Kissing the frog

Confounding speculation that press distributor Ruch would acquire it, convenience-store franchiser Żabka - whose name translates as "little frog" - has been sold to Czech-Slovak private-equity company Penta Investments. The transaction value exceeds zł.500 million and should be finalized this summer. Ruch's bid for the company, the value of which was never publicly confirmed, was rumored to have been around zł.400 million.

"We see a great potential in synergy with our existing business in Poland," says Martin Danko, a PR manager from Penta Investments Slovakia. In fact, Penta manages a chain of 30 Doctor Max pharmacies and 400 Profesjonał bookmaker outlets. Penta's strategy calls for foreign expansion for Żabka, with the Czech Republic and Slovakia to serve as starting points. It also intends to sell Żabka to another investor after a few years, according to Danko.

"This is a good move for Żabka," notes Adam Wroczyński, a retailing expert from the Academy of Franchising Systems' Development (ARSS). "The investment could clear up the financial situation of the chain, strengthen its position ... and modernize it," he said, referring to financial problems experienced by some Żabka outlets.

Wroczyński notes a potential for this type of retailing in Poland, since the market is not consolidated. "Polish retailing will remain based on small and mid-sized shops," says Wroczyński, stressing that over 60 percent of the public visits local grocery stores every day. "Hypermarkets too, are launching smaller formats," he concludes.

Żabka operates almost 2,000 outlets across Poland. In 2006, the firm saw sales revenue of zł.1.24 billion.