Domestic chain integration, international mergers and new retail formats are the key phenomena changing the retail market in Poland.
According to a PMR report entitled “Grocery retail in Poland 2007”, the value of grocery retail in Poland will exceed PLN 220bn in 2007, 14.6% higher than a year earlier. Market growth is evidenced not only in the retailers’ rapidly rising revenues but also in the evolution of the industry’s sales structure.
Unlike in Western Europe or some Central European countries, smaller-format stores play a prominent role in Poland: they represented 68.3% of total grocery retail turnover in 2007. Supermarkets, hypermarkets and discount chains, which first appeared in the country about a dozen years ago, have failed to assume a dominating role in the sector, even though they are undoubtedly at an advantage in terms of logistics and know-how. New formats are gaining in strength, though their shares in the industry’s sales are still far lower than in the Czech Republic or Hungary. In 2007 hypermarkets, supermarkets and discount stores accounted for 12.2%, 13.2% and 6.5% of total retail sales, respectively.
Large-scale stores have been growing in popularity and number in Poland for many years. However, between 2006 and 2007 the market focused on the integration of small stores and the development of convenience chains and delicatessen supermarkets.
To withstand the competition of supermarkets and discount chains, small stores are forced to integrate. Integration reduces the costs of supplies and logistics. Emperia is the largest integrator of small retailers; in 2007 it incorporated seven retail chains into its group. Most recently, in December 2007, it acquired Retail Service Poland, a company managing a franchise-based chain of 27 outlets.
A similar strategy is followed by another wholesaler – Eurocash. It integrates the franchise-operated Delikatesy Centrum supermarkets and the abc convenience stores.
Eurocash and Emperia enjoy a major competitive edge: they can support the delivery of inventory from wholesale units located across the country. Eldorado will soon be able to further leverage across-country supplies thanks to the recent acquisition of the entire interest in McLane Polska, a grocery wholesaler, by Eurocash. McLane generates annual revenues of around PLN 1bn and is the operator and main supplier for IGA stores.
Emergence of convenience sector
Among the plethora of small stores, three large nationwide convenience chains are noteworthy, namely: abc (integrated by Eurocash), Zabka (Polish chain recently acquired by Czech and Slovak investment fund Penta Investment) and Groszek (franchise-based retail chain developed by Emperia).
The business potential of the convenience segment has also been noticed by major large-format foreign retailers. In the second half of 2007 Carrefour launched Carrefour 5 Minut stores, whereas Tesco plans to open Tesco Express convenience stores at the beginning of 2008. Another player seeking to win a position in the convenience segment is press distributor Kolporter, which is testing the business concept for its Meta stores offering wide choice of alcoholic beverages.
Convenience stores are popular in the US and Western Europe because of the market there is saturated with large-scale stores. This factor also plays a role in Poland. It is additionally augmented by the fact that the convenience business model comprises the perfect response to the needs and preferences of Polish consumers who still tend to buy less but more frequently at small neighbourhood stores.
Growth of deli supermarkets
Piotr i Pawel and Bomi, two supermarket chains offering a larger choice of premium products, were established in the early 1990s. In 1995 another such player appeared – Krakow-based Alma. Yet only recently has the development of this segment gathered speed. While in 2006 only nine new deli supermarkets were opened, in 2007 about 30 such stores were launched. In the meantime, a new player has entered the segment: Emperia’s Stokrotka Premium. North Coast, importer of Italian premium food products, is also planning to launch a deli chain.
In addition, at the end of the year Bomi took over 20 Rast supermarkets, which also offer upmarket products. Bomi plans to make further acquisitions and grow organically, to have about 100 premium stores by end-2009, half of which will operate under the Bomi banner.
Deli supermarkets are visited mainly by higher earners, consumers not guided by price alone. It is no coincidence that the growth of Alma, Bomi and Piotr i Pawel picked up pace as Poles started to earn more. Over the first three quarters of 2007 the average wage in Poland rose 9.1%, relative to 4.1% annualised wage growth in 2006.
Polish retail market is becoming more complex. Only several years ago it seemed that the changes would boil down to traditional businesses being gradually superseded by modern formats. However, now small stores are more modern and tend to join to form larger chains. Besides hypermarkets, supermarkets and discount stores, new business formats, such as deli supermarkets or convenience stores, are also appearing in the country.
Author of the report:
Marcin Szaleniec, Retail Analyst
tel. /48/ 12 618 90 62
More information on the report:
tel. /48/ 12 618 90 20
e-mail: [email protected]
PMR (www.pmrcorporate.com) is a publishing, consulting and market research company providing information, advice and services to international businesses interested in Central and Eastern Europe. With highly skilled staff, top ranked web sites and over ten years of experience, PMR is one of the largest companies of its type in the region.
ul. Supniewskiego 9, 31-527 Krakow, Poland
tel. /48/ 12 618 90 00, fax /48/ 12 618 90 08