‘At some point sales will fall’: Norman Aquilina cautions on grocery retail sector growth

At some point sales and contribution per square metre will fall, Executive Chairman of Quinco Holdings Norman Aquilina said about the grocery retail sector, highlighting that developments taking place in the supermarket and corner store field should be treated with caution.

Mr Aquilina referred to the news broken by this newsroom that the Arkadia supermarket chain is being acquired by Azzopardi Group and said that it has placed a spotlight on a sector which is “undergoing rapid change.”

He mentioned that he is also hearing of another, potentially more significant, transaction in the pipeline, but did not mention any of the parties involved.

He said that over the last 12 months, the country saw the opening of four major supermarkets, “alongside the continued mushrooming of multiple ‘franchised’ C-stores, with more lined up.”

At the same time, he said, the traditional corner stores that once defined neighbourhoods are rapidly disappearing.

“This is not surprising, nonetheless, these developments should be treated with caution because more stores do not create more demand, they simply redistribute existing spend across a larger base, bringing along higher execution risks. At some point, sales and contribution per square metre will fall and raise questions of sustainability."

He added that the whole supply chain is being reconfigured, with even importers and distributors compelled to revisit their value proposition both in terms of cost efficiency and reliability of supply. “Some may even be going deeper by reviewing their business model. This is clearly not just a retail reset. It is a supply chain reset too.”

The market is separating those who can scale up from those who cannot “and is clearly pointing to a sector that is actively repositioning itself,” he said.

“What we are seeing now is not a series of isolated events, it is the acceleration of a structural shift.”

Mr Aquilina was recently appointed Executive Chairman of Quinco Holdings, the former food division of Farsons which was spun off into its own company. Prior to that, he was the CEO of Simonds Farsons Cisk plc.