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Dutch supermarket chain Jumbo is working on a recovery plan to boost its margins, which have come under increasing pressure in recent months due to higher raw material prices and increasing competition.
New, lucrative products
Franchisers in particular are concerned about the margins, which is why a discussion between them and the supermarket chain itself was planned. The supermarket has now promised to work on a “margin recovery plan that will lead to a percentage recovery of margins towards the end of the year.” An internal memo, which Distrifood made public, further states that the “introduction of new, innovative higher-margin items and the optimisation of promotions” are key to the plan. Partly due to the corona crisis, the Jumbo stores saw their turnover rise sharply in the past year. As a result, the profit margin in absolute figures has remained stable, even though the margin in percentage has decreased.
The Dutch chain attributes the lower margins to increasing promotional pressure from competition and higher raw material prices. Jumbo has a lowest price guarantee in the Netherlands, which means that the chain has to respond immediately to promotions by other retailers. Rising raw material prices, on the other hand, are a general problem affecting the entire sector. “Sugar and palm oil, in particular, are very expensive at the moment. Still, the market is reluctant to raise prices”, the memo continued.
To a question as to whether the plan to increase margins would also be implemented in Belgium, our editors have not yet received an answer. Jumbo does not have a lowest price guarantee in Belgium, but the margins are also shrinking on the Belgian market due to the more expensive raw materials.
