Casino cashes in its chips
Casino's Polish stores are to be sold to two other retail-chain owners operating in Poland - Metro and Tesco. Although Metro's Real and Tesco will open their own outlets in place of the acquired stores, the buildings and plots will be owned by GE Real Estate, which paid EUR 555 (zł.2,178) million for the properties.
GE Real Estate is to pay EUR 224 (zł.879) million for 19 existing Geant hypermarkets as well as seven others which are either being constructed or are in the planning phase.
Casino's other retail chain - the Leader Price discount supermarkets - are to be acquired by Tesco for EUR 105 (zł.412) million. The British company bought 142 supermarkets and five plots for future investments. "We want to reach clients who haven't come across our offer before - especially those in smaller towns," says. Tesco Polska's spokesperson, Przemysław Skory, adding that the new supermarkets will facilitate existing customers' access to Tesco stores.
Skory explains that a permit from the Office for Competition and Consumer Protection (UOKiK) is still necessary for the transaction to go through. He expects the anti-monopoly office to issue an opinion in "a few months' time. It should take about six months after that for the stores to operate under the Tesco logo."
No easy ride
Although the transaction will strengthen Tesco's position in the retail market in Poland, it won't make competition any easier for the British chain. By acquiring the Geant stores the number of Real hypermarkets in Poland will grow to 49, with a total trade area of 425,000 sqm. "Thanks to this we will strengthen our presence in different regions, as well as in larger cities," says the director of Metro AG's office in Poland, Renata Juszkiewicz.
The acquisition will help Real overtake Tesco, with its 48 stores, as the leader in the hypermarket segment. Furthermore, employment in the company will grow from the current 7,300 to over 13,000 workers. The new stores in Real's portfolio are expected to be rebranded by the end of the year. However, like Tesco's Skory, Juszkiewicz adds that the process will only start after the anti-monopoly office grants a permit for the transaction to go through.
Barbara Mikusińska, editor-in-chief of industry magazine Handel, claims that hypermarkets in Poland are going to be losing clients to supermarkets and shops of a smaller format. "They have problems with finding new locations - the markets in the cities are becoming more and more saturated," she claims. She also adds that bureaucracy does not help investors, as the waiting period for obtaining permission has been extended.
Tough competition
At the beginning of 2006, Tesco was the hypermarket leader in terms of trading area, with 24.6 percent, followed by Carrefour with 16.3 percent, Real with 16 percent, Auchan with 13.9 percent and Geant with 12.2 percent. The competitivness of the Polish market is proven by the fact that the top three players on the market have just over 56 percent of it.
According to statistics provided by market research company AC Nielsen, there are five hypermarkets per million inhabitants in Poland, which is three times less than in the Czech Republic and Slovakia. "But we have to notice what percentage of Poles live in small towns and rural areas," Mikusińska points out.
Size matters
Supermarkets are in a similar position - with 69 per million people in Poland to 103 in the Czech Republic. On the other hand, unlike shoppers in other countries of the region, Poles favor small neighborhood supermarkets and grocery stores over hypermarkets. Some 54 percent claim they shop in traditional stores, while only a quarter of the Czechs and around 40 percent of Hungarians and Slovaks do so. Therefore, Mikusińska thinks that hypermarket operators will grow through acquisitions, as Real's example shows, rather than organically. "If they don't get satisfactory results, they will either leave the market or invest in other, smaller distribution channels," she said.
Juszkiewicz denied the rumors that Real only bought the hypermarkets to sell them to Wal-Mart, whose possible entrance onto the Polish retail market has been hot gossip for the last year. "The Polish market is attractive to the Metro Group and we have carried out investments for the long term," she says. "The concern doesn't plan to sell its outlets."
Mikusińska is skeptical about Wal-Mart's possible entry to Poland. She points out that the rumors result from the chain's declaration that it is interested in the markets of the CEE region. "We have been speculating on this for the past year," she said. Mikusińska says that in Europe Wal-Mart is only present in the UK and Germany and in the latter "they are not doing well. I don't think they will enter the market in the nearest future."
