Just three months after its bourse offering, Superdiplo has captured the limelight with an aggressive expansion strategy that has made it Spain's second-largest supermarket chain and seventh-largest food retailer four years after its birth.

And Superdiplo, the only listed supermarket group in Spain, is thinking even bigger.

"We are at an historic moment in the industry," said Superdiplo chairman Carlos Rodriguez de Tembleque.

Javier Valverde, stock analyst at Santander Investment estimates that some three or four supermarket chains will survive in Spain in 10 years from the 400 that now have turnover of three to 40 billion pesetas ($263.6 million).

And he thinks Superdiplo, which has a market share of two per cent in Spain's splintered industry, will be one of them.

"This company has(already) multiplied its size more than eight times. It is clearly one of the catalysers for market concentration in Spain," Valverde said.

By June, Superdiplo had parlayed just 20 stores and some 24,000 square metres (258,300 square feet) of selling surface at its start in 1994 into 192 stores and 206,000 square metres (2.217 million square feet).

"This is a growth company and we plan to reinvest earnings in opening stores and in buying new companies...We plan to increase market share as much as we can," Superdiplo's Rodriguez Tembleque agreed.

It plans to build more than 25 new stores this year alone and press ahead with its aggressive acquisition plan, particularly in its strongholds in the Canary Islands, southern Andalusia and Madrid.

For the past 20 years, Spanish food retailing has seen rapid growth in supermarkets and in hypermarkets, which draw a large percentage of their sales from products other than food.

The domestic hypermarket industry is dominated by French groups: market leaderPromodes with Continente, Carrefour, Pryca and Auchan's Alcampo.

But after 20 years of rapid expansion in Spain, hypermarkets are seen yielding market share to supermarkets, which had grabbed 45 per cent of the pie by 1996 from nine per cent in 1975.

At the same time, hypermarkets' market share fell in Spain last year for the first time, hit by the introduction of a new law that restricted holiday opening hours, prohibited sales at a loss and made construction difficult.

Large supermarkets are expected to benefit from the better economy, which will encourage consumers to shop at closer locations at only slightly more cost. Demographics also favour supermarkets, as only 25 per cent of Spanish women drive and hypermarkets tend to be on the outskirts of cities.

By putting on bulk, Superdiplo is arming itself for what is expected to be accelerating supermarket consolidation at home -- and ever more attempts to exploit the underdeveloped market by European competitors whose home growth islimited.

"There is going to be a consolidation, first downstream in Spain and then I am sure upstream in Europe, from which will emerge much larger companies," Rodriguez Tembleque said.

Concentration is accelerating in Spain although it still lags the rest of Europe. In 1997, the top five players had a 38 per cent market share versus 16 per cent in 1984, but that still left them well behind much of Europe, said Valverde.

Santander is one of two banks that led Superdiplo's sale of 27 per cent of its shares this spring.

In southern Andalusia alone there are more than 80 retailfood chains -- the smallest just one store of 150 square metres (1,615 square feet).

"In Europe, none of those companies could survive because they can't compete on price. This (level of consolidation) took place in Europe 10 years ago," Rodriguez Tembleque said.

And that process of concentration continues at hot boil across the continent, with bigger brethren to the North merging and showing particularly avid interest insouthern Europe.

"This process of concentration is going to be huge and that goes for Italy and Portugal as well," Valverde said.

Superdiplo's most aggressive foreign competitor is Dutch supermarket chain De Boer Unigro.

De Boer Unigro, which just joined forces with Vendex Foods to create a group that is seen controlling 24 per cent of the Dutch market, has made no secret of its interest in Spain.

In June, it bought Hilario Osoro, a chain of 80 supermarkets and a small number of cash-and-carry wholesale outlets in northern and northwestern Spain.

Unigro has also bought Almeria-based Galeria Carvajal, Hijosde Timoteo Diaz of Toledo and Union Bops of Murcia and is now Spain's third-biggest supermarket operator right behind Superdiplo, which is second in sales and first in profitability.

In addition to Unigro, Dutch competitor Royal Ahold NV is also eager to expand in Spain, but its local partner Caprabo in Catalonia is seen as more conservative and the partnership has brought Ahold the purchase ofjust one chain of supermarkets.

Analysts say Superdiplo need not worry much about its foreign competition, which is largely in the market for purchases of 25 to 30 billion pesetas, whereas it focuses on smaller acquisitions of up to 10 billion.

"It has bought 16 chains in the last few years. They are well used to acquiring and integrating companies," Valverde said.

Top domestic competitors, such as market leader Mercadona, are seen running out of financing capability or unwilling to buy -- largely leaving the floor to Superdiplo's bold strategy.

The trend is similar across southern Europe, as large giants absorb small shops and chains.

In Italy, for example, instead of merging, French giant Auchan teamed up with Rinascente.

France's Promodes and Germany's Tengelmann followed similar strategies to tie up with Italian supermarket chain GS and Pam supermarkets, respectively.

And Superdiplo, backed by its success to date, sees the field wide open and expects to eventually convert its financialmuscle into a berth in Spain's Ibex 35 blue-chip index.

"We have the vocation to form part of the IBEX...but we have just joined the bourse," Rodriguez Tembleque said.