Penguins Out in Cold as Spanish Firms Freeze Holiday Spending
Employees of Spain’s Laboratorios Farmaceuticos Rovi SA (ROVI) had to party without the penguins.
The Antarctic animals sporting Rovi’s scales logo welcomed workers to past Christmas celebrations at the Faunia nature theme park in Madrid. The drugmaker cut this year’s budget by almost 60 percent to about 25,000 euros ($32,600), Chief Financial Officer Javier Lopez-Belmonte said.
“We don’t want to splurge amid these economic times,” he said. “We had musical concerts, comedians, all with great pomposity in luxury sites. This year we did something more austere and functional in a more modest location,” while still giving employees a chance to meet the company’s chairman. Rovi invited about 350 of its 830 employees to the Dec. 16 event.
Christmas parties have gone the way of Spain’s AAA credit rating as Prime Minister Mariano Rajoy, sworn in yesterday, tries to revive a stagnant economy, reduce the 23 percent unemployment rate and prevent the country from being overwhelmed by the sovereign debt crisis.
“We’re suffering a lot because some regions aren’t paying their bills to us and banks don’t want to lend us money,” said Carlos Rodriguez, secretary general of Prim SA. (PRM) The medical products supplier has suspended all spending on leisure activities, including a champagne reception in a hotel for current and former employees, because “the time isn’t right to celebrate anything.”
The Party’s Over
Companies are scrimping on parties and gifts regardless of performance, said Xavier Oliver, marketing professor at IESE business school.
“Some firms slash Christmas spending because they would feel ashamed of giving free and expensive dinners while others are losing their jobs,” he said.
Aragonesa de Lotes SL, a gift basket distributor based in Zaragoza, has seen corporate cutbacks of as much as 50 percent. Hampers of nougat, wine, champagne and ham costing 30 euros to 40 euros are outselling the 50-to-60 euro items popular last year, general manager Cristobal Lopez said.
“The environment is really challenging and we don’t expect a recovery in at least two years,” said Lopez, who founded the company in 2007. “People are used to the crisis by now and it will be a ‘sad Christmas’ again. Lots of companies have already gone out of business so it can’t get much worse.”
Consumers are cutting back on festive food and presents, which Spaniards traditionally give on Jan. 6, or 12th day of Christmas, to mark the three kings’ arrival in Bethlehem. Spain is the only country forecast to cut spending out of nine European countries, including Germany, France and the U.K., as retail sales are lower than they were in 2005, the U.K. Centre for Retail Research said.
Paloma Losada, a 28-year-old interior designer, will spend Christmas with her parents in Galicia to save money. Almost half her colleagues have been fired and she doesn’t feel like celebrating much. Even as she keeps her job, Losada wants to save as much as she can, avoiding department stores such as El Corte Ingles SA.
“I’m thankful I still have a job, but I need to be cautious,” Losada said as she walked out of a Lidl discount supermarket in Madrid. “I will buy own brands and spend much less on gifts. These aren’t times to be partying.”
Consumer lobby group Fuci says Spanish consumers will cut Christmas spending by 17 percent to 560 euros on average, the biggest slump since consumption started to fall in 2008.
Reme Leal, a 29-year-old accountant at Ernst & Young LLP in Madrid, will spend less than that after her salary’s been frozen for two years. She’ll cut back to about 400 euros, and will buy mostly clothes instead of cologne or toys. She’s doing more shopping at Carrefour SA (CA) than more expensive stores.
El Corte Ingles, Spain’s biggest department store operator, is responding to perceptions of higher prices with 40 percent discounts. It’s confident the move will pay off by attracting a wider range of consumers, a spokeswoman said.
“The crisis has taught consumers how to buy cheaper stuff,” IESE’s Oliver said. “The passion for consumption won’t fade out. We can’t help going shopping, but we now realized we have to find better deals.”
To contact the reporter on this story: Manuel Baigorri in Madrid at email@example.com.