers who are allergic or intolerant to certain products. Likewise, and with the commitment and cooperation of the various suppliers, Mercadona has continued, insofar as is possible, to eliminate all allergens from both the manufacturing process and from its products’ ingredients.

In 2010, Mercadona actively cooperated with various Health and Food Safety authorities in the different Autonomous Communities, and also maintained close ties with the Spanish Agency for Food Safety and Nutrition (AESAN).

Along these same lines, we should also note Mercadona’s active presence over these twelve months in the various forums associated with food safety, such as the Food Safety committees of the Spanish Association of Commercial Codification (AECOC) and of the Spanish Association of Distributors, Self-Service Centers and Supermarkets (ASEDAS). Also of note was its involvement in the Spanish Society for Food Safety (SESAL), the Foro Interalimentario (Interfood Forum) and the Association for Food Industry Research (AINIA).

A DECADE OF COMMITMENT TO COELIACS: 750 GLUTEN-FREE PRODUCTS. Since the year 2000 Mercadona has been working closely with Spain’s Coeliac Disease Association (FACE), actively collaborating and participating in the organization’s events and including its gluten-free products in the listing of foods for coeliacs published and distributed annually by FACE. The commitment, made ten years ago, to expand the selection of quality and safe gluten-free products with full nutritional guarantees has withstood the test of time, as a result of which Mercadona added 50 new gluten-free products to its offerings in 2010.

A CLOSE RELATIONSHIP

At Mercadona, we are convinced that being accessible means relying on observation: “better to see once than to hear a hundred times”.

At Mercadona, this closeness gives us a competitive advantage, since sensing what “The Boss” needs is fundamental to being able to offer him solutions. To do this, in 2009 the company created its Monitor position, which in 2010 continued to play a key role in enhancing the close ties that Mercadona has with its customers, ties that are based on the principle that “it is better to see once than to hear a hundred times.”

In 2010, over 250 monitors were tasked with maintaining more direct contact with the “Bosses,” noting their preferences at stores and getting to know their needs: what they want, what they value, what they appreciate and what they do not like. The information gathered over these months by the monitors allowed the company to improve its selection, to offer specific answers to its customers and to address their requests. The fact that it was done quickly and efficiently also contributed to reinforcing the trust placed in the company by the more than 4.4 million households that shop at Mercadona.

During these twelve months, Mercadona made a notable effort to get even closer to its “Bosses,” strengthening communications and dialogue with associations that represent consumers and look out for their interests.

As a result, these twelve months saw the signing of collaborative agreements whose aim is to set up stable coordination and information accords, like the one signed in Seville with the Andalucía Consumers Union (UCE-A) to foment the defense of consumers’ rights; the framework agreements reached with the Galicia Consumers Union (UCGAL) and with the Galician Federation of Housewives, Users and Consumers; the one signed with the Extremadura Consumers Union (UCE); and the pact signed with the Thader Murcia Consumption association.

TOTAL NUMBER OF SUPERMARKETS AT THE CLOSE OF 2010: 1,310 supermarkets, 60 openings, 14 closings, 32 stores remodeled, 1,253 Ambience Stores.

Customer Service Center (CSC)

In addition to the information gathered daily by the in-store monitors and prescribers, Mercadona has a Customer Service Center that handles all of the concerns reported by customers either by e-mail or through the free hotline number set up by the company exclusively for this purpose. Thanks to this permanent channel of communication between Mercadona and its “Bosses” the company can listen to their opinions quicker and offer solutions that are better tailored to their needs more efficiently.

In 2010, the employees of the Mercadona Customer Service Center fielded a total of 460,000 inquiries and suggestions that, as a whole, helped the company identify areas of improvement so that, in keeping with its goal, the company can offer them the best solutions by way of an efficient selection and a positive shopping experience.

Customer Service Number 900 500 103.

CUSTOMER SERVICE CENTER. Over 460,000 inquiries and suggestions were received by the CSC staff in 2010.

www.mercadona.es

THE EMPLOYEE

SATISFACTION AND LEADERSHIP

Having the workforce exhibit a spirit of leadership is key for a highly efficient company.

Leadership, commitment, effort and a passion for one’s work are attributes that must be shared by everyone on the Mercadona team. The counterpart to this is that the company, aware that those tasked with satisfying “The Boss” must themselves be just as satisfied, must offer quality jobs in which all employees, throughout their careers, can grow professionally and develop their skills.

In 2010, so as to consolidate itself as a highly efficient company, Mercadona continued to promote productivity among its employees by dedicating significant resources to keeping the staff motivated and involved in the achievement of the company’s goals: 63,500 employees with permanent contracts, 1,500 more than the year before, all of them highly committed to the Total Quality Model and whose involvement was one of the keys to the results obtained by the company in 2010.

Convinced that past success is no guarantee of future results, in 2010 Mercadona consolidated the efficiency of its workforce by committing to leadership. Thanks to this, the company now boasts motivated human resources who set the example and are able to show initiative, to adapt to changes and to convey them effectively to make them happen, thus passing their passion for excellence in their daily jobs on to their fellow employees.

COMMITTED TO CREATING STABLE JOBS: 1,500 new direct permanent jobs created in 2010.

MERCADONA STAFF IN 2010: 63,500 employees; all with permanent contracts. 33%men; 67% women.

Internal training and promotion

For Mercadona, the best asset a top company can have is its human resources. The ability to rely on a highly effective workforce means constantly investing in their professional training and development. In 2010, these investments totaled 30 million euros, representing an investment of 471 euros per employee and a total of 1.2 million training hours, all of them within the work schedule.

As part of the ongoing training programs developed by the company’s Human Resources Department, courses were given over the last year to enhance the job skills and abilities of every employee. Emphasis was placed on the prescription skills of supermarket section managers and on the leadership skills of executives.

Another pillar at Mercadona is the commitment it has to the professional growth of the people that make up its workforce. The clearest example of this dedication can be seen in the Management Committee itself, since all of its Managing Directors are the product of internal promotions, as is the case with every executive at the company.

In 2010, this commitment to employee training and development resulted in 577 people being promoted to jobs with more responsibility thanks to their professional achievements.

COMMITTED TO TRAINING: 1.2 million training hours, 14 different training initiatives, 30 million euros invested in training, 471 euros per employee on average, 577 personnel promoted.

Work and family-life compatibility

For years now Mercadona has known that the more you give people, the better they are treated and are told what is expected of them, the better they perform. That is why making compatible the work and family lives of employees pursuing careers at the company is of the utmost concern in the management of its human resources.

Numerous and diverse measures have been enacted by the company in this area, such as the 80-plus different work schedules made available to those employees who have opted for a flexible schedule, or the expansion of the Standard Workforce (standard annual schedules), which is becoming available to more and more people. But the most obvious example of Mercadona’s commitment to this compatibility is reflected in one fact: the percentage of female employees who decide to become mothers was 8.8 in 2010, a year in which 3,749 women also opted to extend their four months of legally mandated maternity leave by an additional 30 days, taking advantage of an initiative started by Mercadona in 2005. Mercadona, whose commitment to compatibility consolidates with each passing year and whose proven returns are even greater in difficult times, is aware of the fact that much remains to be improved in this area before it can achieve its goal of being the company that best treats all of its employees.

STABILITY AS A BASIS FOR COMPATIBILITY: 3,749 employees decided to become mothers in 2010; 8.8% of the company’s female employees; 4.5% higher than the average for births in Spain.

Welcome Plan

Establishing channels of communication with everyone in the workforce is essential to identifying their concerns, adapting to their needs, conveying what is expected of them and having them feel like an active part of the company. At Mercadona, the first step in this communication process is taken with the Welcome Plan, which the company uses to orient new employees joining the Mercadona project.

Through this Welcome Plan, new additions are given detailed information on their future jobs and on the training they will receive so as to properly perform their duties.

PIONEERS IN MEASURES FOR WORK & FAMILY LIFE COMPATIBILITY. WORK & FAMILY LIFE COMPATIBILITY:
Standard Workforce: Standard schedules and better personnel planning.
Permanent contracts: Stability.
A fifth month of maternity leave.
Nurseries at some.
Logistics blocks.
Reducing unnecessary travel.
Not opening supermarkets on Sundays.
Culture of Endeavour: an individual and collective commitment from the employees aimed at satisfying the needs of “The Boss”.

A COMMITTED WORKFORCE

At Mercadona, recovering the Culture of Endeavour is the key to growth.

The decision made by the company to realign itself with its Total Quality Model has resulted in recovering the Culture of Endeavour in the area of human resources. This, in turn, has translated into the commitment by everyone involved in the Mercadona Project to work better and more to effect change, to be more competitive and productive.

In 2010, the everyday efforts shown by the employees, who exhibited very high levels of self-reliance and productivity, were fundamental to having the company achieve its established goals.

Being able to rely on this high level of commitment from the staff is only possible if the staff feels satisfied. This is something that concerns Mercadona, which in return offers its employees conditions that allow them to identify with the company’s objectives, such as job stability, as evidenced by the fact that all of Mercadona’s 63,500 employees have permanent contracts, higher than average salaries and a salary policy that since 1997 has been based on the Principle of Equality: equal pay for equal work.

But in addition to this, Mercadona incentivizes effort from its workforce through its bonus pay policies, which allow for an individual’s contribution to the group project to be quantified. In 2010, in response to their productivity and efficiency, the company decided to distribute 210 million euros in performance-based incentives among those employees with over one year of seniority and whose involvement over these twelve months not only allowed the company to achieve its general goals, but the employee to achieve job-specific goals.

5% increase in productivity in 2010.

210 million euros in incentive bonuses distributed in 2010 for all employees who met their objectives.

WORKPLACE HEALTH AND SAFETY

15 million euros invested in prevention

Protecting the health and safety of every employee is one of the basic components of the Mercadona Total Quality Model. In 2010, the company continued to enhance its continuous improvement prevention policy for every job and production method, an endeavor to which it allocated 15 million euros.

During these twelve months, Mercadona conducted regulatory audits of its occupational risk management system, while at the same time it evaluated and standardized every job using safety and ergonomic criteria. Additionally, the company engaged in a significant informative and educational undertaking through the use of both general and specific training courses on such topics as Risk of Working on Raised Platforms, Electrical Hazards, Risks of Working at Heights and Fall Prevention, Chemical Hazards, etc.

This past year also saw significant improvements made to the company’s machinery and facilities. Some of these included the installation of industrial manipulators at the logistics block in Villadangos del Páramo (León), which allows heavy loads to be moved effortlessly; new, more ergonomic cleaning machines for the supermarkets; low-noise depalletizers in the automated warehouses; and the modifications made to the cardboard shredders to avoid potential impact injuries.

In order to protect the health of its workforce, Mercadona has a medical staff of 78 professionals and 19 specially trained prevention technicians. In 2010, this team was responsible for developing and implementing all of these improvements, as well as for providing employees with the information and training necessary to prevent the potential risks associated with their routine activities.

In carrying out this work last year involving workplace health and safety, the Mercadona Prevention Service was assisted by the following insurance providers: FREMAP, UMIVALE, ASEPEYO, Mutua de Accidentes de Canarias (MAC), Mutua BALEAR, Mutua de Accidentes de Zaragoza (MAZ), IBERMUTUAMUR and Mutua MONTAÑESA. Over the course of 2010 Mercadona also worked to exchange know-how with the Prevention Services of its main suppliers, which is undoubtedly an important point as the company strives to continue improving in this area.

THE SUPPLIER

SUPPLIER: GROWING TOGETHER

Promoting stable relationships to ensure the competitiveness of the agriculture and food industry and develop the primary sector

For Mercadona, the role played by its suppliers is key, since the company’s growth depends to a large extent on their own commitment and efforts, growth that can only be achieved if, as is its stated objective, it manages to satisfy its customers with an efficient selection.

That is why “The Boss” is at the heart of all of the decisions made jointly by the company with its providers, with whom it continued to work in 2010 in an effort to identify strengths and opportunities and to provide customers with better solutions while being more productive and competitive.

Of note within the Total Quality Model is the figure of the Integrated Supplier, with whom Mercadona has a relationship of trust in which stability and expectations form the basis for a job well done, since it allows these manufacturing companies to focus on the goal of offering “The Boss” the products with the best price to quality ratio on the market – eliminating whatever does not add value and adding only those improvements that the customer is willing to pay for.

Mercadona’s 100-plus integrated suppliers, who make the Hacendado, Bosque Verde, Deliplus and Compy brands, among others, are highly committed to Mercadona’s mission and values, a commitment that extends to the generation of wealth and employment. For years this undertaking has been reinforced by the efforts being made by these suppliers to contribute to the modernization of Spain’s primary sector by bolstering and diversifying local economies so as to make the food and agriculture industry stronger and more dynamic.

In 2010, this commitment by the company’s integrated suppliers saw greater consolidation. During these twelve months, the joint investment exceeded 420 million euros, a sign of their ongoing commitment. Also encouraged was cooperation with local SMEs and with raw material producers, who totaled over 9,200 nationwide. In addition, and despite the difficult times, Mercadona’s integrated suppliers managed to create 2,000 new jobs, raising their total workforce to over 40,000 employees. This is evidence that these companies’ commitment to the Total Quality Model is generating important benefits for Spain’s economy.

A firm commitment to the primary sector

Ensuring food safety and the quality of its products are the two basic pillars of Mercadona’s Golden Rule. In order for the integrated suppliers to address these needs, transparency is fundamental. That is why the company supports stable relationships, which also implies stable prices, planned growth and mutual cooperation.

IMPACT OF INTEGRATED SUPPLIERS ON THE ECONOMY IN 2010: 420 million euros invested, 2,000 new jobs, 9,200 SMEs and raw material producers

But Mercadona, with the support and commitment of its integrated suppliers, is also firmly dedicated to the primary sector in Spain, which it considers a strategic sector. This involvement is a two-way street: on the one hand, it aims to contribute to the creation of a stronger and more dynamic sector, while on the other, it attempts to maintain price stability, in clear contrast to the tendency evidenced in recent years, in which reality has shown that the markets are using such raw materials as just another financial asset, with the price volatility such a strategy entails. Through this approach, Mercadona and its integrated suppliers are working to reduce the impact generated by this scenario, which provides them with a clear competitive edge.

In 2010, Mercadona and its suppliers worked to make the most of the potential offered by Spain’s primary sector and to showcase it against the international primary sector. To this end, they have made a joint commitment to, whenever viable, use raw materials produced in Spain. This, in addition to generating wealth in our own country, contributes to lowering prices, since a large portion of a product’s costs are derived from the logistics involved in their transport.

An example of this is the initiatives carried out by Verdifresh with different farmers in Murcia, Huelva and Toledo, with whom it has signed stable agreements affecting more than 300 hectares set aside for growing beets, parsley, spinach, radicchio or rocket. Or those undertaken by the integrated suppliers Ultracongelados Virto and Conservas El Cidacos, who are cooperating with more than 1,400 different farmers to guarantee harvests on approximately 15,600 hectares of farmland. Another example of this type of initiative is the one engaged in by Tarradellas throughout the year. This company guaranteed the harvest of wheat by over 100 farmers in Girona and Lleida. By moving this raw material closer to its production facilities, the company can more easily plan and optimize its processes.

These measures which, as a whole, involved reaching long-term agreements with over 1,500 famers to cultivate 18,000 hectares, are also being implemented in other areas, such as breeding livestock and fishing.

FIRMLY COMMITTED TO EMPLOYMENT IN SPAIN: The activity generated by Mercadona, both through direct and indirect employment, involves 1% of Spain’s working population. 200,000 jobs generated by Mercadona’s activity 1% of Spain’s working population.

The growth experienced by the integrated and other suppliers translates directly into the generation of wealth and employment in those areas where their activities take place.

Thanks to these efforts, Mercadona and its integrated suppliers have yet again reaffirmed their support of rural areas, providing a dynamic boost to local economies. In fact, the commitment to the creation of wealth that Mercadona shares with its integrated suppliers is complete. In addition to promoting specialization, technology and productivity, it also results in pioneering initiatives in the industry, since even though the projects are important, the truly significant thing is to invest in these projects and get them started, something that Mercadona will continue doing for years to come.

CERTIFIED TRACEABILITY FROM THE FARM OR PLOT OF LAND AND SUSTAINABLE ACTIVITY WITH SPAIN’S FARMING SECTOR. For years Mercadona has relied on the traceability of its products as a distinguishing trait and to ensure food safety. To fulfill this commitment to transparency, which is shared by all of the integrated suppliers, the company goes to great lengths, especially in the case of fresh and perishable products.

As a result of this, external auditors have certified that Mercadona’s activity is sustainable and responsive to Spain’s agricultural industry by confirming that 85% of the total volume of produce sold by the company is grown in Spain, with 15% being imported either for reasons of seasonality or due to the lack of certain products in the domestic market.

This responsible attitude was a constant throughout 2010, a year in which the suppliers of beef, lamb, pork, chicken, milk, fish, oil, fruits, vegetables and eggs were also audited by accredited outside companies to yet again certify their traceability from the farm or plot of land.

420 MILLION EUROS INVESTED BY THE INTEGRATED SUPPLIERS IN 2010.

Some examples of the investments (millions of €):

GALICIA:
- QUESERÍAS ENTREPINARES, Lugo, 16.8
- CASA MACÁN, Taboada (Lugo), 1.8
- ESCURÍS, Pobra do Caramiñal (A Coruña), 2.6
- MASCATO, Pontevedra, 0.8
CANTABRIA:
- IPARLAT, Renedo, 1.4
MADRID:
- PANIFICADORA ALCALÁ, Alcalá de Henares (Madrid), 1.4
- UBESOL- MAVERICK, San Fernando de Henares (Madrid), 9.6
CASTILLA Y LEÓN:
- QUESERÍAS ENTREPINARES, Valladolid, 6.5
- GRUPO SIRO, Venta de Baños (Palencia), 10.7
- AGRÍCOLA VILLENA COOP. V., Gomezserracín (Segovia), 1.2
- LACTIBER, León, 5.7
- GRUPO VERDIFRESH, Burgos, 1.1
- GRUPO ALMACENES LÁZARO, Encinas de Abajo (Salamanca), 0.5
ANDALUCÍA:
- DULCES OLMEDO (LA MURALLA), Sevilla, 3.5
- GRUPO SADA, Sevilla, 3
- S.A.T. LAS PALMERITAS, Huelva, 1.2
- COMPAÑÍA LOGÍSTICA ACOTRAL, Málaga, 4.5
- RAMAFRUT, Almería, 0.8
- CORTIJO CUEVAS, Granada, 0.4
- COVAP, Córdoba, 2.5
EXTREMADURA:
- CONSERVAS EL CIDACOS, Coria (Cáceres), 1.2
- GRUPO HUEVOS GUILLÉN, Almendralejo (Badajoz), 1
- CATAFRUIT, Don Benito (Badajoz), 1.8
ISLAS CANARIAS:
- GRUPO SADA, Santa Cruz de Tenerife, 1.7
- GRUPO SIRO, Agüimes (Las Palmas), 0.8
CASTILLA-LA MANCHA:
- SENOBLE IBÉRICA, Noblejas (Toledo), 1.5
- CONSERVAS EL CIDACOS, Puebla de Montalbán (Toledo), 1.7
- INCARLOPSA, Tarancón (Cuenca), 7.6
- CHAMPINTER, Albacete, 4.5
PAÍS VASCO:
- INTERAL, Lezo (Guipúzcoa), 1.3
NAVARRA:
- ELABORADOS NATURALES DE LA RIBERA, Corella, 3.2
- ULTRACONGELADOS VIRTO 7.6
LA RIOJA:
- UNIÓN TOSTADORA, Logroño, 1
CATALUÑA:
- SCA HYGIENE PRODUCTS, Barcelona-Tarragona, 14
- YOU COSMETICS, Gava (Barcelona), 2
- CASA TARRADELLAS, Barcelona, 35
- EMBUTIDOS MONTER, Girona, 2.9
- GRUPO SIRO, Montblanc (Tarragona), 2.6
- CATAFRUIT, Lleida, 2.5
ARAGÓN:
- BYNSA, El Burgo de Ebro (Zaragoza), 3.1
- CATAFRUIT, Fraga (Huesca), 0.9
- AGUA DE BRONCHALES, Bronchales (Teruel), 0.5
COMUNIDAD VALENCIANA:
- AGROMEDITERRÁNEA, Valencia, 13.8
- MARTÍNEZ LORIENTE, Cheste (Valencia), 9.4
- GRUPO HELADOS ALACANT, Sant Vicent del Raspeig (Alicante), 3.3
- SANCHIS MIRA, Xixona (Alicante), 2.8
- AGUA DE CORTES, Cortes de Arenoso (Castellón), 1.2
ISLAS BALEARES:
- FONT AGUDES, Bunyola (Mallorca), 0.3
- LOGIFRUIT, Mallorca, 1.3
MURCIA:
- PLASBEL PLÁSTICOS, Alcantarilla, 1.1
- CENTRAL QUESERA MONTESINOS, Jumilla, 2.6
- S.A.T. AGRÍCOLA PERICHÁN, Mazarrón, 2.6

ANNUAL MEETING OF MERCADONA INTEGRATED SUPPLIERS 2010

The annual meeting between Mercadona and its integrated suppliers was held last February 3rd in Valencia. At this meeting, the work carried out over the course of 2010 was analyzed in an effort to introduce only those improvements that provide value to “The Boss” and that contribute to increasing efficiency at the companies.

This meeting also provided a forum for discussing the challenges facing the food and agriculture industries in the medium and long term, as well as to restate their joint commitment to continue relying on innovation and investment to provide a competitive edge.

Over the course of this meeting, Mercadona’s three Managing Directors of Purchasing, José Ramón Illán, Francisco Espert and Rafael Berrocal, noted in their presentations the importance of Mercadona’s Golden Rule and emphasized leadership, processes and prescription as the way to expand the Mercadona Project.

INTEGRATED SUPPLIERS. Clearly identified on the packaging of the products they manufacture for Mercadona.

LOGISTICS BLOCKS

An efficient network for “transporting more with fewer resources”.

Mercadona has a total of nine logistics blocks that, as a whole, make up a distribution network with a surface area of over 694,000 square meters. In the past twelve months, the company made significant efforts to achieving two fundamental goals: ensuring the timely supply of every one of its supermarkets, 1,310 at the end of 2010, and incorporating all the efficiency improvements needed to allow “transporting more with fewer resources” and being increasingly “invisible” to the environment.

To achieve this, Mercadona is committed to investing over 600 million euros in coming years, most of which will be allocated to completing the logistics block in Villadangos del Páramo (León), scheduled for March of 2011, and to constructing new blocks in Abrera (Barcelona) and Guadix (Granada).

In the case of Abrera, whose cornerstone was laid last July, Mercadona will invest 360 million euros to construct this facility. Once completed, scheduled for 2014, it will be able to supply 250 supermarkets. To build this block, the company is collaborating with 150 SMEs, which will in turn employ 600 people. As for Guadix, the resources invested there will exceed 100 million euros by the time the project is finished in 2013. This block will directly create 150 new jobs, all of them with permanent contracts, and its construction will involve more than 25 SMEs, who will employ over 200 individuals.

The logistics blocks of Villadangos del Páramo and Abrera will replicate the intelligent warehouse model used in Ciempozuelos (Madrid). This pioneering Mercadona project is contributing to the creation of worthy and desirable jobs through the complete elimination of any manipulation or overexertion on the part of the employee and by contributing to preventing or reducing the risk of occupational accidents while increasing productivity.

MAP OF LOGISTICS BLOCKS: 694,000 square meters devoted to ensuring the company’s supply chain.

LOGISTICS BLOCK in operation:

RIBA-ROJA DEL TÚRIA, (Valencia); ANTEQUERA, (Málaga); SANT SADURNÍ D’ANOIA, (Barcelona); SAN ISIDRO, (Alicante); HUÉVAR, (Seville); GRANADILLA DE ABONA, (Tenerife); CIEMPOZUELOS, (Madrid); INGENIO, (Gran Canaria).

LOGISTICS BLOCK planned/under construction: VILLADANGOS DEL PÁRAMO, (León); GUADIX, (Granada); ABRERA, (Barcelona).

SATELLITE WAREHOUSE: MERCAPALMA (Palma de Mallorca); HOSPITAL DE ÓRBIGO, (León); PLA-ZA, (Zaragoza).

SOCIETY

LOCALLY COMMITTED

Boosting local economies is affirming the future growth of the company.

Society, the company’s fourth component and to whose growth and satisfaction Mercadona is committed, is a fundamental pillar to the development of the company. In recent years, the main concern with society has been to look for formulas to contribute to the economic and social development of our country. That is why the main efforts during this time were focused on optimizing all of the company’s processes, which has resulted in great rewards for society: savings of 2,200 million euros in 2010 that Mercadona’s customers were able to devote to other areas of activity and consumption.

In addition, Mercadona, convinced that the more involved it is in developing Society the more the company will succeed, continued to generate wealth and jobs in 2010, creating value for the country as a whole through its Project: 1,500 new jobs in the past twelve months, a 575 million euro investment and a 3,059 million euro contribution to the GDP. To this we must add the indirect contributions made by the company’s integrated suppliers year after year, and which totaled 420 million euros in 2010 by way of investment, along with the creation of over 2,000 jobs.

But in addition, Mercadona, through its activity, invigorates urban commerce in those neighbourhoods in which it is present, while at the same time it boosts local economies, as shown by the fact that in 2010, Mercadona and its suppliers collaborated with 9,200 SMEs and producers of various raw materials.

IMPACT OF COMBINED MERCADONA - INTEGRATED SUPPLIERS ACTIVITY IN 2010:

Investment: 1,000 million euros.

Workforce:104,000 employees.

Production activity is spread out throughout Spain: construction of over 30 factories and new production lines.

9,200 SMEs and raw material producers.

3,500 new jobs.

Mercadona shares with over 1,100 businesses the dream of going back to traditional forms of commerce through its presence in local town markets.

COMMITTED TO LIVING IN HARMONY WITH TRADITIONAL MARKETS

Mercadona not only believes in having its stores alongside more traditional commercial establishments, but in encouraging their development, as evidenced by the commitment it has had since 2001 to breathe new life into local town markets.

In 2010 Mercadona opened two new stores in these traditional markets, bringing the total number of stores located in these settings to 19. These stores share the dream with over 1,100 merchants of recovering these traditional market places. To this end, Mercadona plans to open seven more stores in local town markets in the medium term.

Mercadona’s Presence in 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)
Los Filtros Market (Manises-Valencia)
Cobert de Inca Market (Inca-Balearic Islands)
Moncada Market (Moncada-Valencia)

In planning stage:

P1. Fondo Market (Santa Coloma de Gramanet-Barcelona)
P2. Cappont Market (Lleida)
P3. Sant Pere de Ribes Market (Sant Pere de Ribes-Barcelona)
P4. San Pascual Market (Madrid)
P5. Sant Adrià Market (Sant Adrià de Besòs- Barcelona)
P6. Calafell Market (Calafell-Tarragona)
P7. La Guineueta Market (Barcelona)

THE PROFITABILITY OF TRANSPARENCY

Dialogue, closeness and involvement are the keys to our social commitment

The relationship that Mercadona maintains with society relies on transparency. To this end, the company promotes an attitude of respect, dialogue, closeness and involvement. This attitude is shared by both the company’s employees and its suppliers, who are convinced that devoting efforts and resources to collaborating in the growth of society means investing in the future of Mercadona.

In 2010, as a result of the close ties that Mercadona has with society, the company consolidated its corporate reputation, positioning itself as one of the most highly regarded brands in this area by both national and international institutions. This is evidenced by the tenth place it holds in the New York’s Reputation Institute ranking, or the fact that it has become one of Spain’s two leading private companies in terms of its reputation, according to an annual study conducted by KPMG. This recognition, which to Mercadona entails the responsibility to continue improving its contributions to society, highlights how the Total Quality Model can also generate important returns.

COMMUNITY TIES: OUR NEIGHBOURS

In 2010 Mercadona continued to develop the activities undertaken at the start of the year and aimed at maintaining close ties with neighbours and at keeping its activities invisible to them. Some examples of the activities carried out in 2009 and continued over the course of 2010 are:

Soundproof pallet jacks for moving merchandise.

Rubber tires on the machines that lift the heaviest pallets.

Air purifiers to reduce the bad odors emanating from rubbish storage rooms.

Trucks with sound-proof floors.

Soundproofing of the sales floor and storage area on all new and refurbished stores.

Training: over 1,000 managers trained in specific skills and on the importance of being invisible to the surroundings in which we conduct our activity.

Number of complaints from our neighbours

Permanent dialogue

The close relationship that Mercadona maintains on a local level is one that is also based on mutual acknowledgment through a permanent dialogue. That is why over the course of 2010, the company took part in various events, which it used to explain its mission and values, detail its objectives, share its concerns and, most of all, forge closer ties.

Along these same lines, during these twelve months the Mercadona management model continued to be introduced to various local governments, who were able to gain first-hand knowledge of the company’s entrepreneurial spirit and corporate values. An example of this was the visit by the president of the Regional Government of Extremadura, Guillermo Fernández Vara, to the intelligent logistics block that the company has in Ciempozuelos (Madrid), accompanied by representatives from the Extremadura business association CREEX and from the Cáceres and Badajoz chambers of commerce; or the meetings held with different representatives of regional governments at other Mercadona logistics blocks, like the ones in Antequera (Málaga), Huévar (Seville) and Villadangos del Páramo (León).

Along these lines, we should also note the visit by the president of Panamá, Ricardo Martinelli, to the logistics block in Ciempozuelos (Madrid), which presented an opportunity to share with other markets the contribution of the Total Quality Model to society.

SOME OF THE INSTITUTIONS WITH WHICH MERCADONA COLLABORATES

Spanish Association of Commercial Codification (AECOC).
Spanish Association of Distributors, Self-service Centers and Supermarkets (ASEDAS).
Spanish Association of Business Organizations (CEOE) and its respective territorial and regional organizations.
Spain’s Official Chamber of Commerce in Belgium and Luxembourg.
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 (Ministry of the Environment and Rural and Marine Affairs).
EDEM Entrepreneur Business School.
Eurocommerce.
European Retail Round Table (ERRT).
Terrasa School of Commerce.
Interalimentario Forum.
COTEC Foundation.
Knowledge and Development Foundation (Fundación CyD).
Mobility Foundation (City of Madrid).
Family Enterprise Institute (IEF).

Yet another bond that Mercadona continued to forge in 2010 was in the area of education. Over 2,500 vocational and university students visited the facilities over the course of the year. The relationships with consumer organizations and homemaker associations were equally fluid during these twelve months, which saw numerous visits and meetings that served to continue strengthening the bonds that the company has had for years with these groups.

In 2010, Mercadona reaffirmed its participation in the Business Parliamentarian Program, organized by the Association of Businessmen, and which serves to familiarize numerous politicians and parliamentarians with the company’s operation.

The effort made daily by the 63,500 people who have turned the Mercadona Project into a sustainable reality was recognized in 2010 by winning various awards. One example of this was the Business Excellence award, presented during the 7th CEOE Business Congress in Guadalajara in recognition of having been the biggest engine of job growth in this province. A sign of the interest aroused in academia by Mercadona was evidenced by the decision made in 2010 by various prestigious universities to include the company’s project as a case study, as was the case with Harvard University (USA) or, in our country, with the Universitat Pompeu Fabra (Barcelona) and the ESADE Business School (Barcelona).

Another important recognition worth mentioning was the one given in 2010 by Expansión&Empleo to the President of Mercadona, Juan Roig, for leadership and innovation in the management of human resources. The award was accepted by the Managing Director of Human Resources and Finances, Héctor Hernandez. The honor will provide an incentive to continue pushing for a responsible human resources policy, while serving as a reminder that there is still much more room for improvement in this area.

Also in 2010 Mercadona collaborated closely with the EDEM, Entrepreneur Business School, a non-profit foundation supported by the company. Last year again, Mercadona had the chance to get involved, through the participation of its president, Juan Roig, in the 15x15 Course to share 15 days with 15 business leaders. As on other occasions, various members of the Management Committee, including Rafael Berrocal and José Ramón Illán, took part in the different courses given at the EDEM. The Course on the ABC’s of Best Sellers saw the participation for the first time of Julia Amorós, Managing Director of Dry Product Prescriptions at the company, and Carolina Roig, Coordinator of the Market Analysis Division. During these courses, they were able to share their professional experiences and the company’s management model with businessmen, members of boards of directors and executives enrolled in various programs.

Also of note are the important efforts being made by the company to highlight to society the image of the entrepreneur, as evidenced by the creation of a new “Entrepreneur” category in the King Jaime I Awards, sponsored by Mercadona, the EDEM, Entrepreneur Business School and the Valencian Entrepreneur Association (AVE). At last year’s inaugural presentation of this seventh award category, the honoree was Emilio Mateu, an industrial automation and electronics engineer and founder of the company Tecnología de Corte e Ingeniería, in his home town of Guadassuar (Valencia). During the award ceremony, Mateu personally thanked the president of EDEM, Manuel Palma, the secretary general of EDEM, Hortensia Roig, the president of AVE, Francisco Pons, and the president of Mercadona, Juan Roig, for the recognition.

THE ENVIRONMENT

Opting for efficiency to minimize the use of natural resources.

Knowing full well that natural resources are limited, the company is committed to the goal of doing more with less in each and every one if its processes. To achieve this, the Environmental Management System, which has been in place for years, has produced numerous “small improvements” that, as a whole, have resulted in significant savings in the amount of natural resources used and have made the company more competitive.

In 2010, as part of this search for ways to save natural resources, Mercadona continued to streamline its energy consumption, in keeping with its belief that the most environmentally friendly energy is that which is never used.

23 million euros invested to protect the environment.

Measures taken:

TRANSPORTING MORE WITH LESS: Foldable boxes: Take up 80% less space on trucks. 10,000 fewer tons of CO2 through reducing the number of trucks needed to transport the same number of boxes.

Packaging improvements: By improving the processes for different packages, Mercadona managed to save 7,000 tons of plastic and 8,000 tons of cardboard. In the last two years, this resulted in a 4.5% reduction in the amount of packaging material used by the company.

Implementation of the PNIR: In 2010, Mercadona, following the advice of various consumer organizations, set up pilot programs in several parts of Spain to determine the best way to adapt to the Integrated National Plan for Waste (PNIR in Spanish) and reduce the use of single-use plastic bags. The first test was initiated in Barcelona where, through awareness campaigns to encourage the utilization of reusable bags and baskets, the use of single-use plastic bags dropped by 80%. As a result, and thanks to the legislative initiatives of both the central and regional governments, the advances made by different distribution companies, the backing of ASEDAS and Mercadona’s firm endorsement of reusable bags and baskets, these efforts have contributed to the reduced use of natural resources in these times of austerity.

Silent Nighttime Unloading: 407 stores in 35 different provinces use Silent Nighttime Unloading, 6% more than in 2009. Thanks to this, the company is even more “invisible” to its neighbours. Also, this measure alone has managed to reduce CO2 emissions by 70,000 tons.

Eco-friendly Supermarkets: certified by AENOR, this project contributes to reducing the environmental impact of the stores. By the close of 2010, a total of 360 company supermarkets, 15% more than in the previous year, had incorporated the guidelines developed involving climate control, lighting and building envelope. The resulting energy savings over these twelve months exceeded 82 million kWh, with an indirect reduction in CO2 emissions of 26,000 tons.

Energy Efficiency in Warehouses: Various actions were taken over the course of the year to improve the energy efficiency in the warehouses. One example of this was the installation of regenerative braking systems in all the storage and retrieval vehicles at the Villadangos del Páramo (León) logistics block, saving 1.3 million kWh of electricity and cutting CO2 emissions by 420 tons.

Sustainable Products: In 2010 Mercadona expanded the FSC certification of its cellulose products to packaging materials, like the Tetra Pak used in its juice and milk cartons. This certification guarantees that the raw material comes from responsibly managed forests. As a result, the company has become the first in the industry in Spain to have these types of containers that rely on sustainable forest management.

ECO-FRIENDLY HACENDADO TETRA BRIK MILK AND JUICE CARTONS: The Tetra Pak beverage carton is made mostly from paper, a natural and renewable resource. To ensure that the wood it is made from comes from responsibly managed sources, it has been certified by the FSC (Forest Stewardship Council). Together we can look after our planet’s resources. When choosing an FAS-labeled carton, you are doing your part to ensure our planet’s future.

Through the voluntary adoption of these initiatives, Mercadona is intensifying its responsible environmental behavior while at the same time fulfilling the commitment it made to the Retail Forum, of which it has been a member since its foundation in March of 2009. This joint project of the European Commission, the European Retail Round Table (ERRT) and Eurocommerce promotes sustainability in the distribution industry and encourages the manufacture of more sustainable products and better consumer information.

As a member of the ERRT, Mercadona is a signatory of the Retail Environmental Sustainability Code, approved by the European Commission, and through which the company agrees to continue adopting measures intended to improve its environmental behavior by:

Promoting more environmentally sustainable sourcing and production of products.
Improving the environmental performance of the retailers’ premises.
Optimizing the transportation of goods.
Reducing packaging and minimizing waste.
Improving facility access.
Improving communications with customers.

The first anniversary of the Forum was celebrated on June 24, 2010, with the participation of the European Environmental Commissioner.

The European Commission wished to recognize various distribution firms, including Mercadona, as examples of companies that encourage good environmental practices. It specifically highlighted the recovery of 100% of the commercial packaging at the logistics blocks and supermarkets in 2010, as well as the sale of cellulose products made with materials from sustainably managed forests.

The EC also noted the company’s environmental commitment, as a part of which it has voluntarily adopted measures to consume fewer resources, such as through the installation of new systems to recover heat from machinery rooms, which is piped to the retail space to aid in heating, thus resulting in significant energy savings.

MERCADONA RECOGNIZED FOR ITS SUSTAINABLE PRACTICES: In 2010 the European Commission recognized Mercadona as an example of a company that promotes good environmental practices.

SUSTAINABLE TRANSPORT

With Sustainable Transport, Mercadona manages to “transport more with fewer resources”, noticeably reducing the environmental impact of distributing goods.

ROAD:

407 stores with nighttime unloading
70,000 fewer truck trips a year
15 million fewer kilometers by road
83,500 fewer tons of CO2
31 million euros saved in logistical costs by:
- Bringing suppliers’ facilities closer to the logistics blocks
- Optimizing truck capacity and loading
- Traveling fewer kilometers by road

RAIL:

571 train loads a year
5 different routes
285,000 tons transported
14,300 fewer trucks
11.5 million fewer kilometers by road
17,000 fewer tons of atmospheric CO2 emissions
5% increase in the tons transported versus 2009

SHIP:

585,000 tons of cargo transported
28,000 fewer trucks
30,000 fewer tons of atmospheric CO2 emissions

RECYCLING (Figures for 2010):

146,000 tons of paper and cardboard
6,800 tons of plastic
2,100 tons of wood
912 tons of polystyrene
130 tons of used batteries collected in stores
7 tons of toner recycled (avoided emitting 23 tons of CO₂)

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, cleaning and perfume products through its 1,310 supermarkets, which are supplied by a series of logistics centers that the company has strategically located throughout the country.

COMPANY TRENDS

The results achieved by Mercadona in 2010 were made possible by the trust of over 4.4 million households, the effort of 63,500 employees, the commitment of 2,000 suppliers (1,000 service providers and 1,000 sales representatives), more than 100 of them integrated suppliers, who manufacture the Hacendado, Bosque Verde, Deliplus and Compy brands, and thanks to society’s positive reaction to our activities.

Their involvement and commitment to the management model allowed the company to continue to advance in the development of mid-and long-term efforts designed to find solutions to satisfy with equal dedication the needs of the company’s five components.

In 2010, the company continued to revise all of its processes so as to adapt to the needs and demands of the “Bosses”, the clear objective being, by recommending products, to offer customers the highest quality products at the market’s most economical prices: The Shopping Cart Menu.

Over these twelve months, Mercadona also reduced the payment periods to its suppliers, going from an average of 65 days in 2009 to 63 days in 2010.

As in previous years, the company’s annual accounts were audited by Deloitte, S.L., which on 31 January 2011 issued its report without qualification, as usual. Said report, along with the annual accounts, is duly deposited in Valencia’s Mercantile Registry.

Key Figures ((millions of euros and kiliters)
Sales units in Kiliters: 2009: 8,000; 2010: 8,532; % Charge 09/10: 7%
Turnover: 2009: 15,505; 2010: 16,485; % Charge 09/10: 6%
Operating Income: 2009: 370; 2010: 560; % Charge 09/10: 51%
Income before tax: 2009: 360 ; 2010: 564; % Charge 09/10: 57%
Net income: 2009: 270; 2010: 398; % Charge 09/10: 47%

SALES UNITS (KILITERS)

For 2010, one of the key indicators at the company continued to be the number of kilos and liters sold (kiliters).

At the end of the financial year, the company reported a figure of 8,532 million kiliters sold, a 7% increase over the 8,000 million sold in 2009. The company is satisfied with this figure, as it proves the increasing loyalty of its customers.

2009: 8,000 millions of kiliters sold.

2010: 8,532 millions of kiliters sold.

SALES

As in previous years, the Total Quality management model and a development policy based on organic growth allowed Mercadona in 2010 to generate a turnover of 16,485 million euros, a 6% increase over 2009.

2009: 15,505 Gross sales millions of euros.

2010: 16,485 Gross sales millions of euros.

INCOME

Income before tax stood at 564 million euros in 2010, as compared to 360 million the previous year, which represents a 57% increase. Income after tax in 2010 came in at 398 million euros, a 47% increase over 2009, a year in which Mercadona posted net results of 270 million euros.

These figures, which represent a return to the growth rates of 2008, reflect the suitability of the measures implemented to realign the company with its Total Quality Model.

2008: 320 Net income millions of euros.

2009: 270 Net income millions of euros.

2010: 398 Net income millions of euros.

EBITDA

Mercadona’s capacity to produce revenue was in line with the remainder of its business figures, with the company’s EBITDA totaling 1,000 million euros at the end of 2010, versus the 725 million euros posted in 2009.

2009: 725 EBITDA millions of euros.

2010: 1,000 EBITDA millions of euros.

CAPEX

As of 31 December 2010, Mercadona boasts a total of 1,310 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 472 million euros, earmarked primarily for the construction of 60 new stores and the refurbishment of 32 supermarkets to bring them in line with the chain’s comfort standards. Construction was also started on new logistics blocks in Abrera (Barcelona) and Guadix (Granada), a new warehouse was opened in Pla-Za (Zaragoza) and construction work continued on the logistics block in Villadangos del Páramo (León). To the above figure we must add the investments in financial assets and those intended for the purchase of land and premises for future stores, which raises the total investments made over these twelve months to 575 million euros.

2009: 573 CAPEX millions of euros.

2010: 575 CAPEX millions of euros.

EQUITY CAPITAL

The capitalization of almost all profits obtained meant that, by the end of 2010, the company’s equity capital figure rose to 2,255 million euros.

Worthy of note is the constant evolution in the ratio of equity capital relative to total assets, which went from 41% in 2009 to 45% in 2010.

2009: 1,885 Equity capital millions of euros.

2010: 2,255 Equity capital millions of euros.

PRODUCTIVITY

Productivity, measured in the number of kilos and liters sold, rose by 5% in 2010 to a total of 11,286 kiliters a month, versus the 10,724 kiliters a month in 2009.

This figure highlights the commitment of everyone involved in the Mercadona Project to achieve the goals set by the company.

2009: 10,724 kiliters sold/person/month.

2010: 11,286 kiliters sold/person/month.

MERCADONA, S.A

Balance sheet as of 31 December 2010 (thousands of euros)

ASSETS

A) NON CURRENT ASSETS, 2,523,123
1. Intangible assets, 64,863
  1. Concessions, 45,835
  2. Computer software, 8,710
  3. Other intangible fixed assets, 10,318
2. Tangible fixed assets, 2,371,547
  1. Land and structures, 1,411,945
  2. Technical facilities & Other tangible fixed assets, 844,182
  3. Advances and construction in progress, 115,420
3. Group companies, equity instruments, 30,000
4. Long-term investments, 40,184
  1. Equity instruments, 3,092
  2. Long-term deposits, 25,252
  3. Other financial assets, 11,840
5. Deferred tax assets, 16,529

B) CURRENT ASSETS, 2,537,435
1. Inventories, 560,003
2. Trade and other receivables, 75,837
3. Current financial assets, 4,817
4. Short-term accrual accounts, 6,552
5. Cash and cash equivalents, 1,890,226
  1. Cash, 1,095,226
  2. Cash equivalents, 795,000

TOTAL ASSETS, 5,060,558

Translation of financial statements originally issued in Spanish and prepared in accordance with generally accepted accounting principles in Spain.In the event of a discrepancy, the Spanish-language version prevails

LIABILITIES AND SHAREHOLDERS' EQUITY

A) SHAREHOLDERS' EQUITY, 2,255,241
A-1) Equity,
1. Authorized capital, 15,921
2. Share premium, 1,736
3. Reserves, 1,845,312
  1. Legal & Statutory, 3,184
  2. Other reserves, 1,842,128
4. Treasury shares, (6,968)
5. Income for the year, 397,933
A-2) Fair value changes, 464
A-3) Subvention, donations & bequest, 843
B) NON-CURRENT LIABILITIES, 200,874
1. Long-term provisions, 23,446
2. Long-term payables, 19,937
  1. Payable to credit institutions, 7,967
  2. Other financial payables, 11,970
3. Deferred tax liabilities, 157,491
C) CURRENT LIABILITIES, 2,604,443
1. Short-term payable to credit institutions, 2,371
2. Trade and other payables, 2,602,072
  1. Trade accounts payables, 1,893,403
  2. Group companies, trade accounts payables, 67,458
  3. Creditors, 265,041
  4. Staff, 168,006
  5. Current tax payables, 27,620
  6. Other liabilities with Public Institutions, 180,544

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY, 5,060,558

MERCADONA, S.A
2010 Statement of income (thousands of euros)

A) CONTINUING OPERATIONS
1. Revenue, 15,242,859
Net sales, 15,242,859
2. Procurements, (11,411,277)
Merchandise purchases and procurements, (11,411,277)
3. Other operating revenues, 27,287
Non-core and other current operating revenues, 20,130
Subsidies transferred to income for the year, 7,157
4. Personnel expenses, (1,876,569)
Wages, salaries and similar expenses, (1,457,761)
Employee welfare expenses, (418,808)
5. Other operating expenses, (1,013,107)
Outside services, (985,431)
Taxes other than income tax, (21,723)
Impairment losses & variation in operating allowances, (52)
Other operating expenses, (5,901)
6. Amortization expense, (406,328)
7. Registered non-financial asset subsidies and others, 369
8. Impairment and net result from non-current assets disposals, (3,087)
Impairment and losses, (4,586)
Net result on non-current asset disposals, 1,499
A.1) OPERATING INCOME, 560,147
9. Financial income, 40,593
Income from equity investments in other companies, 432
Income from equity and other long-term investments in other companies40,161
10. Financial costs, (23,192)
Third parties, (23,192)
11. Impairment and net result from financial instrument disposals(14,000)
Impairment and losses, (14,000)
A.2) FINANCIAL INCOME, 3,401
A.3) INCOME BEFORE TAXES, 563,548
12. Corporate income tax, (165,615)
A.4) INCOME FOR THE YEAR, 397,933

Translation of financial statements originally issued in Spanish and prepared in accordance with generally accepted accounting principles in Spain. In the event of a discrepancy, the Spanish-language version prevails

Mercadona’s results for 2010 are the direct result of once again putting “The Boss” at the heart of every decision

History of the Mercadona Project 1977 - 2010

1977: The matrimony formed by Mr. Francisco Roig Ballester (1912-2003) 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: Introduction of the free Customer Credit Card for ‘The Boss’.
1988: Inauguration of the Riba-roja de 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: Introduction of the Always Low Prices (SPB) commercial strategy, which will later evolves into the Total Quality Model.
1996: The birth of the Hacendado, Bosque Verde, Deliplus and Compy brands.
Opening of supermarket number 200, in Segorbe (Castellón).
The first labor 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 Ambience.
Celebration of the first Meeting with Integrated Suppliers.
Signing of collective labour agreement (2001-2005).
2001: Inauguration of the first free nursery 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.
Inauguration of the logistics block in San Isidro (Alicante) and the company’s second nursery.
Launch of the new Hortensia H. perfume line.
Opening of a supermarket in the l’Olivar Market, Palma de Mallorca.
2004: Opening of the logistics block in Huévar (Seville) and the company’s third nursery.
The Management Committee decides not to open supermarkets on Sundays, except on special occasions.
2005: Introduction of the new Mercadona uniform.
First edition of Mercadona Sorolla Innovation Awards.
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 implementation.
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).
2009: Return to basics to ensure an efficient selection, doing only what offers value to ‘The Boss’.
Signing of new Collective Labour Agreement and of Equality Plan (2010-2013).
2010: Human Resources management model based on Leadership and on a Culture of Endeavour: keys to being a high-performing and productive company.

The Mercadona Project continues to move forward

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