The rise of small retailer mergers: team up or get left behind?

Celina Kramer & Jeroen Lustig
Published on
January 19, 2024

Last summer, a new shift happened in the Dutch supermarket landscape as local retailers Nettorama and Boni announced their merger. While concrete plans remain under wraps, A-INSIGHTS, in collaboration with Distrifood, has been examining the financial implications of this collaboration.

As smaller retailers join forces to counterbalance industry leaders like Albert Heijn and Jumbo, the Nettorama-Boni merger asks the following questions: is it enough to shake the current status quo, and is this trend here to last?

Alone we go faster, together we go further?

Facts don’t lie: a couple of years after Dutch retail cooperatives PLUS and COOP announced their merger, and while US players Kroger and Albertson have presented their plan to fusion in 2024, Dutch regional food retailers Nettorama and Boni have received approval from the antitrust watchdog ACM, suggesting a growing trend in concentration in the food retail industry.

But here’s the burning question: can this newformed duo offer a solid alternative to heavyweights Jumbo and Albert Heijn? In terms of market shares alone, the merger positions the new entity as a robust A-brand discounter with over 80 stores and 6800 employees nationwide, still falling short of Jumbo's 850 stores and Albert Heijn's 1150 in 2021.

A comparable phenomenon emerged post the PLUS/COOP merger. Despite possessing only half of Jumbo's market share in 2021, the merger empowered them to compete in a segment that neither Jumbo nor Albert Heijn primarily addressed: the small-town, low-prices market.

Another advantage for the Nettorama/Boni partnership is Nettorama's impressive 2021 EBIT. "With an operating profit of 7.7%, Nettorama outperforms Jumbo’s EBIT of 2.4%, and even the well-performing Albert Heijn is estimated to be 2-3 percentage points lower than Nettorama," comments our founder, Jeroen Lustig.

Moreover, we've observed strategic moves within the merged company to capitalize on synergy benefits. “The parties simultaneously announced that only a few overlapping jobs will disappear at the head office, but all staff will be retained, and distribution centers in Nijkerk and Oosterhout will both remain in operation,” A-INSIGHTS’ founder points out. This means that the synergies in personnel costs will not contribute significantly to improving the effectiveness of the merged company. "With combined personnel costs of 8.8 percent, they are at the same level as, for example, Jumbo in 2021."

If these efforts prove insufficient to compete definitively against Albert Heijn and Jumbo – given Nettorama-Boni's different market share and focus on a distinct segment – the merger should, at the very least, enable them to navigate a highly competitive environment. This suggests that the concentration trend in the industry shows no signs of slowing down.

Curious to read more on the topic?

This article is part of an ongoing series about the Dutch food retail landscape in collaboration with Distrifood. Click here to read the full article (in Dutch) and our full opinion on the Boni-Nettorama merger.
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