A game for big players
Clearly there is a great deal of room in Poland for consolidation, and the biggest players are looking for ways to cement their position and expand their client base.
Experts predict that in the future, only three to five major companies will maintain their positions while the rest will be pushed to the margins. "There are many operators on Poland's market and such a situation is something rare not only in Europe but also in the region," said Dorota Flak, a retail research specialist from King Sturge.
Sleeping giant
Predictions of sector consolidation take place in the shadow of repeated announcements that the American retail giant Wal-Mart, famous for its significant price-cutting policies, plans to enter the Polish market. But specialists agree that building an entirely new infrastructure would be unfeasible for Wal-Mart, so the company would have to look at an alternative business plan.
"In order to enter the Polish market the American investor should buy up an already existing chain," commented Piotr Kaszyński, a partner and head of retail at Cushman & Wakefield. "The question is, who can they buy? Knowing about the market's real estate and the biggest investors' plans, I can't see the possibility right now."
However, even if the American company does find a way into Poland, it would not necessarily mean any immediate changes will take place in the retail sector. "At the beginning Wal-Mart would be just one of the operators and would not be a threat to other companies' positions," explained Flak. "I don't think Wal-Mart plays a big role in other companies' strategic development plans."
Comeback kid
Although experts have been speculating on Wal-Mart's possible entry into Eastern Europe for almost two years, another important investor, the Rewe Group, has recently announced a comeback and its desire to strengthen the company's position in Poland.
Rewe will be rebranded with the Billa name by the end of this year, and Rewe president Janusz Kulik said that the company intends to play a part in the consolidation of the market. Rewe recently announced it will invest over EUR 130 (zł.517.2) million in Poland and treble the number of its stores by 2011.
While some foreign investors plan to strengthen their position, others have decided to change their plans. According to Kaszyński, these movements are typical in a globalizing world. "Nowadays, companies need to join together or buy other companies, or sell their share to a bigger player on the market." he says.
The French-owned Casino group chose the latter tack, recently selling its Geant hypermarket chain to the Metro Group. Soon Casino's Leader Price chain will be purchased by British-owned Tesco for EUR 105 (zł.417.6) million.
Tesco's big plans
Paweł Skory, a spokesperson for Tesco explained how the situation stands: "The company is still waiting for approval from the Office of Competition and Consumer Protection [UOKiK]. However, we know which shops we are going to take over and how much it will cost us."
According to Skory, the purchase of Leader Price is in line with Tesco's worldwide tactic to develop stores in a variety of formats. "Tesco currently possesses three types of shop in Poland, and the biggest ones are our hypermarkets, which amount to 5,000 to 12,000 sqm [of retail space] and are located in shopping malls," said Skory. "The second type of store are medium-format ones, and the third kind are shops we established last year, which consist of a maximum of 1,000 sqm. All those developments were built and constructed using Tesco's own funds."
Earlier this year Tesco purchased the Austrian company Julius Meinl's stores in Poland. With these outlets, together with the 145 Leader Price stores, Tesco plans to open a fourth type of shop, smaller than 1,000 sqm.
Top of the pile
Metro Group's takeover of Casino's Geant was part of the group's bid to stay at the top of the retail pile.
"By taking over Geant's 19 hypermarkets, the number of Real hypermarkets will be increased to 49, with a total space of 425,000 sqm," said Beata Juszkiewicz from Metro Group. "UOKiK has already approved the transaction so we have kicked off the rebranding process of all Geant stores."
Januszkiewicz added that Poland remains a highly attractive market for the Metro Group and all its investments are planned for the long term. "Metro does not plan to sell its outlets," said Juszkiewicz.
New direction
For its part, following it's pull-out from the Polish supermarket scene, the Casino group plans to invest in third-generation shopping centers. "Casino group plans to build five such malls," said Damian Ponczek, spokesperson for Casino in Poland. "We have already received permission for Opole and Dšbrowa Górnicza. Development and construction work will start at the beginning of 2007."
Consolidation of the supermarket sector should be good news for Poland's shoppers as experts say the main outcome will be lower prices. "The bigger the company the more you can sell and the lower the prices," said Cushman & Wakefield's Kaszyński. "These companies show quite an aggressive approach towards price policies as a way to gain new clients. It is clear that purchasing power in Poland is limited, so there is no chance of increasing prices."
