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Top 20 CEE Grocery Retailers: Tesco slips while Russia
drives growth
23 July 2012
Miloš Ryba Senior Retail Analyst
The 2011 Top 20 Central and Eastern European grocers saw a shake-up
among the top retailers as Tesco and Rewe Group dropped ranking places,
overhauled by Russia's Magnit and Portugal’s Jerónimo Martins.
Furthermore, the way development is progressing suggests that
companies operating in Russia will lead the way in the Central Eastern
European retail market for the foreseeable future.
X5 Retail Group could become the largest retailer in CEE in the future.
Russia drives sales growth in Central and Eastern Europe
The Eastern European grocery retail market has now outstripped Central Europe.
Therefore developments in this region – and especially in Russia - will have a
profound impact on the leading players in our future Top 20 grocers rankings. As
in 2010, growth in the CEE region was driven by retailers operating in Russia.
Magnit’s revenue grew by 40.4%, while X5 Retail Group’s sales were up 31.5%
(in euro terms). True, the sales were primarily driven by substantial store
openings, but were also bolstered by positive like-for-like sales rises. Magnit has
reported 11.1% like-for-like revenue growth, while X5 grew 6.0%.
In contrast, the revenues of global players like Tesco and Metro Group
respectively grew by 8.1% and contracted by 7.8%. The only large retailers in
Central Europe to report double-digit revenue increases were Schwarz Group
and Jerónimo Martins. The former grew by 17.5%, while the latter reported sales
up by 20.5% in its single market of Poland. In addition, Jerónimo Martins’
Biedronka discount stores outperformed Russia’s retailers in terms of like-for-like
sales with a 13.4% surge.
The overwhelming importance of the Russian retail market in the entire Central
and Eastern European region can be best demonstrated by comparing the
revenues generated by X5 - the Russian market leader - and Schwarz Group, the
leader in Central Europe with operations in 12 countries. X5 Retail Group is likely
to overhaul Schwarz Group’s turnover in Central Europe in the next three years,
with every chance of assuming Schwarz’s second-place position by 2017.
Tesco down and Russia's Dixy Group up
Tesco has acquired a franchised store network for the first time in CEE – Zabka
in the Czech Republic.
This year saw Tesco drop out of the top five while Dixy Group, a new player in
the ranking, made its debut in 16th position thanks to its acquisition of rival
Victoria Group. However, Tesco’s drop in the ranking should not be viewed as a
sign of failure. In fact, Tesco has been doing well in Central Europe. It expanded
significantly in the Czech Republic through its procuring of the Zabka
convenience stores, maintained its programme of converting larger stores in
Central Europe to its Extra format, trialled its e-commerce model in Prague and
rolled out self-checkouts in all its countries of operation. Such investment will
undoubtedly consolidate Tesco’s position in its current markets. However, the
UK-based retailer needs to expand into new markets if it is to recapture its top
five position in the region as a whole.
Ongoing market consolidation
Key market players made two huge moves in 2011. In Russia, X5 Retail Group
acquired 660 Kopeika supermarkets to consolidate its position in Moscow and
the Moscow region, while Belgium-based Delhaize Group purchased Delta M,
the retail arm of Delta Holding in Serbia. This was Delhaize’s largest move in
Central Europe since its exit from the Czech Republic and Slovakia in 2006. The
retailer has secured the position of clear market leader in Serbia, as well as
gaining access to new markets like Bulgaria, Albania and Bosnia and
Herzegovina. Thanks to this acquisition combined with its strong position in
Greece, Delhaize Group has become one of the key grocers in the Balkans. On a
much smaller scale by comparison, Slovenian Tus sold its Serbian business to
Croatian Agrokor, while Slovenian Mercator completed a takeover of
Pantomarket, market leader in Montenegro.
A busy year in Balkan markets
Indeed the Balkans proved to be the most vibrant market in 2011. In Greece, Aldi
completed the sale of its business to Schwarz Group’s Lidl and other competitors
at the start of the year. The country’s ongoing economic turmoil led to bankruptcy
of Atlantic, once among the leading Greek retailers. The revenues of the market
leader Carrefour Marinopoulos kept plummeting and Carrefour eventually called
time on the joint venture agreement between itself and Marinopoulos. Last but
not least, in Slovenia, Mercator's management withdrew its support for the
company sale to Croatian rival Agrokor as a consortium of banks was trying to
sell a 52.1% stake in the retailer, leading to the resignation of its entire
management in March 2012.
Major trends for 2012: e-commerce, franchising and market
consolidation
Tesco is supplying online shoppers from four hypermarkets in Prague.
The year 2012 will be a milestone for the launch and expansion of e-commerce
banners by grocers like Tesco, Auchan, Leclerc, Mercator and X5 Retail Group.
Tesco has recently rolled out its online banner in Prague and Warsaw with short
term plans to expand into other large Polish cities. Meanwhile, Auchan is already
online in Warsaw and is to revamp its Moscow e-commerce banner. In Russia,
X5 Retail Group is planning to expand E5.ru outside Moscow. Franchising is
likely to become a more common means of expansion as foreign retailers seek to
develop their networks faster with minimum risk, whereas others will aim to sell
underperforming divisions. Tesco undertook a new expansion strategy in CEE
with its acquisition of Zabka-franchised stores in the Czech Republic, while
Carrefour hopes to open 200 Carrefour Express stores in Poland in 2012 and
COOP EURO in the Czech Republic aims to find a franchisee for its struggling
supermarkets and neighbourhood stores.
The Central and Eastern European retail market is likely to undergo further
consolidation. We could see another big shift in the top of our rankings in the
near future as some global players, faced with problems in their domestic
markets, may decide to sell some operations or even exit from an emerging
market altogether.
There seems to be plenty on offer. Metro Group will look for a buyer for its 110
Real hypermarkets in Russia, Ukraine, Romania, Poland and Turkey, while
Carrefour may well divest from Poland. Carrefour’s ex-partner in Greece,
Marinopoulos, is looking for a partner to finance its businesses in Greece,
Bulgaria, Cyprus and Albania.
A potential investor for a hypermarket chain could be Auchan. It recently showed
an interest in the Central European hypermarket sector in buying Delhaize’s Cora
hypermarkets in Hungary. Considering Auchan’s strategy of developing City
compact hypermarkets, Carrefour’s assets would be a better fit than the large
Real stores. Real could also be an attractive option for Walmart, which has been
eyeing the region for several years. Indeed, Central Europe is not unknown
territory for Walmart as its UK’s Asda banner sources private label products from
the region. Purchase of the Real network in Central and Eastern Europe – which
is intended to be sold as one package - would bring Walmart into Russia. This
could well be the thing that interests Walmart most of all.
Central and Eastern Europe: Top 20 Grocery Retailers, 2011e-2016f (EUR,
mn)
Number of
Banner
Outlets,
Sales,
2011
2011*
Metro Group 464
17,745
Change Rank Company
Same
1
Food Retail
Banner
Format
Sales,
Sales, 2011**
2016
3,068
21,553
Metro Group’s revenues dropped across the entire region and in all formats in 2011.
The only exception was Russia where sales growth was driven by store expansion of
Metro cash & carry and Media Markt banners. The company hopes to sell its Real
hypermarkets to focus on its core cash & carry and electronics businesses.
Same
2
Schwarz
Group
1,958
14,016
14,016
23,731
Schwarz Group continued the expansion of both its formats, especially Lidl discount
stores in the Balkans. It completed the purchase of Plus stores in Romania and
acquired some Aldi stores in Greece. The retailer is likely to continue its expansion
drive, entering Lithuania and Serbia this year.
Same
3
X5 Retail
Group
3,011
12,774
12,768
25,020
X5’s revenues growth in 2011 was considerably lower that its rival Magnit. Karusel
hypermarkets are the retailer’s big challenge. X5 is looking for a new hypermarket
concept. It is likely to grow through takeovers of local players like Siberian Holiday
Klassik.
Same
4
Auchan
193
9,478
9,478
18,706
65% of Auchan’s revenue in the region is generated in Russia. The retailer is going to
roll out its Auchan City compact hypermarket across its markets. In addition, it plans to
improve its e-commerce in Poland and Russia. Retail’s presence may grow
significantly in the next few years as Auchan may consolidate its market position
through mergers and acquisitions.
Up
5
Magnit
5,309
9,458
9,433
20,715
Magnit, the fastest growing grocer in Russia in terms of revenues opened a record
1,254 stores last year. It is going to focus on expansion of its price oriented
supermarkets as well as Magnit Kosmetik drugstores.
Down
6
Tesco
1,066
8,919
8,702
12,283
Tesco is among the top retailers in countries in which it operates (Czech Republic,
Slovakia, Hungary and Poland). However, it is facing strong competition, especially in
Poland and Hungary. E-commerce, which Tesco is going to expand across the region,
may improve its market position.
Up
7
Jerónimo
Martins
1,916
6,259
6,241
11,970
Biedronka is one of the fastest (a 13.4% like-for-like revenue growth in 2011)
organically growing grocery chains in Central Europe. Apart from expansion of its
discount format, the retailer may roll out its Hebe drugstores in the near future.
Same
8
Carrefour
1,311
6,108
6,108
8,399
Carrefour’s deteriorating financial situation in Greece led to termination of its JV
contract with Marinopoulos. The retailer’s presence in the region is likely to decline
significantly in future as it aims to exit some of its emerging markets. Poland may be
one of them.
Down
9
Rewe Group 1,353
5,237
5,200
7,734
Czech Republic and Romania are Rewe’s strongest markets. In other CEE countries
Rewe does not have a significant role. Rewe Group’s low investment in 2010 and 2011
did not help as Schwarz Group’s Lidl has become a strong competitor for its Penny
banner in the Balkans. Absence of a convenience store format or an e-commerce
strategy is also to retailer’s disadvantage.
Same
10
COOP
EURO
10,883
4,307
4,307
4,499
COOP EURO is having tough times in the Czech Republic where it aims to convert
underperforming stores to franchise models. Its local associations may help its market
position in Hungary as the Hungarian government tend to protect domestic players.
Same
11
CBA
4,915
3,544
3,544
4,467
CBA’s recently-introduced multi-format strategy will help the retailer maintain its market
position. Its role in the Hungarian retail market will be reinforced once it completes
acquisition of Luis Delhaize’s Profi discount stores and Match supermarkets.
Same
12
Ahold
548
3,468
3,451
3,581
Ahold keeps strong market positions in the Baltics and its outlook has also improved in
the Czech Republic. However, the company will have to bring some innovation into its
strategy, such as e-commerce, in order to survive in the long term.
Same
13
Mercator
1,586
3,247
2,685
4,164
Mercator’s ongoing sale along with the replacement of top management play into the
hands of foreign competitors like Schwarz Group, Agrokor and Delhaize Group. The
retailer faces a tough test in its home market and lacks funds for quick expansion into
new markets like Bulgaria.
Same
14
SPAR
(Austria)
642
3,125
2,924
3,841
SPAR (Austria) has focused on the development of small formats. It is testing a
convenience store format Spar To Go which could later be introduced into other
countries.
Same
15
Agrokor
1,809
2,893
2,291
3,904
Like Mercator, Agrokor, which lacks funds for investment, faces strong competition
from discounters in is home market and Delhaize Group in Serbia. Purchase of
Mercator could help both retailers in a struggle with foreign players.
New
16
Dixy Group 1,118
2,845
2,845
6,514
Dixy Group is going to focus on organic expansion of its supermarkets and
neighbourhood stores. The retailer is going to complete rebrand all Victoria stores as
part of their integration into Dixy's operational structure.
Up
17
Delhaize
Group
847
2,817
2,543
4,946
Delhaize Group has become one of the largest grocers in the Balkans thanks to the
acquisition of Serbian leader Delta M. Delhaize’s strength of combining best practices
from different countries will help it to consolidate its market position in the region.
Down
18
Maxima
469
2,794
2,629
3,526
Maxima is the leading retailer in the Baltics. However, the company has expanded into
Bulgaria and Poland. Good prospects in the Baltic retail market may help the retailer
finance store development in its new markets.
Same
19
Eurocash
786
2,687
335
5,151
Having acquired the wholesale arm (Tradis) of its rival Emperia Holding, Eurocash will
go ahead with the synergy of business units, logistics and will renegotiate prices with
suppliers using its massive purchasing power. Consequently, the company will be a
much stronger rival for Metro Group’s Makro cash & carry.
Down
20
O'Key
71
2,616
2,616
5,477
O’Key has been expanding outside its home market of St. Petersburg. New
hypermarkets will be launched in the Urals and Siberia. In addition, the retailer plans to
launch a price oriented supermarket under the brand Da!
Note: e – estimate; f – forecast; * Banner Sales – total sales (including VAT) of all
banners owned or operated by the company. This figure includes full revenues
from franchised operations and full revenues from partly-owned chains/stores; **
- Food Retail Format Sales – total sales (including grocery and non-grocery)
through food retail formats. .
Source: Planet Retail Ltd - www.planetretail.net
Source: Planet Retail