Colombian business Koba Colombia SAS (Koba) opened its first D1 discount store in Medellín, Colombia, in 2009. D1 became the first discount chain to enter the market. A decade later, Koba celebrated the huge milestone of opening its 1,000th store and announced ambitious plans to double this number.
In recent years, the business increased the pace of store openings and on Wednesday 7 October, less than a year after opening its 1,000th store, it celebrated opening its 1,500th in the town of San José del Guaviare.
Pandemic has not hindered expansion
In an interview with Valora Analitik in May 2020, Koba’s president, Fernando González, said that at the end of 2019 the business intended to open 400 new stores in 2020. However, the pandemic’s effects led to a reduced number of openings between March and May. As a result González’s expectations dropped to between 350 and 380.
In a more recent interview (October 2020), González told business magazine Dinero “we have been able to continue with our expansion plan and so far this year we have been able to open 500 stores…We seek to end the year with about 1,700 openings in the national territory, depending on the situation”.
Painted mural in Colombia celebrating D1’s 1,500th store
Source: Linked In, D1
Further room to grow
D1 now has a presence in 300 municipalities across 26 departments. According to Koba, its coverage reaches 77% of homes. However, its strategy remains to reach all customers and continue to democratise its quality products and affordable prices.
“We want to continue with our commitment to cover the entire national territory and reach all the municipalities and departments of Colombia”. González.
Koba has developed a solid logistics network, with 400 of its own trucks. Some of Colombia’s remote towns suffer from poor quality roads. Despite this challenge, Koba is committed to designing bespoke logistics solutions to support the transportation of groceries to these areas.
Since the start of pandemic Koba has been partnering with third party delivery businesses to unlock delivery capabilities in major cities.
The pandemic has increased proximity’s desirability…
D1’s small footprint stores have enabled Koba to find vacant units in locations closer to the customer. During the first peak of the pandemic in March/April, customers were advised to stay at home as much as possible. The threat of the virus meant customers wanted to perform their shop quickly and as close to home as possible. As a result, proximity stores became a more attractive option for many consumers.
This saw D1 enjoy higher ticket sales in March/April, which, according to González, were generated from fewer visits, but greater spend.
Source: IGD Research
…supported by offering lower prices
The pandemic has brought much of Colombia’s informal trade to a standstill. This, in addition to an expected post-pandemic recession, has made Colombians more apprehensive about their future finances.
As a result, we expect many to become more frugal, even when buying groceries. This will benefit the discounters in Colombia, whose business model is centred on selling high volumes of product at low prices.
Koba expects to end the year with a turnover of COP8 bn
In 2019 D1 reached sales of COP4.9 tn (US$1.5 bn), making it the third largest grocery retailer in Colombia.
Source: IGD Research
Excluding the peak pandemic weeks in March and April, D1’s sales have remained consistent through 2020 and Koba has forecasted full year revenue of COP8 tn (US$2 bn). This represents a significant increase on 2019 and is more optimistic than González’s COP7 tn forecast, which he gave in May.
New stores provide thousands of jobs
Koba said its 2020 store opening programme has been generating between 300 and 500 new jobs per month. Between October and the end of the year it aims to create a further 1,000 to 1,500 jobs. As the business continues to expand into more rural areas, its stores are providing employment opportunities which previously did not exist.
New E1 proposition could lead to further growth opportunities
Earlier this year Koba opened the first store under its new E1 banner, which are proximity stores located on petrol forecourts. Although not widely publicised, we know Koba to have at least three E1 stores in operation at Esso and Petrobras stations.
Partnering with forecourt operators could potentially be a new way for Koba to grow volume and further expand in the market. Forming exclusive partnerships with major fuel players would limit opportunities for its competitors to expand in this area.
Source: Mall & Retail
This is not the first time we have seen a discounter retailer trialling forecourt stores. In 2018 Spanish discount retailer DIA opened a handful of DIA stores within BP fuel stations in Spain’s capital, Madrid. However, we have yet to see a discounter roll this model out at scale.