Jeronimo Martins SGPS SWOT & PESTLE Analysis

Strength

1. Leading food distribution chain in Portugal: Jeronimo Martins Group (JMG) operates majorly through two brands in Portugal, Pingo Doce and Recheio. JMG is the largest food distribution and consumer durables chain in Portugal. Pingo Doce operates in supermarkets segment with 441 stores and Recheio has 42 stores and platforms, both holding leadership positions in their segments. Pingo Dece also operates restaurants in 36 supermarkets with Take Away counters. The banner also has drugstore, clothing and shoe brands, namely, Bem-Ester, Code and Spot. Through Jeronimo Martin's Agro-Alimentor, food products derived from dairy products, livestock farming and aquaculture are provided. It leverages the group’s position in Portuguese market as both producer and supply chain service provider.

2. Jeronimo Martini showed resilience amid Covid due to potential of Biedronka: JMG has outperformed market expectations even during pandemic. Covid-19 brought the economy and public movement to a gruesome halt with closures of supermarkets. The major part of services of JMG include essential items like food and household items but there was a cardinal concern of supply chain disruption and shortage of labourers due to the lockdown. Even in such demanding situations, the group showed resilience in its business through e-commerce and home deliveries especially due to it retail chain banner, Biedronka, the largest supermarket chain in Poland operating 3002 stores as of early 2020. Biedronka alone provided profit to the group, although other banners could not perform amid pandemic. With regular contribution in-group revenue above 60%, sales of Biedronka grew by 7.8% y-o-y to €6536 million in half yearly results of 2020. The group's sales grew by 4.6% to €9317 million in H1 2020 with EBITDA margin of 4.7% and net profit margin of 1.4%, which was worth €132 million.

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Weakness

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Opportunity

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Threats

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Political

1. Sunday trading ban in Poland and its impact: Poland imposed Sunday Trading Bans in 2018. It restricted business on 2 monthly Sundays in 2018, 3 monthly Sundays in 2019 and all Sundays in 2020, except Sundays before festivals. It was done to provide quality family time to the working class of Poland, which has witnessed the highest working hours in Europe. It also promotes traditional mom and pop shops as they are exempted from the law along with shops in airport, railways stations and other emergency services. The law boosts usage of e-commerce, a direct threat to offline retail chain. The law puts a stress on store operaters to operate for longer hours on Fridays and Saturdays with heavy discounts to attract more buyers. JMG operates through the banner of Biedronka in food distribution retail and Hebe in health and beauty sector retail in Poland. Biedronka is outpacing the bank's affect by heavy discounts and promotional discounts through 'Everyday Low' campaigns but Hebe suffered due to heavier discounts in low margin products. To mitigate the effect, Hebe started the online retail channel somewhere mid 2019. The ban has pushed retail chains towards digital transformation and transformation in business model.

2. Growing tensions in Venezuela triggering growth of the unorganised sector in Columbia: Recently, Latin America has seen drastic changes in the political scenario. JMG has business interest in Columbia, one of the most stable states of Latin America. The highest disruption has occured in Venezuela. In Venezuela, the opposition leader annexed the government without public mandate and raised political tensions across the nation. Venezuela's economy has been deteriorating since then and many Venezuelans fled from their homeland to Columbia in 2019. Columbian government openly embraced the refugees. This has raised the unemployment in the Columbia but the private consumption increased. It also increased the dominance of unorganised sector in various sectors, which also include food distribution. This could be a direct threat to JMG. JMG operates through the banner, Ara in Columbia. Ara has been a loss making enterprise since a long time. With insurgence of unorganised sector, competition would surge and profitability would trail.

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Economic

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Social

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Technological

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Legal

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Environmental

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