The Portuguese food distribution market shows strong concentration, with Continente and Pingo Doce together representing 50% of the market, followed by Lidl with 13.8%. For many consumer goods companies, between 80% and 90% of retail sales are concentrated in just seven clients, and a single retailer can represent up to 30% of a supplier's business, making substitution difficult in case of loss.
The central issue relates to the combination of three phenomena: retail concentration, expansion of formats with shorter assortments, and continued growth of private label. The retailer has a particular position, being simultaneously the manufacturer's customer, owner of the selling space, and competitor through their own brands, which profoundly alters the negotiating balance and can influence market architecture.
Recent data shows that 97% of consumer goods sales in Portugal still take place in physical stores, where space is a finite resource. Lidl, by giving more space to manufacturer brands, has managed to increase the shopping basket and market share, while Mercadona, with about 90% private label, faces difficulties because the Portuguese consumer wants more assortment and more brands available.
The compression of assortment can become a disincentive to innovation, which in consumer goods is expensive, time-consuming, and risky. The risk is creating an hourglass-shaped market, with private label at one end, major brands at the other, and emptiness in the center. The fundamental question is what market we want to offer the Portuguese consumer in five or ten years, and whether price, quality, innovation, brands, and new operators can continue to compete for their preference.
