Biweekly News Review
Published by PMR Publications
Central Europe Retail Update A prime source of market intelligence for retail professionals
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PMR Publications (www.pmrpublications.com) is a division of PMR Ltd., 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.
Biweekly News Review
Issue No.
19 (118) – Tuesday, 23 September 2008 Published by PMR Publications
Central Europe Retail Update A prime source of market intelligence for retail professionals
Czech Republic
page 3
Market news
www.ceeretail.com
Retail news Emperia aims to become leader on FMCG market in Poland Bomi to continue expansion
Strong crown forces firms to cut employment and relocate production Discounters - the fastest developing format in the Czech Republic Weak retail sales for fifth consecutive month
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Retail news
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Supplier news Herman working on improvements Mlekovita expands in Eastern Europe
Kika expands to Liberec COOP reports positive results in H1 2008
Romania
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Market news Top three retailers’ market share falls short of Western European figures
Supplier news Douwe Egberts introduces Grand Aroma Instant Czech breweries sell beer online Pleas faces more closures Karlovarska Becherovka to distribute Absolut vodka
Hungary
Retail news DEGI finalizes take over of Iris commercial centre Flamingo invests €10m in 10 new stores page 7
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Supplier news
Market news Consumption sagging in Hungary Plaza-building boom Clothing retail: Far East and second-hand clothing sell best Coffee sales news
Ikea closes production facility in Romania Panasonic targets 15% of digital camera market
Slovakia
Bookline H1 revenue 62% up Mundo Multiplaza in Zuglo – kick off on 1October
Canned beer grows in popularity Leather and shoe companies experience sales drop in H1 2008
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Supplier news
Retail news
Chocolate bars: smaller size or higher price Sweet Point might be gone for good
New logistic centre to be built in Lozorno More sport chains to enter Slovak market
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Market news Act on large stores poised to return WEEE act amendment before the Sejm
page 17
Market news
Retail news
Poland
page 14
page 10
In brief
page 20
Feature
page 21
Poles developing taste for premium alcohol
Upcoming events
PMR Publications (www.pmrpublications.com) is a division of PMR Ltd., 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.
page 22
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Tuesday, 23 September 2008
Central Europe Retail Update – Issue No. 19 (118)
Companies in this issue: 5.10.15 Abra Meble Albert Albinuta Almi Decor Amica Apple Artima Asko Asseco Business Solutions Auchan Billa Bomi Bookline BSH Carrefour Carrefour Express CD Reality CEDC Ceska Pojistovna Co-op Coca-Cola HBC Polska Coffee Beanery COOP Cooperate Cora Debreceni Hus Diageo Diskont Diverta Douwe Egberts Echo Investment Eko Holding Eldorado Electrolux Electro World Emperia Holding ETA ETA Professional Exisport Flamingo Computers Flamingo International Flanco World G'market Gemini Holding
page 20 page 20 page 3 page 14 page 4 page 13 page 15, 20 page 14 page 3 page 20 page 14, 15 page 14 page 10, 20 page 7 page 13 page 14 page 14 page 19 page 12, 13 page 5 page 9 page 13 page 5 page 4 page 18 page 14 page 9 page 7 page 4 page 15 page 6 page 8 page 11 page 4 page 13 page 8 page 10 page 6 page 6 page 18 page 15 page 14 page 14 page 14 page 11
Gliwickie Przedsiebiorstwo Budownictwa Przemyslowego Graal Grand Aroma Instant H&M CR Hard Rock Cafe Heineken Slovensko Herman Hodinky.cz Hruska Ideea Ikea Indesit Company Interchem Interex Irish Lifestyle Sports Jednota Karlovarska Becherovka Kaufland Kika Komex Komfort Kozep Europai Media es Kiado Szolgaltato Kraft Foods Slovakia Krasa.cz La Fourmi Leciva Praha Lesnina L Real Makro Cash & Carry CR Mars Hungary Maxxium Mega Image Metro Mlekovita Nachod brewery NFI Octava OSM Pilica Otter Distribution Overstock.com Panasonic Romania PA Nova-Gliwice Parfemy.cz Parfum.cz
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Penny Market Penta Investments Pernod Ricard Pleas Plus Discount PM Zbrojniky PPF Profi Prozdravi.cz Rabat Pomorze Rast Real Rewe Group RTC Holding San Development Sanofi-Aventis Sara Lee Corporation Sarantis Sconto Semya Slovakofarma Hlohovec Slovenska sporitelna Spar Sperky.cz Sportisimo Swedwood Siret Sweet Point Tempo Tengelmann Termo Tesco Tip Trade 90 Tradis Trans-Ziem Tuty Vivantis Whirlpool Wojas Wyborowa Zabka Zabka Polska Zentiva Zsolnay
page 3, 4, 8, 14 page 5, 9, 19 page 6 page 6 page 4, 14, 15 page 19 page 4 page 14 page 5 page 11 page 11 page 14 page 4 page 15 page 11 page 19 page 6 page 8 page 4 page 5 page 19 page 17 page 8, 14, 15 page 5 page 18 page 16 page 9 page 4 page 4, 15 page 4 page 3 page 4 page 8 page 10 page 11 page 4 page 5 page 13 page 13 page 13 page 5, 20 page 20 page 19 page 10
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Central Europe Retail Update – Issue No. 19 (118)
Tuesday, 23 September 2008
The growth of retail sales in June is attributed primarily to the sale of household utilities as well as sales of books, newspapers and stationery. In contrast, however, the figure was negatively affected by lower sales of foodstuffs, beverages and tobacco. Although sales in July increased, the overall figure was still below the forecast level of 4.5% thereby representing the fifth month in a row in which forecasts had been missed. The lower demand being demonstrated is a sign of consumer cautiousness in the face of high inflation (around 7%) combined with slower growth in real wages, according to Reuters.
Czech Republic Market news Discounters - the fastest developing format in the Czech Republic As many as 41% of Czech households consider hypermarkets as their main place for shopping, according to the recent “Supermarket & Discount 2008” research conducted by Incoma research with GfK Group. Hypermarkets became popular in the Czech Republic immediately upon being introduced to the market in 2002. Over time, they have replaced the small independent stores previously favoured by Czechs. The vast majority of those surveyed (19%), shop at superettes and 17% regularly shop at supermarkets. The popularity of the supermarket has fallen for the third consecutive year. According to the research, supermarkets in the Czech Republic are being squeezed out by hypermarkets in larger towns while, in smaller towns, ground is being lost to discounters. Currently, the majority of supermarkets are located in bigger towns and cities, especially Prague. The only exception to this are supermarkets owned by cooperatives, which are successful in smaller towns. This type of store is particularly strong in Southern Bohemia. However, these regional traits lead to an uneven distribution of supermarket retail space as there are regions with more than 100 m2 per 1,000 inhabitants (Prague) as well as areas where there are few or no supermarkets at all (West and East Bohemia). About one fifth (21%) of Czechs prefer to visit discount stores, and this format’s popularity has been increasing for some time. The research confirmed that discounters are the fastest developing format in the country: since 1990, the number of these stores increased by more than ten-fold. Currently, there are approximately 560 stores belonging to the food discount chains and around 200 other discount stores. In terms of retail space, discounters occupy the largest trade area in Central Bohemia – 63,000 m2, or 15% of the total area occupied by discounters in the Czech Republic. On average, there
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is 40 m2 of discount retail space per 1,000 inhabitants in the country. According to the survey, Czechs prefer this format mainly due to price promotions (81%) and low prices (79%). Convenient opening hours (48%) and location (43%) were also identified as important factors. In addition, the wide range of products that tends to be available at discount stores is regarded as important by 30% of Czechs. As far as brands are concerned, Kaufland was named by 20% of Czechs as the chain where they spend most of their expenditure on groceries. It was followed by Tesco (11%), Penny Market (9%) and Albert (9 %). Of Czech stores, only Jednota (8%) and Hruska (2%) were listed among the most popular.
Retail news Kika expands to Liberec Austrian furniture retailer Kika plans to open a new store with furniture and home accessories in Liberec. Construction of the two-storey building will begin in May 2009 and will be completed in around six moths, CTK informed. Kika plans to open 10 stores in the largest Czech cities and invest over CZK 5bn (€203.4m), according to the company’s representatives. The next target for expansion is Ostrava. The company entered the Czech market in 2005 and currently has four stores: two in Prague, one in Brno and one in Plzen. Kika is the fourth biggest furniture retailer in the Czech Republic with annual sales of CZK 1.5bn (€61m). It ranks behind Ikea (CZK 7.3bn or €297.6m), Asko (CZK 2bn or
Weak retail sales for fifth consecutive month In July, seasonally adjusted retail sales in the Czech Republic fell by 0.6% month on month at constant prices and rose by 1% from a year-on-year perspective. Non-seasonally adjusted sales increased by 3.4% year on year, according to data released by the Czech Statistical Office.
Where do you spend the most of your expenditure on groceries (%)? Czech Republic, 2008 Kaufland
20
Tesco
11
Albert
9
Penny Market
9
Jednota
8
Lidl
7
Billa
5
Hypernova
5
Interspar
4
Globus
4
Plus Discount
4
Hruska
2
Norma
1
Makro Cash & Carry
1
Source: Incoma Research, GfK Group, 2008
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Tuesday, 23 September 2008
€81.4m) and Sconto (CZK 1.6bn or €65.1m). Kika’s goal is to become the number one retailer of its type in the country in five years. Total sales in the furniture sector in the Czech Republic increased by 11.6% to CZK 38.4bn (€1.6bn) last year. Strong financial results encouraged other furniture and interior decoration retailers to open their first stores in the Czech Republic. New openings are planned by the Slovenian company Lesnina and Poland’s Almi Decor.
COOP reports positive results in H1 2008 The COOP cooperative, which represents around 3,000 stores in the Czech Republic, experienced a year-on-year increase in sales of 7.4% in the first six months of 2008 to CZK 13.8bn (€561.9m), reported CTK. Net profits in the period rose to almost CZK 130m (€5.3m). The group prepared a large advertising campaign in the media for September with the aim of strengthening the position of its stores in small towns as foreign retail chains announced expansion on this market. The group will also invest approximately CZK 70m (€2.8m) to standardise the image of its stores and introduce the same logo for all outlets. Last year, the group posted a turnover of CZK 27.3bn (€1.1bn) despite growing competition from foreign retail chains. If the COOP stores were under single ownership, they would rank sixth among the largest Czech retailers in 2007. COOP runs five retail chains in the country, namely, Termo, Tuty, Tip, Tempo and Diskont.
Rewe commences Plus Discount rebranding German Rewe Group aims to complete the rebranding of 142 Plus Discount stores, acquired recently from the German Tengelmann, to Penny Market by the end of the first half of 2009, according to Pavel Kebisek, a Penny Market Executive in the Czech Republic. The acquisition increased the total number of Penny Market stores in the country to around 300 units and raised the market share of the network from 16% to 22%. Mr. Kebisek also explained that management expects the annual turnover of the network to increase to €1.1bn.
Central Europe Retail Update – Issue No. 19 (118)
Hard Rock Cafe to open in Prague
The Czech Office for the Protection of Competition (UOHS) approved the acquisition in August on condition that Rewe sells four of the 146 purchased stores.
The Hard Rock Cafe chain has announced its plans to open its first restaurant in the Czech Republic in Prague this winter. It will be located in Dum u Rotta on Male Namesti, according to the Czech Information Agency. A Hard Rock Cafe store has already opened in September this year and sells gift items with the company’s famous logo. The first Hard Rock Cafe opened its doors to the public in 1971 in London. The chain currently has more than 140 restaurants in more than 40 countries.
Overstock.com now available for Central Europe customers On 27 August, one of the largest internet outlet stores, American Overstock.com, began shipping to Central and Eastern European countries including the Czech Republic, Poland, Hungary and Slovakia. The store offers over 600,000 products across ten categories including furniture, clothing, electronics, books, and jewellery. Goods are priced in the local currency. Overstock.com, established in 1997, is regarded as a pioneer in the online sale of surplus merchandise, and, today, offers a combination of surplus, returned, refurbished, and new items at discount prices. The company started international expansion this year and is currently active in 34 countries worldwide.
PPF gains control over Eldorado retail chain PPF, owned by Petr Kellner, has intensified its expansion into the Russian market by acquiring a 50% stake in the Russian Eldorado retail chain. PPF is reported to have spent CZK 7-14bn (€291.8-583.6m) to acquire the stake, which is considered to be
Retail sales in the Czech Republic (%, y-o-y, constant prices), July 2007-July 2008 8.8
8.9
7.1
5.7
3.7
6.6
5.2
4.6
4.1
1.2
1.8
3.6
-3.0 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08 Apr 08 May 08 Jun 08 Jul 08 Note: retail trade including sale, maintenance and repair of motor vehicles & motorcycles as well as retail sale of automotive fuel Source: Czech Statistical Office (CSU), 2008
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Retail sales indices by selected goods categories in the Czech Republic (%, y-o-y, constant prices), July 2007-July 2008 30
20
10 0
-10
Jul 07
Aug 07
Sep 07
Oct 07
Nov 07
Dec 07
Jan 08
Furniture, consumer electronics and household equipment Food, beverages and tobacco Source: CSU, 2008
Feb 08
Mar 08
Apr 08
May 08
Jun 08
Jul 08
Pharmaceutical and cosmetics Textiles, clothing, footwear and leather goods www.pmrpublications.com
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Central Europe Retail Update – Issue No. 19 (118)
Tuesday, 23 September 2008
a relatively low price, taking into consideration the fact that in 2007, the whole Eldorado chain was worth nearly CZK 84.8bn (€3.5bn). The acquisition, however, has not yet been confirmed by either of the companies involved, wrote Hospodarske Noviny. Eldorado has 1,100 stores selling electronics and home appliances in Russia and Ukraine. The chain is also a partner of the Home Credit & Finance Bank, part of the PPF holding. Two days after announcing a deal with Eldorado, PPF unveiled more details and a clarification that the deal is in fact a loan aimed at helping the Russian company repay overdue payments to its suppliers and creditors. Moreover, PPF has revealed that additional financing is also being considered and that the possibility that PPF will acquire a major stake in Eldorado does exist.
PPF was established in 1991. It controls Ceska Pojistovna, Home Credit and has shares in nearly 200 other companies.
Online perfume sales on the rise Internet store Parfemy.cz, one of the largest online perfume retailers in the country, recorded a 16% growth in sales for the first half of 2008 compared to the same period in 2007. This has largely been attributed to that the fact that branded perfumes are one of the best selling products on the internet in the Czech Republic, Moderni Obchod wrote. The online store has been owned by Vivantis since 2003 and offers 4,000 branded
Confidence indicators in the Czech Republic, August 2007-August 2008 40 35 30
15 10 5 0
-4.6 Aug 07
Sep 07
Oct 07
Nov 07
Dec 07
Jan 08
Feb 08
Mar 08
Apr 08
May 08
Trade confidence indicator
Jul 08
Jun 08
-15
Aug 08
Consumer confidence indicator
Note: The confidence indicator for trade is the average of three indicators – the assessment of economic situation, stocks (with inverted sign) and the expected development of economic situation. These indicators are the percentage differences between the responses “growth (+)” and “fall (-)”. The consumer confidence indicator is composed of four indicators – expected financial situation of consumers, expected total economic situation, expected total unemployment (with inverted sign) and savings expected in 12 months to come. Source: CSU, 2008
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Selected price indices in the Czech Republic (%, y-o-y), August 2007-August 2008 15.0
9.1 6.5 6.4
10.0 5.0 0.0
-10.0
-1.2 Aug 07
Sep 07
Oct 07
Nov 07
Dec 07
Jan 08
Feb 08
Mar 08
Apr 08
May 08
Jun 08
Jul 08
CPI (6.4)
Food and non-alcoholic beverages (9.1)
Alcoholic beverages and tobacco (6.5)
Clothing and footwear (-1.2)
Note: The y-o-y ratio change in the legend is for the final month of the graphed period. Source: CSU, 2008
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Zabka grocery chain has recently ventured outside of Prague’s borders, Moderni Obchod wrote. The first outlet outside of the capital city was opened in August 2008 in Slane, said Zabka spokesperson Jana Studnickova. The Zabka chain has been owned since June 2007 by the investment fund Penta Investments. Currently, there are 10 Zabka stores in Prague. Penta plans to have 250 stores in the country in three years, 100 of which will be located in Prague.
Coffee Beanery plans to enter Czech market
20.0
-5.0
Penta Investments recently announced that it has not yet concluded the acquisition of the Russian grocery retail chain Semya. Although a deal is expected to be reached, Penta denied recent reports suggesting that the retail chain had already been acquired. Marek Ondrejka, local Managing Partner of Penta in Moscow, also insisted that information will be made available to the press and public as soon as deal has been finalised.
Zabka reaches beyond Prague
20
-10
Penta Investments delays acquisition in Russia
22.3
25
-5
perfumes from over 150 producers as well as gift sets and cosmetics. In addition to Parfemy.cz, Vivantis operates online stores selling watches (Hodinky.cz), beauty products (Krasa.cz), jewellery (Sperky.cz) and health goods (Prozdravi.cz). The company also plans to acquire Parfemy.cz’s biggest competitor – Parfum.cz, one of the oldest online retailers of perfume in the country.
Aug 08
American Coffee Beanery coffee shop chain seeks a partner to open its first franchise outlet in the Czech Republic, according to the Czech Information Agency. The company was established in 1976 and is among the six biggest coffee-shop chains in the world. It has over 200 coffee shops in the US as well as in China, Cyprus, Middle East countries and Puerto Rico.
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Tuesday, 23 September 2008
Central Europe Retail Update – Issue No. 19 (118)
Makro Cash and Carry CR sales and net profit, 2001-2007 Year 2001 2002 2003 2004 2005 2006 2007
Sales revenues (CZK bn) 18.2 30.7 30.9 33.3 34.2 35.3 37.2
Source: CTK, 2008
Czech H&M increases revenues by 22% H&M CR saw revenues increase by 22% to CZK 1.6bn (€66.3m) in the financial year 2007 (December 2006-November 2007). Net profit rose by 4.4% to CZK 259.5m (€10.5m), according to the Czech Information Agency. Hennes & Mauritz CR, which entered the Czech Reupublic market in 2003, currently has 14 stores. The company was established in 1947 and operates more than 1,600 stores in 29 countries.
Makro Cash & Carry CR to open more outlets in the Czech Republic Makro Cash & Carry CR recently released its financial results for 2007, according to which sales revenue for the 12 stores in the country increased to CZK 37.1bn (€1.5bn), wrote CTK. The company’s net profits totalled CZK 1.6bn (€63.2m). After a two-year break from expansion, Makro plans to open more units in the country. The company, for example, is plans to open a centre in Ostrava and the project plans are currently being assessed by the local authorities.
Supplier news Douwe Egberts introduces Grand Aroma Instant Douwe Egberts, part of the Sara Lee Corporation, has introduced a new brand of instant coffee to the Czech market – Grand Aroma Instant, wrote Moderni Obchod. According to Sara Lee Czech Republic data, in 2007, the Czech coffee market increased by 2.6% year on year while sales of instant coffee rose by 3.3%.
Net profit (CZK m) 445.3 849.4 1,062.4 1,317.7 1,399.7 1,503.8 1,567.9 www.pmrpublications.com
Douwe Egberts was established in 1753 as a small family business. It was acquired in 1978 by the international coffee producer, the Sara Lee Corporation. The company produces ground and instant coffee brands such as Excella, Grand Aroma, Torera, Prima Standard, Paloma and Toccata.
ETA plans to double revenues by 2011 ETA, the Czech manufacturer of small home appliances, intends to double its revenues to CZK 2bn (€83.4m) by 2011. Company representatives also revealed that there are plans to significantly expand ETA’s market share from its current position of 13.5%, wrote the Czech Information Agency. In addition, the company is also preparing for the launch of its new di vision, ETA Professional, which will manufacture appliances for hotels, restaurants, catering companies and hairdressers. ETA was established in 1943 and operates 43 stores in the Czech Republic and one in Slovakia. In 2007, the company recorded revenues of CZK 1bn (€ 41.7m). In a breakdown of revenue, the Czech Republic accounts for 60%, Slovakia for 20% and the remaining 20% is generated through exports to Eastern Europe.
Czech breweries sell beer online Czech beer will now be available to buy online via special internet sites such as pivoteka.cz, pivodomu.cz or bernardexpres.cz, wrote Hospodarske Noviny. Nachod brewery, for instance, has been selling its specialty Primator, online but only in the UK. The company now plans to expand the service to include the Czech market. Online shops might be a strong competitor for traditional pubs and hypermarkets,
claim online beer retailers, as quoted by the newspaper. This way of selling beer is a good option for smaller breweries, according to Jan Vesely, head of the Czech Beer and Malt Association. The internet will allow them to reach customers directly, thus avoiding transactions through intermediaries which increase costs. Further expansion of internet beer stores is expected to accelerate, predicted Mr Vesely as quoted by the daily.
Pleas faces more closures Czech clothing manufacturer Pleas is set to close down its factories in Chotebor and Caslav on 30 November 2008, Hospodarske Noviny reported. This year, the company has already shut down three of its seven underwear production factories: in Milevsko, Boskovice and Luky nad Jihlavou, all of which were closed during the July-August 2008 period. Production will continue in the plants in Havlickuv Brod and Polna where a total of 950 people are employed. The decision is motivated by rising labour costs and the negative effect of the Czech crown strengthening against other currencies. Pleas was established in 1994. At the beginning of this year its workforce comprised 1,500 workers at seven factories.
Karlovarska Becherovka to distribute Absolut vodka On 3 September 2008, Pernod Ricard announced that the four shareholders of Maxxium (Vin & Sprit / Pernod Ricard, Remy Cointreau, The Edrington Group and Beam Global Spirits & Wine) have agreed to terminate the agreement pertaining to the distribution of the Vin & Spirit brands by Maxxium, in particular Absolut Vodka. Termination will take effect on 1 October 2008. Maxxium currently distributes the Vin & Spirit portfolio in most major markets outside the US. As a result of the agreement, Karlovarska Becherovka (JBKB), owned by Pernod Ricard since 1997, will become the exclusive distributor of Absolut Vodka in the Czech Republic. Until now, Absolut Vodka was distributed in the Czech Republic by Maxxium Worldwide’s daughter company Maxxium Czech.
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Central Europe Retail Update – Issue No. 19 (118)
Pernod Ricard acquired Swedish manufacturer of Absolut Vodka, Vin & Sprit, in March 2008 for €5.9bn. Pernod Ricard recorded sales of €6.6bn last year and is the second largest spirits distrib-
Tuesday, 23 September 2008
utor in the world, after British company Diageo. Last year, over 128 million of bottles of Absolut vodka were sold worldwide, half of which was in the US. It is the fourth most popular spirit in terms of sales after Smirnoff
vodka, Bacardi rum and Johnnie Walker whisky. n
Coffee sales: value up, volume down
Hungary Market news Consumption sagging in Hungary Retail sales in Hungary have dropped in H1 2008 relative to the corresponding period of the previous year, according to a GfK Hungaria study quoted by Napi. Supermarkets were able to increase their market share by 2.4 p.p. (mostly in Q1) on the back of a high number of this type of store opened during this period. The proportion of households shopping at this type of store grew from 35.9% to 39.4% in H1 2008. The study also revealed that the amount spent by clients at supermarkets also increased during this period. The turnover of other modern channels rose at a rate below the FMCG market inflation rate, thereby preventing their market share from increasing. According to Ecostat, the inflation rate of food products was around 12% in January-June 2008. During the same period, retail sales increased by only 8% compared to the first six months of 2007. The combined share of modern retail channels, however, increased by 0.5% compared to the same period in 2007.
Plaza-building boom At present, there are 69 shopping centres in Hungary, according to the data of the Hungarian Shopping Mall Association, quoted in Napi Gazdasag. Five of them were opened in 2007, including Arena Plaza, the largest shopping mall in the country. Two have been added since the beginning of
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2008: Agria Park in Eger, and the M1 Outlet outside Budapest. Despite the widely held belief that the building boom will slow down in the near future, ten more malls are expected to be opened by 2011 and existing shopping centres, such as as the Uj Udvar in Obuda and the Paris Nagyaruhaz, are to be renovated. There are currently 36 projects under construction in Hungary including 365,000 m2 of retail area in Budapest and nearly 500,000 m2 outside the capital.
Clothing retail: Far East and second-hand clothing sell best Sales of clothing in Hungary stagnated in the first half of 2008 with a decrease of less than 1% in volume a value of HUF 174,6bn (€729.6m), according to data from GfK Hungaria quoted by Napi Gazdasag. In H1, stores that sell clothing from Far East caught up with general clothing stores, both realising 23% increase in volume. In terms of value, general clothing stores possessed a 34.6% share – 3 p.p. lower than in the previous six months. In the meantime, the share of Far East clothing stores grew by over 1 p.p., reaching 15.2%. Sales of second hand clothing also performed well: the channel’s share was 2.6% by volume and 5% by value. In contrast, mail order companies and cash and carry stores appear to have suffered in the first half of the year. GfK data shows that the share of clothes sold in hypermarkets decreased in H1, both in terms of volume and value. This could explain the intense price war that hypermarkets are waging against Far East stores.
Retail sales of coffee grew by 8% in value terms in the period August 2007-July 2008 compared to the same period a year before and now exceed HUF 46bn (€192.2m) a year. These findings were revealed by a Nielsen study quoted by Figyelo. As for volume, stores sold 1% less than last year. Roasted coffee sold best even though priced 15% higher than in the same period a year before. Instant 3-in-1 mixes were ranked second despite being 4% more expensive than 12 months before, while the price of 2-in-1 mixes dropped by 5%. When applying these findings to market share, roasted coffee’s share fell by 3 p.p. while 3-in-1 mixes rose by 3 p.p. Commercial brands performed well with their share increasing by 1pp to reach 13%. The findings also reveal that the share of coffee sold by hypermarkets increased at the expense of stores measuring 401-2,500 m2 stores, while that of traditional stores measuring less than 400 m2 remained stable at 39%.
Retail news Bookline H1 revenue 62% up Online book retailer Bookline posted revenues of HUF 1.5bn (€6.3m) for the first half of 2008, 62% higher than the HUF 898m (€3.8m) posted in the same period a year earlier, the company said in its unaudited financial results, reported Napi Gazdasag. Bookline suffered a net loss of HUF 52m (€217,000) in the first half of the year, which reflects the figure of the corresponding period of 2007. The company, which generates 93% of its turnover through the sale of books, expanded its product offering to include CDs, DVDs, cosmetics and electronics. A feature typical of the book retail segment is that 60% of annual revenue is realised in H2 of the year. A75.1% stake of Bookline is held by Kozep Europai Media es Kiado Szolgaltato,
Tuesday, 23 September 2008
a company owned by the businessman and investor Kristof Nobilis.
Mundo Multiplaza in Zuglo – kick off on 1 October The Polish property developer Echo Investment has been given the green light from local authorities to commence construction work on Mundo, the new multipurpose centre on Bosnyak Square in the heart of Budapest’s 14th district. The project will be co-funded by Echo (HUF 1.2bn or €5m) and local authorities with (HUF 500m or €2.1m). The exact details are to be agreed in a contract to be signed on October 31. Echo acquired the 6.8-ha plot from the local council in June 2006 and construction plans were approved in June 2008. The development, valued at HUF 40bn (€167.1m), will comprise 65,000 m2 retail and 30,000 m2 office area.
Penny Market: HUF 1m penalty The food discount chain, Penny Market, has been found guilty and fined HUF 1m (€4,176) by Hungary’s competition watchdog GVH for misleading customers. GVH investigated statements made in the chain’s campaign leaflet for 26 August – 1 September 2007 and advertisements published in several papers on 2 August 2007. The investigation proved that Penny Market had insufficient stocks at the outset of the campaign, and that one product was sold at a higher price than originally advertised in the campaign. On consideration of several mitigating factors, such as a transparent and reliable price monitoring system in all of the 165 chain’s stores and the absence of precedent, GVH lowered the original fine imposed to HUF 1m (€4,176).
Central Europe Retail Update – Issue No. 19 (118)
mobile phones and printers) included in the campaign leaflet were not available at all. Furthermore, in some cases, the products were not sold at the discount advertised.
Trade 90 bought by Sarantis Greek cosmetics and household goods wholesaler Sarantis completed the acquisition of Trade 90, a Hungarian food and household products distributor on 15 September, reported MTI. The €2.7m acquisition was funded by Sarantis’ own capital. Trade 90 is expected to have sales of €6.5m in 2008. The company is one of the main suppliers in the Hungarian market. It also has longterm agreements to export to Austria, Slovakia, the Czech Republic, and Romania. Sarantis began its expansion into Eastern Europe in the 1990’s. The Greek company entered Hungary in 2006 after acquiring Plias Hungary, the Hungarian subsidiary of the Greek Plias Group in autumn 2005. As a result of the deal, Trade 90 will merge with Sarantis Hungary, which is active mainly in the distribution of men’s cosmetics.
More luxury brands in Andrassy Boulevard Budapest’s prestigious Andrassy Boulevard is attracting more and more upmarket brands, as demonstrated by the soon-to-be-opened Gucci and Roberto Cavalli stores and the news that they will be joined by an Armani fashion store and cafe before the end of the year, wrote Napi Gazdasag. Manufacturer of luxury exclusive mobile phones and distributor Vertu is also close to completing the fitting of its store. Other developments include the soon-to-commence work on the new Dolce & Gabbana unit on the corner of Andrassy Boulevard and Nagymezo Street while watch manufacturer TAG Heuer as well as Chanel and Dior will all be appearing in the near future.
Spar expanding Spar has recently added two more units to its chain: a supermarket in Szigetvar, Southern Hungary, on 16 September, and another one in Tiszakecske, in the east, two days later, reported MTI.
Retail sales in Hungary (%, y-o-y), June 2007-June 2008 Jun 07
Jul 07
Aug 07
Sep 07
Oct 07
Nov 07
Dec 07
Jan 08
Feb 08
Mar 08
Apr 08
May 08
-1.4 -2.7 -3.6
-1.9
-2.5 -3.4
-3.6 -4.1
-4.2
-1.6
Jun 08
-4.6
-4.2
-4.0
Note: retail sales indices adjusted for calendar effects Source: Hungarian Central Statistical Office (KSH), 2008
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Retail sales indices by selected goods categories in Hungary (%, y-o-y), June 2007-June 2008 10
Electro World fined HUF 5m
5 0
Hungary’s competition watchdog (GVH) has imposed a HUF 5m (€20,900) fine on the consumer electronics chain Electro World for misleading customers, reported Vilaggazdasag. GVH’s investigation revealed that during two of the company’s campaigns in autumn 2007 several of the products (LCD TVs,
-5 -10
Jun 07
Jul 07
Aug 07
Sep 07
Oct 07
Nov 07
Dec 07
Furniture, consumer electronics and household equipment Food, beverages and tobacco Note: retail sales indices adjusted for calendar effects Source: KSH, 2007
Jan 08
Feb 08
Mar 08
Apr 08
May 08
Jun 08
Pharmaceutical and cosmetics Textiles, clothing, footwear and leather goods www.pmrpublications.com
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Central Europe Retail Update – Issue No. 19 (118)
Tuesday, 23 September 2008
The Szigetvar supermarket occupies more than 700 m2 of retail area, and employs 30 staff while the supermarket in Tiszakecske employs 32 and occupies an area of over 900 m2. With these openings, Spar has increased its storecount in Hungary to 383, including the 174 stores it took over from Plus on 1 July 2008.
Co-op: HUF 240bn revenue in H1 2008 The Hungarian supermarket chain Co-op posted revenues of HUF 240bn (€1bn) for the first half of 2008, a 14.3 % increase from the same period a year earlier, said CEO Laszlo Muranyi at a press conference on 17 September, MTI reported. The increase was recorded despite falling consumption in the country. Mr Muranyi emphasised that Co-op achieved the revenue increase without
adding to its storecount and attributed the result to the higher value of purchases and inflation. The supermarket chain hopes to maintain the 14% growth rate and has targeted an overall revenue of HUF 500bn (€2.1m) for 2008 as a whole, HUF 60bn (€250.6m) more than in 2007. Co-op has approximately 3,000 stores and employs over 32,000 people. About 90% of all the products sold by Co-op are made in Hungary.
Supplier news
Sweet Point might be gone for good
Chocolate bars: smaller size or higher price Mars Hungary has increased the price of Mars, Bounty, Snickers and Milky Way bars and M&M’s by 7% on average, reported Vilaggazdasag. Prices of some other prod-
GKI consumer confidence indicator in Hungary, August 2007-August 2008 Aug 07
Sep 07
Oct 07
Nov 07
Dec 07
Jan 08
Feb 08
Mar 08
Apr 08
May 08
Jun 08
Jul 08
Aug 08
0.0 -10.0 -20.0 -30.0 -40.0 -50.0
-42.9
-60.0 Note: The consumer confidence index is calculated from the responses to questions concerning the actual and the expected financial position of households, the actual and the expected economic situation of the country, and the purchase of consumer durables of higher value. Source: GKI, 2007
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Selected consumer price indices in Hungary (%, y-o-y), August 2007-August 2008 14 12 10 8 6 4 2 0 -2
10.6 6.5 6.2
Aug 07
Sep 07
Oct 07
Nov 07
Dec 07
Jan 08
Feb 08
Mar 08
Apr 08
May 08
Jun
Jul
Aug
08
08
08
CPI (6.5)
Food and non-alcoholic beverages (10.6)
Alcoholic beverages and tobacco (6.2)
Clothing and footwear (-0.6)
Note: The y-o-y ratio change in the legend is for the final month of the graphed period. Source: KSH, 2008
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ucts remain unchanged at the expense of product size. The company insists that the higher prices of the ingredients have prompted the hike in product prices. Mars had hoped to keep the original prices until the end of the year, but eventually could not avoid the changes. Mars’ competitors are preparing similar steps. American chocolate manufacturer Hershey has announced a 10% price rise, while Nestle has reduced the size of some of its products.
-0.6
The Dunakeszi plant of Sweet Point, one of Hungary’s largest sweets manufacturers, in liquidation since January, has been put up for sale again, reported Napi Gazdasag. According to the newspaper, this time the 12 items constituting the company’s property, including e.g. the candy factory, the chocolate factory, the brand names, the packing lines, can be bought separately or as a whole. The net price for the whole package is HUF 548.2m (€2.3m). In January, the liquidation process was initiated against the insolvent company from which about 100 creditors are claiming a total of almost HUF 4bn (€16.7m). As orders and production waned, the liquidator was forced to lay off the 108 remaining workers in June. Sweet Point’s revenue reached HUF 5bn (€20.9m) in 2004 yet this figure declined by 50% in 2006. The company posted a multibillion forints net loss in 2007.
Headcount reduction at Debreceni Hus The Debreceni Hus group, Hungary’s second largest meat processor acquired in June 2008 by the Czech investment fund Penta Investments, is to lay off 124 employees after the company’s monthly losses reached HUF 105m (€439,000). Additionally, the company headquarters are to be moved from Debrecen to Szolnok. The largest plant in the group, Debreceni Hus has experienced problems due to the global increase in the price of raw materials, energy costs and the strong forint, resulting in a drop in export demand. SzoleMeat and Csaba Hus, the other companies in the group are not planning similar steps.
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Tuesday, 23 September 2008
Central Europe Retail Update – Issue No. 19 (118)
Zsolnay to supply Ikea
At present, the factory’s annual production is 200-300 tonnes. The deal with Ikea will enable Zsolnay, a manufacturer of both luxury products and mass-produced items for households and industry, to triple its HUF 1.1bn (€4.6m) turnover. In order to be able to meet the contract requirements, Zsolnay will build a new factory in the Industrial Park in Pecs. The
The Swedish furniture and home decoration retailer Ikea and Hungarian porcelain manufacturer Zsolnay are expected to sign an agreement, under which the latter will produce 5,000 tonnes of chinaware for Ikea annually, reported MTI. The contract will be valid for seven years starting September 2009.
Poland Market news
of Industry and Commerce (KPH) claim, however, that the existence of small stores is threatened by the large retail chains and that they therefore require special protection. In addition, the business organisation Klub Gepardow Biznesu, to which 520 firms and financial institutions belong, plans to prepare a new draft act intended to stop the expansion of hypermarkets in Poland. According to Andrzej Falinski, of the Polish Organisation of Commerce and Distribution (POHiD), attempts to limit the expansion of large stores are futile. The Constitutional Tribunal repealed the WOH and therefore established the principles of the free market economy.
Act on large stores poised to return The Polish trade federation, Federacja Organizacji Kupieckich, is working on a draft regulation pertaining to the construction of large stores, according to Rzeczpospolita. The new law is to be less restrictive than the WOH (Large-Scale Retail Objects) Act, which decreed that the construction of a new large outlet (in excess of 400 m2) or the extension or adaptation of existing buildings requires a special permit issued by the local authorities. On 8 July the Polish Constitutional Tribunal decided that the WOH Act violates articles 2, 20 and 22 of the Polish Constitution and should be repealed. Trade organisations, including the Supreme Council of Trade and Service Associations (NRZHiU), the Polish Trade Chamber (PIH) and the Congregation
WEEE act amendment before the Sejm The Sejm’s Environmental Commission has started work on an amendment to the
Retail sales in Poland (%, y-o-y, current prices), July 2007-July 2008 23.8 19.4 17.1
17.4
15.7
14.2
Jul 07
Aug 07
Sep 07
17.6 14.9
14.2
14.3
May 08
Jun 08
Jul 08
12.4
Oct 07
Source: Central Statistical Office (GUS), 2007
10
20.9
19.2
Nov 07
Dec 07
Jan 08
Feb 08
Mar 08
Apr 08
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facility will be equipped with modern technology and will result in an increase in workforce from the existing 300 staff. n
act on waste electric and electronic equipment (WEEE), prepared by the Environment Ministry. The draft bill proposes that, in addition to stores which sell electronic appliances, scrap yards and home electronics service points should be obliged to collect WEEE. The draft also provides penalties for dismantling used equipment anywhere other than specialist recycling facilities. Disposing of used equipment along with one’s rubbish instead of submitting it to a company which collects WEEE will lead to a fine of PLN 2,000-100,000 (€600-30,000). Retailers will also be obliged to put the recycling fee on the receipt. In accordance with an EU directive, the amount of recycled used electric and electronic equipment should be 4 kg per capita.
Retail news Emperia aims to become leader on FMCG market in Poland Emperia Holding, the well-known FMCG product distributor and retailer, is working on the consolidation of the group in order to become a leader on the Polish FMCG market. In distribution Emperia is in the process of merging its companies into one entity, called Tradis. The company plans, at a later stage, to speed up the construction of the distribution centres. At the moment, new warehouse centres are emerging in Bedzin and Starogard Szczecinski. The company is also considering building new facilities in Poznan, Torun and Bydgoszcz, and expanding its product range.
Bomi to continue expansion Bomi, a delicatessen chain, is planning further expansion. The company has already
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Central Europe Retail Update – Issue No. 19 (118)
Tuesday, 23 September 2008
Financial highlights of Eko Holding, 2007-2008 2007 1.2 14.0
Sales revenues (PLN bn) Net profit (PLN m)
2008f 1.4 20.0
Change y-o-y 16.7% 42.9%
f – forecast Source: Eko Holding, 2008
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completed the acquisition of the Rast supermarket chain and is about to complete a merger with a wholesaler, Rabat Pomorze, in which it has a 95% stake. The company’s management has denied unofficial reports that Bomi is to be put up for sale. According to Krzysztof Pietkun, one of the shareholders quoted in Puls Biznesu, the firm is well-managed and is one of the most rapidly developing retail chains in Poland; it is also planning further acquisitions. Bomi has also purchased a 20% stake in Interchem, a distributor of chemical products. The company is to be Bomi’s supplier of chemical products.
Eko Holding’s prospectus to be approved in the near future
Builder found for Gemini Jasna Park shopping gallery
The Financial Supervisory Authority (KNF) might approve the issue prospectus of Eko Holding, the operator of the Eko supermarket chain, by the end of October. The company would, therefore, be able to debut on the stock exchange. In accordance with a previous statement by company executives, the IPO could take place in the fourth quarter of 2008. The bear market might, however, force the company to put the debut off until the beginning of 2009, according to portalspozywczy.pl.
The Gliwickie Przedsiebiorstwo Budowni ctwa Przemyslowego construction firm has signed a contract with the Krakowbased Trans-Ziem, a building engineering company, pertaining to the construction of the metal framework of the Gemini Jasna Park shopping centre in Tarnow. The transaction is worth PLN 26.5m (€7.9m), and work is due to be completed by 8 May 2009. The shopping gallery is to take up 48,000 m2 in total, of which 40,000 m2 will be occupied by tenants. The car park will have space for 1,050 vehicles. The investor of the mall is Gemini Holding, which is also currently building a shopping gallery in Bielsko-Biala.
Retail sales indices by selected goods categories in Poland (%, y-o-y, current prices), July 2007-July 2008 60
Improvements planned for Wroclaw’s Magnolia Park
50 40 30 20 10 0 Jul 07
Aug 07
Sep 07
Oct 07
Nov 07
Dec 07
Jan 08
Feb 08
Mar 08
Apr 08
May 08
Jul 08
Jun 08
Furniture, consumer electronics and household equipment
Food, beverages and tobacco
Pharmaceutical and cosmetics
Fabrics, clothing and footwear www.pmrpublications.com
Source: GUS, 2007
Confidence indicators in Poland, August 2007-August 2008 15.0
8.0
10.0 5.0 0.0 -5.0
The Eko Holding group manages a network of more than 200 supermarkets and has also recently founded Polska Grupa Drogeryjna (“The Polish Drugstore Group”), which comprises six distributors of cosmetics and household chemical products.
Aug 07
Sep 07
Oct 07
Nov 07
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-10.0
Aug 08
The Magnolia Park shopping centre in Wroclaw is to be expanded. The NFI Octava fund, the owner of the centre, plans to commence work in 2009 and to build an additional 37,000 m2 over two years. The total leasable area will, therefore, reach approximately 103,000 m2, and the centre will become the third largest in Poland. By 2015 the investor also plans to build flats, office space and hotels taking up between 190,000 and 260,000 m2 in total on a site adjacent to the centre. The development plan was recently approved by Wroclaw City Council. The fund is also preparing another large retail centre in the Dolnoslaskie voivodship – Magnolia Park in Walbrzych, where the company intends to build 43,000 m2 of retail space. The centre is due to be completed at the end of 2010/beginning of 2011.
-8.0
-15.0 Retail trade confidence indicator
Consumer confidence indicator
Note: The retail trade confidence indicator is calculated from the responses of managers of retail businesses and their prognosis on general economic climate. The indicator is an arithmetical average of value of basic indices concerning present and future business climate in examined companies. Current consumer confidence indicator is calculated as an arithmetical average of opinions on household financial position, general economic situation and currently done major purchases. Source: GUS, 2007
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New shopping gallery planned for Przemysl www.pmrpublications.com
The property developer San Development and the construction firm PA Nova-Gliwice
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Tuesday, 23 September 2008
Central Europe Retail Update – Issue No. 19 (118)
have signed an agreement with the authorities of Przemysl pertaining to the construction of a shopping gallery in the town. According to galeriehandlowe.pl, the project will require investment of PLN 160m (€48.2m). In addition to boutiques the centre will also house a six-screen cinema. The companies have agreed to conclude an offset investment for the town – they will renovate the historic Dom Ogrodnika (“Gardener’s House”) located in the city park, where an art centre with exhibition areas and a cafe are to be created. The offset contract is worth PLN 3m (€0.9m).
Supplier news Herman working on improvements The meat company Herman intends to make amendments to its financial forecast and to introduce a corrective programme, as the situation on the market is disadvantageous
for meat producers. The prices of pork and other raw material such as spices and stuffing have increased significantly, leading to weaker results. In the first half of this year the company made a net loss of PLN 1.9m (€0.6m) and generated sales revenues of PLN 24.7m (€7.4m), demonstrating that the financial forecast for this year, of a net profit of PLN 0.6m (€0.2m) and sales revenues of PLN 69.5m (€20.8m), might be impossible to achieve. Herman is to update its financial prognosis on 30 September, when the annual and audited financial report will be presented. The company also plans to disclose its corrective programme. It intends to revise its contracts with suppliers and contractors such as large retail chains. It will also shut down unprofitable stores and open new establishments in better locations. The company is also working on strengthening its position in those parts of Poland in which it has, so far, been relatively unknown. In addition, Herman is working on the development of a new offer of upmarket
Selected prices indices in Poland (%, y-o-y), July 2007-July 2008
products which generate more respectable profit margins.
Mlekovita expands in Eastern Europe Mlekovita, the second largest dairy in Poland, is taking over production companies in the Czech Republic and Slovakia and is at an advanced stage of negotiations in Lithuania, Romania and Bulgaria, according to portalspozywczy.pl. The Czech and Slovak acquisitions will cost approximately €10m and should be completed by the beginning of 2009. The acquired businesses specialise in dairy products such as yogurts. Their sales revenue is on the order of PLN 20-50m (€6-15m). Mlekovita is also at an advanced stage of talks with a Lithuanian yogurt producer. The company is interested mainly in the markets of the new European Union member countries, such as Romania, Bulgaria and their neighbours. In Poland, negotiations with OSM Pilica in the Silesia region, and with the Ostroleka dairy, are about to be concluded.
10 7.8 5.6 4.8
8 6 4 2 0 -2 -4
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-6 -8
-7.1
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CPI (4.8)
Food and non-alcoholic beverages (7.8)
Alcoholic beverages and tobacco (5.6)
Clothing and footwear (-7.1)
Note: The y-o-y ratio change in the legend is for the final month of the graphed period. Source: GUS, 2007
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Employment in retail sector in Poland (%, y-o-y), July 2007-July 2008 10.5
Jul 07
9.0
9.0
Aug 07
Sep 07
Source: GUS, 2007
12
10.9
11.2
11.2
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Nov 07
Dec 07
12.1
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10.5
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8.7
8.3
8.1
8.6
9.1
Mar 08
Apr 08
May 08
Jun 08
Jul 08
CEDC planning further expansion on the Polish market The CEDC, the largest alcoholic beverage distributor in Poland, whose brands include the popular vodka products Absolwent, Zubrowka, Bols and Soplica, envisages a 5% increase in sales volume on the Polish market in 2009. The company also plans to increase its revenues by up to 7% in Poland over the next year. The most substantial improvement in results is to be achieved by means of a change in the image of Bols vodka. The company has not, however, disclosed any details pertaining to the repositioning of this brand. In addition, the production costs are to be reduced because of the lower prices of raw materials such as spirits. In 2007 the company had a 30.6% share of the Polish market in terms of sales volume. The CEDC’s financial forecast for this year envisages sales revenues between PLN 3.4bn (€1bn) and PLN 3.7bn (€1.1bn).
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Central Europe Retail Update – Issue No. 19 (118)
Polish vodka promotion to increase exports The Polish Spirits Industry Association (PPS) is planning to increase exports of Polish vodka by means of extensive promotional campaigns, according to Rzeczpospolita. It plans to spend tens of millions of Polish zloty on a programme called “A strategy for the promotion of Polish vodka.” The vodka producers aim to increase sales of Polish spirits, because in 2007 exports declined by 40% in comparison with the previous year, to 22m litres. According to forecasts, the 2008 level is likely to mirror last year’s figure. The association plans to increase export sales of vodka to as much as 80m litres in 2012. PPS hopes that vodka exports will increase to as much as 130m litres as a result of advertising over the next 12 years. The first stage of the strategy should be completed before the Euro 2012 football cup. The programme envisages the launch of a tourist route of vodka promotion centres such as that in the distillery in Krzesko, where Polmos Siedlce demonstrates the way in which Chopin vodka is produced. Part of the project would include the opening of cafes, souvenir shops and restaurants offering Polish food, in addition to the promotion centres. PPS is relying on support from the government and from industry organisations such as the Polish Vodka Association, established by Wyborowa, the vodka producer, and the CEDC, the largest vodka distributor in Poland.
Coca-Cola eager to produce juices Coca-Cola HBC Polska wishes to become one of the three most prominent juice producers A
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in Poland in three years’ time. The company insists that, in the longer term, it aims to become the leader or the runner-up in every market subdivision in which it operates. At present, Coca-Cola has four production plants in Poland: in Radzymin, Lodz, Staniatka and Tylicz. Total investment outlays since 1991 have come to €360m. The firm has recently completed the expansion of the Radzymin facility, which cost €37m. As part of this expansion two new production lines have been launched: an aseptic line and a carbonated beverage production line. According to company representatives quoted by the Polish Press Agency, existing capacity in Poland is sufficient and CocaCola is not, therefore, planning further expansion or takeovers. At the moment the company holds over 20% of the non-alcoholic beverage market in Poland, in terms of value.
Wojas to enter the Slovakian market On 26 August Wojas, the well-known shoe producer and retailer, established a subsidiary, Wojas Slovakia, which is to manage the retail and wholesale business of Wojas’ footwear and leather accessories on the Slovakian market. The first store is to open in September this year. The company plans to launch up to 12 outlets in the largest Slovakian cities. At present Wojas has 65 stores, of which three opened during the first half of this year, and another five are due in H2 2008. The company generated sales revenues of PLN 39.9m (€11.9m) in the first half of 2008, reflecting 77% growth in comparison with the corresponding period of last year. The financial prognosis for this year envisages sales revenues of PLN 94m (€28.1m) and a net profit of PLN 6.3m (€1.9m).
New Indesit plants in Poland At the beginning of October the Indesit Company, an Italian producer of home appliances, will launch dishwasher and washing machine factories in Radomsko. At the moment, the company has two facilities in Poland, at which ovens and refrigerators are produced. The total amount invested in Poland by the firm has, therefore, reached €240m. Indesit expects its factories to turn out 4m units in 2009, when the new plants reach their full capacity. In 2008 the group expects to produce 2.9m items in Poland, 10% of which are to be sold on the Polish market. According to GfK Polonia, after the first half of the year Indesit will be the fourth largest player in terms of sales value in the Polish large domestic appliance market, holding 12.5%, after BSH, Electrolux and Whirlpool, and ahead of Amica. In terms of sales volume, the Italian company is the front runner and holds 14.6% of the market. Indesit expects that the Polish home appliances market will be worth 10% more by the end of 2008 in contrast with 2007, which is significant in comparison with the stagnating markets in a number of European countries. The profitability of the producers is, however, declining, because of rising inflation and falling prices. n
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Central Europe Retail Update – Issue No. 19 (118)
Romania Market news
is declining, according to Nielsen’s study. Despite this, Romanians do prefer to purchase fresh food, fruit and vegetables, dairy products, sweets and coffee from traditional markets and grocery stores. As for the frequency of visits, the study reveals a slow growth that applies to only shops at gas stations, bakeries and hypermarkets. At the end of July 2008, there were 38 hypermarkets in Romania. Of these, Carrefour and Real possessed 15 units each, Cora three and Auchan five units. Carrefour has opened four new units since the beginning of the year, while Real has boosted its count by adding one new store. At the end of July 2008, there were 123 supermarkets. Of these, Billa operates
Top three retailers’ market share falls short of Western European figures The combined market share of the top three retailers in Romania – Kaufland, Carrefour and Billa – is 10-20%, much less than corresponding figures in Western Europe, where the three largest players in the retail sector, on average, control a 40-65% share. In the Baltics, this figure is over 65%, according to the Nielsen Research Company. Traditional retail continues to grow in absolute figures but its share in the market
Retail sales in Romania (%, y-o-y), June 2007-June 2008 38.8 31.6 23.8
21.3
20.3
23.5
20.2 9.6
10.7
18.1
11.1
16.4
16.1
Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08 April 08 May 08 Jun 08 Note: Retail sales indices adjusted for calendar effects and seasonality Source: INSSE, 2008
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Retail sales indices by selected goods categories in Romania (%, y-o-y), June 2007-June 2008 120 100 80 60
30 units and is followed by Mega Image (24 units), Spar (16), La Fourmi (14), Artima (12 units, which will be rebranded as Carrefour Express stores by the end of the year), Interex (11), Carrefour Express (9) and G’market (7). So far this year, Billa has opened four new units and Mega Image three. Metro is the leader in the cash and carry segment with 23 units, followed by Selgros, with 17 units. The total number of cash and carry units in the country stood at 40 at the end of July. There are 195 discount stores in Romania. Plus Discount has the most developed chain, with 58 shops, followed by Penny Market (52), Profi (38) and Kaufland (32). Penny Market XXL has six units and Albinuta nine.
Retail news DEGI finalizes take over of Iris commercial centre The investment fund Deutsche Gesellschaft fur Immobilienfonds (DEGI), part of the Aberdeen Property Investors Group of Scotland, has finalised the takeover of the Iris commercial centre in Bucharest from the Avrig 35 group in a deal believed to be worth over €140m. This is the second transaction that DEGI has concluded in Romania. In 2007, the company acquired three office buildings for €110m. The Iris project has a surface area of 10 ha and includes the first Auchan hypermarket in Romania occupying 16,000 m2 of retail space and a 30,000 m2 commercial centre, which will open in autumn 2008. The whole project will occupy an area of 60,000 m2. The Avrig 35 group consists of over 35 companies active in the construction and development of residential, commercial, and industrial real estate. Last year, Avrig 35 had 17 projects in progress. DEGI is one of the most important German companies in the field of property management.
40 20 0 -20
Jun 07
-40
Jul 07
Aug 07
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-60
Furniture, consumer electronics and household equipment
Food, beverages and tobacco
Pharmaceutical and cosmetics
Textiles, clothing, footwear and leather goods
Note: Retail sales indices adjusted for calendar effects and seasonality Source: INSSE, 2008
14
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Flamingo invests €10m in 10 new stores Flamingo International will open 10 new Flanco World home appliance stores by the end of the year at a cost of €10m. The total retail area will be 15,000 m2. As a result of the
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Central Europe Retail Update – Issue No. 19 (118)
Tuesday, 23 September 2008
expansion, the chain will account for 50% of the group’s total sales. Flanco World is the most dynamic chain of the group, contributing 42% of the group’s total retail sales in the first half of the year, in comparison with just 9% in H1 2006. This year, the retailer plans to expand its Flamingo Computers chain, with medium-sized stores occupying approximately 500 m2. The Flanco World chain comprises 21 stores and the company wants to increase its overall retail area to 70,000 m2 by the end of 2008 and 90,000 m2 by the end of 2010. Flamingo International posted a 54% growth in turnover in H1 2008, to €92.6m and reduced losses of €1,7m, down from €4.7m in H1 2007.
Otter Distribution sales up 59% Otter Distribution posted a 59% growth in sales in H1 2008, to RON 32.4m (€8.9m), in comparison with H1 2007 results. Meanwhile, profit increased by 32% to RON 2.9m (€0.8m), according to Mediafax.
In H1 2008, the company opened four Otter units in Brasov, Suceava, Braila and Neptun-Constanta, three Geox stores in Brasov, Bucharest and Constanta, new Fila stores in Brasov and Bucharest, and also Selection and M Missoni stores in the Baneasa Shopping City in Bucharest. Otter Distribution forecasts for this year include a 33% growth in sales to €18m, and a 7% profit margin. In 2007, sales reached €13.5m.
Plus opened the 62nd shop of its chain in Romania The discounter Plus, part of the German Tengelmann group, opened its 62nd store in Romania in Mangalia (South-East Romania) on 10 September. The chain invested €1.5m. The new store occupies a total area of 1,400 m2, of which 1,100 m2 is for retail use. The opening is in line with the company’s expansion plans, which include targeting all cities with more than 15,000 inhabitants. The retailer intends to open 25-30 stores per year.
Selected consumer price indices in Romania (%, y-o-y), June 2007-June 2008 15 13
11.8
11 9
8.8
7
5.9
5 3 1 -1
Jun 07
-3 -5
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Sep 07
Oct 07 CPI
Nov 07
Dec 07
Jan 08
Food goods
Feb 08
Mar 08
Apr 08
May 08
Jun 08
Non-food goods
Note: Retail sales indices adjusted for calendar effects and seasonality Source: INSSE, 2008
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Auchan opens new hypermarket in Suceava Auchan will open a new hypermarket in Suceava (Northern Romania) in October in an investment worth €20m. At present, the French company has four units in Romania. The new hypermarket will operate as a part of the Iulius mall, located in the former industrial area of the city. The Auchan hypermarket will be the largest store in Suceava, with 8,000 m2 of retail area, 40 cash registers and a 1,250 capacity car park. The company has already begun the recruitment of 300 people and a management team of 35 is already in place. Retail development in the last few years has created 4,000 new jobs in the city, according to the local authorities.
Diverta opens its first Ideea store Diverta, the retail division of RTC Holding, opened its first Ideea store on 15 September and plans to open a further five such units within a year. The investment for the first store amounted to €100,000 and turnover for the first year of activity has been estimated at €1m. The Ideea stores will be selling only Apple products and will be certified as the computer manufacturer’s Premium Reseller. Diverta posted a turnover of €47m in 2007 and has forecast €56m for 2008. Diverta recently opened a new store in the centre of Bucharest in an investment worth €2m. This opening represented the start of a new store concept that featured coffee shops and, interestingly, no departments. Diverta has announced that it expects to open another six such units by the end of the year in a total investment expected to be worth €6m.
Trade confidence indicator in Romania, August 2007-August 2008
Spar to open four stores by the end of 2008
30 25 17.0
20 15 10 5 0 Aug 07
Sep 07
Source: INSSE, 2008
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The Spar retail chain plans to open four new units by the end of the year, in Arad, Resita, Barlad and Otelu Rosu, in an investment estimated to be worth €2.5-3m, according to Ziarul Financiar. The company recently abandoned its plans to enter Bucharest due to the high prices of real estate. Should all go to plan, Spar will have expanded its overall presence in the
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Central Europe Retail Update – Issue No. 19 (118)
country to a total of 21 supermarkets and hypermarkets. The total amount invested by Spar in Romania totals €22.4m. Spar entered Romania in 2005 and in 2007 generated sales of €37.5m across its 14 stores, six times higher than in 2006, according to the figures from the Finance Ministry. The retailer suffered a net loss of €3.3m in 2007. In the medium term, Spar envisages a chain of 55 stores in Romania, including Bucharest. Eventually, the network is to comprise as many as 250 units.
Supplier news
Swedwood is the production division of the Swedish retailer Ikea, which opened a plant in Siret (northern Romania) in 1999 in an investment worth €12m. The Siret facility accounted for 1% of the total production of Swedwood. In 2007, the plant posted a turnover of €16.3m with losses of €2.8m, according to the figures published by the Finance Ministry. Ikea is present in Romania since the opening of its first store in Bucharest in March 2007. In its first year of activity, the Ikea store in Bucharest recorded sales of €80m.
Ikea closes production facility in Romania
Panasonic targets 15% of digital camera market
The Ikea-owned furniture producer Swedwood Siret, is closing down production and laying off 481 people due to a slump in profitability prompted by the rising wood prices.
Panasonic Romania has set itself a target of capturing a 15% market share in the country’s digital camera market which is estimated to reach 400,000 units this year. The company forecasts that in the current fiscal
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year (ending on 31 March 2009), it will generate a turnover of €70m, up 16% on the previous year. In H1 2008, digital camera sales increased by 280% year-on-year in volume. At the same time, the sale of video cameras increased by 196%. In the home appliances segment, the most popular Panasonic products are vacuum cleaners and microwaves. n
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Clothing footwear retail market in and
Poland 2008
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Central Europe Retail Update – Issue No. 19 (118)
Tuesday, 23 September 2008
Slovakia Market news
fall in December and January. Bottled beer accounts for 50% of the Slovak market and draft beer for 40%. Heineken Slovensko was the first brewery to support the sales of beer in cans through a marketing campaign in 2004 and, as a result, has managed to raise canned beer’s share of all beer consumed from 1% to 4%.
Canned beer grows in popularity Canned beer has become increasingly popular in Slovakia as reflected by its increase in market share from 1% in 2002 to 8.5% in 2007. Roman Sustak, the head of the Slovak Malt and Beer Association (SZVPAS) quoted by SME, estimates that the share of canned beer will have grown to nearly 10% this year. In general, canned beer is preferred by consumers during the holiday season of July and August due to its easy-to-use packaging. In contrast, sales of canned beer typically
Leather and shoe companies experience sales drop in H1 2008 Companies from the leather and shoe industry posted combined sales of SKK 6.5bn (€218.3m) in H1 2008, down by 17%
Employment in retail sector in Slovakia (%, y-o-y), July 2007-July 2008 6.3 5.7
Jul 07
Aug 07
6.0
5.6
Sep 07
5.7
Nov 07
Oct 07
6.0
Dec 07
1.4
1.4
1.3
1.8
1.8
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Jan 08
Feb 08
Mar 08
Apr 08
May 08
Jun 08
Source: SUSR, 2007
Jul 08
16.6 10.5 7.2
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Aug 07
Sep 07
2.1
Oct 07
Source: Statistical Office of the Slovak Republic (SUSR), 2007
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The Slovak economy is expected to grow by 7.7% this year. The same forecast has predicted that this will slow to 6.5% in 2009 due to the process of Euro adoption. Average price growth is expected to reach 4.4% this year before falling back to 4% the following year. The average rate of inflation is forecast to slow down from 4% in 2008 to 3.9% in 2009. These predictions appear in an updated macroeconomic prognosis published by the Slovak Ministry of Finance (MF SR).
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The inflation rate in Slovakia reached 5% in August – the highest level recorded in the past two years. The figure exceeded analysts’ expectations of 4.7% and was up 0.2 p.p. from the previous month’s level. The most substantial growth was recorded in house prices which grew by 4.1% m-o-m while the increase in food prices slowed to 10.2% y-o-y from 10.7% y-o-y in July. The rate of inflation in August does not reflect the higher consumer tax levied on cigarettes which will push the inflation rate up further once existing cigarette stocks are exhausted. The inflation rate forecast for the end of the year is now 5.2% instead of the previously predicted 5%, according to Michal Musak, analyst at the Slovenska sporitelna savings bank quoted by Trend.
Slovak economy expected to grow by 7.7% this year
Retail sales in Slovakia (%, y-o-y, constant prices), July 2007-July 2008
5.9
Inflation up to 5% in August
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y-o-y. Gross profits reached SKK 498.5m (€16.5m) at 66% y-o-y growth. The reason for the decline in revenues has been attributed to the decrease in the number of employees, according to Stefan Sulo, president of the Slovak Leather and Shoe Industry Association (ZKOP SR) quoted by SME. During H1 2008, some 5.9 million pairs of shoes were produced in Slovakia, down by 21% from the same period in 2007.
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Price regulation approved by the government The Slovak government has approved an amendment to an act on prices which will facilitate the imposition of price regulation
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measures in extreme situations related to Euro acceptance. The government will be able to prevent speculative price growth for some goods with liberalised prices through legislative measures. The amendment will also enable improved information and data gathering for price monitoring, detailed analysis of growth causes and the possibility of price regulation. If approved by the President of Slovakia, the amendment will come into effect from 1 November 2008.
Central Europe Retail Update – Issue No. 19 (118)
previously, the Irish Lifestyle Sports chain also recently announced its expansion plans. Slovak Exisport is currently the leading sports chain in Slovakia with 23 outlets. It aims to become a leading sport retail chain
At present, the firm operates in the Czech Republic where it plans to increase the number of outlets to 52. Sportisimo is another sports-goods retailer that aims to enter the country. As reported
Retail sales indices by selected goods categories in Slovakia (%, y-o-y, constant prices), July 2007-July 2008 40 30 20 10
Bumper apple harvest causing price drop A bumper apple harvest in Slovakia this year has been pushing prices down. The market price of Slovak apples fell to SKK 8-20 per kg (€0.27-0.66) and in retail chains to SKK 35-40 (€1.16-1.33). This year’s harvest is expected to reach 40,000 tonnes this year, in comparison with the 17,000 tonnes recorded last year. Lower prices may result in an increase in the Slovak consumption of apples which, at 25kg per capita annually, is 5kg below the EU average. Typically, the Slovak apple harvest does not cover domestic demand and 30,000 tonnes are imported each year.
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Jul 07
Aug 07
Sep 07
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Jan 08
Feb 08
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Apr 08
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-20 -30 Other retail sales in non-specialised stores Food, beverages and tobacco in specialised and non-specialised stores Pharmaceutical and medical goods, cosmetics and toilet articles Retail sales not in stores (markets, stands, forwarding bussiness) www.pmrpublications.com
Source: SUSR, 2007
Selected consumer price indices in Slovakia (%, y-o-y), August 2007-August 2008 10
9.5
8 6 5.0
Retail news
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New logistic centre to be built in Lozorno
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Slovak developer Cooperate intends to build a new logistics and assembly centre in Lozorno, south Slovakia. The centre will provide over 74,000 m2 of storage space, 20,000 m2 of space for light production industry and 7,000 m2 of office space. The construction works will commence in Q1 2009 and be completed by the end of 2010. The total investment value has been estimated at SKK 750m (€24.8m).
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Food and non-alcoholic beverages (9.5)
Alcoholic beverages and tobacco (3.1)
Clothing and footwear (1.3)
Note: The y-o-y ratio change in the legend is for the final month of the graphed period. Source: SUSR, 2008
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Confidence indicators in Slovakia, August 2007-August 2008 30 20 10 0.0 0
More sport chains to enter Slovak market Sportisimo, the sports retail chain, intends to enter the Slovak market by the end of the year. The company plans to set up two or three new outlets in Poprad and Nitra.
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-20 Retail trade confidence indicator
Consumer confidence indicator
Note: Retail trade confidence indicator is a composite indicator calculated as an arithmetic average of balances of the sales situation, expected sales situation and the volume of stock (with an inverted sign). The consumer confidence indicator is the arithmetic average of the balances (%) of four questions: the financial situation of households, the general economic situation, unemployment expectations (with inverted sign) and savings, all over the next 12 months. Source: SUSR, 2007
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Central Europe Retail Update – Issue No. 19 (118)
in the Central Europe with 100 stores in Slovakia, Poland and Romania by 2010.
New logistic centre planned for Nitra Slovak developer CD Reality plans to build a new logistic centre in Luzianky near Nitra, south Slovakia, by 2012. The 600,000 m2 centre will consist of ten separate goodsdistribution warehouses and two office buildings. The centre will employ approximately 500 people. The investment will cost SKK 1.7bn (€56.3m) but the name of the investor has not yet been revealed.
Supplier news Kraft Foods Slovakia posts increased profits in H1 2008 Kraft Foods Slovakia saw its gross profits increase to SKK 101.4m (€3.3m) in H1 2008, up by 62% y-o-y. Sales of own-product goods and services reached SKK 1.7bn (€56.3m) and sales of other goods added SKK 1.3bn (€45.6m). A
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The company has attributed the favourable results to the strengthening of its position in the coffee segment of the Slovak market, a successful export policy and favourable prices of raw materials influenced by the strengthening of the Slovak crown. Kraft Foods Slovakia, a unit of Kraft Foods, employs about 700 people. The company distribution centre is located near Bratislava.
Slovakia under Zentiva Group Prominent Czech pharmaceuticals producer Zentiva, also operating in Slovakia, has been divided into two companies. The decision was made one day after the company rejected a takeover proposal submitted by its largest shareholder, Sanofi-Aventis. Zentiva insists that there is no connection between the two developments. The newly established company Zentiva Group will consist of the subsidiaries and daughter companies abroad. The Slovak operations will belong to the new organisation together with the Romanian, Hungarian, Bulgarian, Turkish and Russian, Ukrainian and Baltic-countries operations. The entity formerly active as Zentiva will maintain responsibility for research, development,
production and marketing in the Czech Republic. Zentiva expects this division to create better transparency of domestic and international operations. Zentiva was established through the merger of the pharmaceutical companies Leciva Praha and Slovakofarma Hlohovec in 2003.
PM Zbrojniky to supply Slovak army The prominent Slovak meat processor PM Zbrojniky, owned by the Czech investment fund Penta Investments, will supply the Slovak army with canned meat products. PM Zbrojniky was the only company to submit a bid in the tender organised by the Slovak Ministry of Defence. The net value of the four-year contract is SKK 11.8m (€394,300). PM Zbrojniky was established in 1993 and is one of the four leading meat processors in Slovakia. The company has been a member of the Penta group since February 2007. n
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Central Europe Retail Update – Issue No. 19 (118)
In brief Czech Republic A total area of 114,500 m2 of new retail premises was completed in the Czech Republic in the first half of this year, according to the Czech Information Agency. Another 340,000 m2 is expected to be added in the near future, especially in Liberec and Plzen. With regards to Prague, the construction of new premises will be concentrated in the Prague 9, Prague 6 and Prague 4 districts.
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Hungary The American computer manufacturer Apple has opened its 6th branded store in Hungary, a unit with 60 m2 of retail area in the Duna Plaza in Budapest, Vilaggazdasag reported. The company felt that expansion was necessary due to the brand’s dynamic growth in Hungary.
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Bomi, a delicatessen chain, is introducing a cashback service, which allows holders of Visa and MasterCard cards to cash up to PLN 200 (€60) in stores belonging to the network. The service is available irrespective of the bank at which the client has an account. A similar service was recently introduced by Zabka Polska, the operator of the Zabka convenience store network.
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Abra Meble, a furniture retailer, plans to open a new store in Biala Podlaska in October. At the moment, the company runs 63 outlets in 53 towns in Poland.
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Graal, the largest Polish producer of fish preserves, is considering a buy-back of its shares in the Warsaw Stock Exchange, as the company is disappointed with the recent share price. In midSeptember it was at its lowest ever level. The buy-back price is to be PLN 35 (€10.4), the issue price during Graal’s latest public offer, according to Puls Biznesu.
Poland The children’s clothing firm 5.10.15 has launched an online store. It offers clothing and accessories for babies, girls and boys. Delivery is free if the order is worth more than PLN 150 (€44.9). The 5.10.15 brand belongs to Komex, which was established in 1993 and has more than 100 stores operating in Poland.
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Komfort, which offers wall-to-wall carpets, rugs and hardwood floors, is launching an online store. The IT company Asseco Business Solutions will implement this for the company. At present Komfort has more than 120 stores and is one of the largest Polish chains to offer interior decoration products.
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The Galeria Sieradzka shopping gallery opened on 3 September in Sieradz. It is the largest shopping centre in the region, takes up 7,000 m2 and houses 32 stores. The total cost of the investment is €10m. The shopping centre is also to be extended to 10,000 m2, which will cost another €3m.
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Slovak developer L Real plans to invest SKK 300m (€9.9m) in the construction of a new shopping centre in Myjava, west Slovakia. The centre will consist of two one-storey buildings called City Centrum and City Shop and, in total, will occupy an area of 10,000 m2. Construction will begin in October this year and will finish one year later.
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Central Europe Retail Update – Issue No. 19 (118)
Tuesday, 23 September 2008
Poles developing taste for premium alcohol Luxury, high quality spirits are becoming increasingly popular in Poland, as demonstrated by the increase in the consumption of these products outperforming the alcohol market on the whole. Though price is still one the most important factors in influencing the purchase of this type of alcohol, the top premium brands continue to generate more and more revenues. Sales of spirits such as vodka, whisky, brandy, liqueurs, rum, gin and cognac, increased in Poland between June 2007 and May 2008 by 18% in comparison with a the same period a year earlier, according to Nielsen. This growth was significantly higher than the alcohol market as a whole, which recorded a growth of nearly 8%. During the period in question, the most significant increase of sales was reported in the whisky segment, where sales grew by almost 40%. Growing
popularity of this spirit has been attributed to the improvement of the Poles’ economic situation. This has created a new market and this, in turn, has led alcohol retailers to broaden their offer with regard to whisky. In particular, this includes upmarket brands such as those distributed by Moet Hennesy Polska, the subsidiary of LVMH: Glenmorangie and Ardberg. To cater to this new demand, some retailers have even chosen to specialise in selling whisky.
Sales volume increase (%, y-o-y), June 2007-May 2008 Whisky
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Source: Nielsen, portalspozywczy.pl, 2008
Despite this share declining in the period June 2007-May 2008, at 37%, hypermarkets are responsible for the most significant share of whisky sold in Poland. In the overall alcohol market, however, large-scale retailers were outperformed by small traditional stores that, in terms of volume, were responsible for over three quarters of sales. The value of whisky sold during this period amounted to PLN 363m, while the whole spirit’s market is worth PLN 9.6bn. In terms of volume, whisky occupies a 1.9% of the market while vodka sales are responsible for 94%. In terms of value, vodka’s share amounts to over 91% of the total spirit’s market. According to alcohol retailers quoted by portalspozywczy.pl, the interest in spirits other than vodka has risen since Poland joined the European Union as this resulted in a significant drop in the price of these products. The rising sales of premium brand spirits has not negatively affected vodka sales. Vodka producers and distributors insist that this is a result of promotional campaigns. These involve investments in branding and convincing clients of the product’s quality. Producers regard tasting as on of the most efficient marketing activities in the promotion of alcoholic beverages. Spirits are often bought as gifts and, as such, clients pay attention to attractive and exclusive packaging. In contrast, foreign buyers tend to look for regional products. The premium alcohol market is expected to grow in the coming years. The producer and retailers quoted by portalspozywczy.pl hope that vodka will begin to lose its market share in favour of premium brands of whisky, brandy, cognacs and the like. Retailers emphasise that the drinking habits of Poles will continue to evolve and that premium brand alcohol will become even more popular.
Breakdown of spirit sales by volume (%), June 2007-May 2008 Rum 0.4
Vodka 94.3 Cognac 0.1
Gin 0.6
Brandy 1.3
Liqueurs 1.5
Whisky 1.9
Mateusz Malicki Business Editor PMR Publications
Source: Nielsen, portalspozywczy.pl, 2008
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Central Europe Retail Update – Issue No. 19 (118)
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