Spanish grocery retailer DIA hosted its third Capital Markets Day in London on June 21, and the Fung Global Retail & Technology team was in attendance.
DIA focused on the following themes:
CEO Ricardo Currás pledged to concentrate on two priorities:
Management strongly emphasized that the company has been following a strategy of customer centricity since 2012. The strategy puts customer data and views at the heart of decision making. DIA has captured customer data through its loyalty card, which has a 90% adoption rate, as well as through focus groups and online customer feedback tools.
One takeaway from this customer focus has been that, while price remains the number one reason for choosing a retailer, shoppers’ expectations have increased in terms of product ranging, in-store experience and omnichannel services. DIA has been refitting and reformatting stores in its legacy Iberian business. It has also used data to reduce out-of-stocks and improve ranging.
DIA’s growth has been fueled by two elements: acquisitions in its traditional markets of Spain and Portugal and strong growth in Latin America. From 2011 through 2016, DIA grew sales in Brazil and Argentina by a compound annual growth rate (CAGR) of 28% at constant exchange rates and grew EBITDA by a CAGR of 36%.
Looking ahead, the company sees the following opportunities:
In addition, DIA sees scope for consolidation in the Spanish grocery sector, which remains relatively fragmented. In the Q&A section of the meeting, an attendee asked management if the company has plans to drive this consolidation, and executives responded that they expect this process to occur naturally as smaller independent players fall out of the market. Management cited the investments needed in technology as one reason smaller operators may struggle to compete with larger retailers such as DIA.
DIA’s proposition is based on low prices, and it continues to pursue efficiencies, including through technology, to enable this focus.
The company achieves cost savings through a number of means, including:
DIA is a “soft discounter,” meaning it combines traditional “hard discount” elements such as low prices and small stores with softer features such as neighborhood locations, big-name brands and couponing. A further sign of its softer positioning is its embrace of e-commerce, and management pointed to opportunities in this space.
DIA expects to grow its online sales by six times, to more than €120 million, by 2020. We think that e-commerce could be a significant competitive advantage for DIA in a Spanish market that is relatively fragmented and still in a nascent phase of grocery e-commerce development.
Juan Pedro Agustín, Head of Digital, noted that DIA.es has more than 90,000 customers and that it sees a typical basket size five times larger than the average in-store purchase. He also said that DIA.es has a catchment area that represents 60% of the Spanish population. Additionally, the brand’s nongrocery site, Oportunidades.DIA.es, attracts 135,000 customers and offers 5,000 SKUs across general merchandise.
DIA’s online shoppers are younger than its in-store shoppers and represent 2.25 times the value of in-store shoppers. Management also emphasized the importance of the DIA app for e-commerce as well as services such as digital coupons.
DIA’s management reiterated its 2017 outlook and 2016–2018 targets:
Additionally, Chief Corporate Officer Amando Sánchez Falcón noted that, between 2017 and 2020, the company expects capital expenditure to be 3.5%–4.0% of sales, reverting from higher levels following “an intense period of acquisitions.”