Retailer Ahold expanding in supermarket niche
The subsidiary of Dutch food retailer Royal Ahold late last month purchased a 1,000 square supermarket downtown from Polish retailer Frac. At the same time, Ahold signed a preliminary agreement to acquire up to seven more supermarkets from the Krosno-based retail chain.
The opening typifies the consolidation underway in the $22 billion food retail sector, and the thrust into secondary cities by large multinational retailers.
"We will focus on supermarkets," said Marta Pawlowska, Ahold Polska's public relations' officer. "They are the most important for our strategy." Ahold Polska now boasts 87 stores nationwide, including two hypermarkets, she said.
Traditionally, small local shops have dominated Poland's food retail sector. In the last few years, however, large multinational retailers have represented the greatest growth in the sector and with their economies of scale have afforded consumers steep discounts compared to local shopkeepers.
But where large multinational chains have targeted mainly population centers with sprawling hypermarkets on the outskirts of large cities, Ahold said it was moving into cities big and small.
Ahold plans to open medium-sized stores "near the people," Pawlowska said. "We want to be where a lot of people live." That can mean in large, medium or small-population cities, depending on the market possibilities, she said.
Although the number of supermarkets is declining, that could spell opportunity for chains, according to a recent report on the food retailers by CAL Company Assistance (CA).
Traditionally, the Polish market has been characterized by a very high number of stores per inhabitant, said Grzegorz Eichart , CA project manager. But that number is coming down, as the food retail sector consolidates and large, mass market retailers push traditional retailers with fewer than 300 square meters of retail space out of the market, he said.
Mass market firms accounted for 13% of total food turnover in Poland last year. Two years ago, these firms accounted for a mere 1% of the market and could grab up to 20% this year, Eichart said. Recent entrants in Poland's mass market retail group include multinationals Ahold, Geant, Carrefour, Metro, Jeronimo Martins and Tesco, to name a few, launching outlet networks of hypermarkets, supermarkets and discount stores.
Retail space and product range are characteristics that generally distinguish mass market outlet types. Hypermarkets are characterized by more than 2,500 square meters of selling space with both food and non-food items; supermarkets have 300-2,500 square meters of space and discount stores 300-1,000 square meters, Eichart said.
Hypermarkets and discount stores also generally have low markups, and thus lower prices with hypermarkets located in large cities and discount stores in smaller cities. On the other hand, supermarkets are less inclined to steep discounts but offset price with convenience in downtown areas and are typically located in a variety of cities.
"Hypermarkets are growing at the fastest rate, and discount stores are growing second fastest," Eichart said. Supermarkets have definitely attracted less interest from foreign players, he said.
"Our report classes all stores more than 300 square meters as supermarkets, so that puts stores like Billa and Rema 1000 in the same category as the old-fashioned Polish stores, which are not comparable," Eichart said. "So our view is that supermarkets are still a category with exciting potential for foreign investors."
Under the agreement signed late last month, Ahold bought one of Frac's stores, a Delikatesy Centrum supermarket in Krosno, said Waldemar Jezierski, marketing director for Frac. Neither Jezierski nor Ahold's Pawlowska, would reveal the sale price. Ahold also could acquire more Delikatesy Centrum shops, "if certain conditions are met by both sides," said Jezierski, who refused to detail those conditions. The stores have an average size of 900 square meters, and range 600-3,500 square meters, according to the companies.
Frac's future strategy is to build several retail centers, Jezierski said. He would not say when or where these centers would be built. The company was established in 1994, is backed by Polish capital and owned a chain of 14 Delikatesy Centrum shops in southeastern Poland before signing the agreement with Ahold, Jezierski said. The company employs 1,000 people and had revenue of zl. 183 million ($46 million) last year, Jezierski said.
Ahold's deal with Frac demonstrates that the "coffee break" in development is over, said Pawlowska of Ahold. Ahold's former joint venture partner, Alkauf, was bought last year by competitor Metro, Pawlowska said.
"Can you imagine Coke being in a joint venture with Pepsi?" she asked. Negotiations between Metro and Alkauf dragged on for seven months, which was "lost time" for Ahold, Pawlowska said. "You'd have to be crazy to put money into something when you don't even know who your partner is," Pawlowska said. The two competitors reached agreement in October under which Ahold would acquire all of Metro's shares in the joint venture.
In the near future Ahold will beef up its presence in the supermarket and hypermarket niches, Pawlowska said. The chain plans to more than double its current number of supermarkets this year, from 17 to 37, and increase hypermarkets from two to five nationwide, Pawlowska said.
Overall, the chain plans to increase its number of stores by 30-40% this year, adding 20-25 new discount stores to its current total of 65, Pawlowska said. Ahold is considering closing its three "cash & carry," or wholesale, outlets in Zakopane, Nowy Sacz and Wadowice, Pawlowska said.
Ahold does not plan to acquire any more stores in deals like the one with Frac, preferring to rent space in existing locations, or less often, building its own locations, Pawlowska said. Ahold rents space for 60% of its stores, with the remaining stores located in space either built or acquired by the company, she added.
The opening typifies the consolidation underway in the $22 billion food retail sector, and the thrust into secondary cities by large multinational retailers.
"We will focus on supermarkets," said Marta Pawlowska, Ahold Polska's public relations' officer. "They are the most important for our strategy." Ahold Polska now boasts 87 stores nationwide, including two hypermarkets, she said.
Traditionally, small local shops have dominated Poland's food retail sector. In the last few years, however, large multinational retailers have represented the greatest growth in the sector and with their economies of scale have afforded consumers steep discounts compared to local shopkeepers.
But where large multinational chains have targeted mainly population centers with sprawling hypermarkets on the outskirts of large cities, Ahold said it was moving into cities big and small.
Ahold plans to open medium-sized stores "near the people," Pawlowska said. "We want to be where a lot of people live." That can mean in large, medium or small-population cities, depending on the market possibilities, she said.
Although the number of supermarkets is declining, that could spell opportunity for chains, according to a recent report on the food retailers by CAL Company Assistance (CA).
Traditionally, the Polish market has been characterized by a very high number of stores per inhabitant, said Grzegorz Eichart , CA project manager. But that number is coming down, as the food retail sector consolidates and large, mass market retailers push traditional retailers with fewer than 300 square meters of retail space out of the market, he said.
Mass market firms accounted for 13% of total food turnover in Poland last year. Two years ago, these firms accounted for a mere 1% of the market and could grab up to 20% this year, Eichart said. Recent entrants in Poland's mass market retail group include multinationals Ahold, Geant, Carrefour, Metro, Jeronimo Martins and Tesco, to name a few, launching outlet networks of hypermarkets, supermarkets and discount stores.
Retail space and product range are characteristics that generally distinguish mass market outlet types. Hypermarkets are characterized by more than 2,500 square meters of selling space with both food and non-food items; supermarkets have 300-2,500 square meters of space and discount stores 300-1,000 square meters, Eichart said.
Hypermarkets and discount stores also generally have low markups, and thus lower prices with hypermarkets located in large cities and discount stores in smaller cities. On the other hand, supermarkets are less inclined to steep discounts but offset price with convenience in downtown areas and are typically located in a variety of cities.
"Hypermarkets are growing at the fastest rate, and discount stores are growing second fastest," Eichart said. Supermarkets have definitely attracted less interest from foreign players, he said.
"Our report classes all stores more than 300 square meters as supermarkets, so that puts stores like Billa and Rema 1000 in the same category as the old-fashioned Polish stores, which are not comparable," Eichart said. "So our view is that supermarkets are still a category with exciting potential for foreign investors."
Under the agreement signed late last month, Ahold bought one of Frac's stores, a Delikatesy Centrum supermarket in Krosno, said Waldemar Jezierski, marketing director for Frac. Neither Jezierski nor Ahold's Pawlowska, would reveal the sale price. Ahold also could acquire more Delikatesy Centrum shops, "if certain conditions are met by both sides," said Jezierski, who refused to detail those conditions. The stores have an average size of 900 square meters, and range 600-3,500 square meters, according to the companies.
Frac's future strategy is to build several retail centers, Jezierski said. He would not say when or where these centers would be built. The company was established in 1994, is backed by Polish capital and owned a chain of 14 Delikatesy Centrum shops in southeastern Poland before signing the agreement with Ahold, Jezierski said. The company employs 1,000 people and had revenue of zl. 183 million ($46 million) last year, Jezierski said.
Ahold's deal with Frac demonstrates that the "coffee break" in development is over, said Pawlowska of Ahold. Ahold's former joint venture partner, Alkauf, was bought last year by competitor Metro, Pawlowska said.
"Can you imagine Coke being in a joint venture with Pepsi?" she asked. Negotiations between Metro and Alkauf dragged on for seven months, which was "lost time" for Ahold, Pawlowska said. "You'd have to be crazy to put money into something when you don't even know who your partner is," Pawlowska said. The two competitors reached agreement in October under which Ahold would acquire all of Metro's shares in the joint venture.
In the near future Ahold will beef up its presence in the supermarket and hypermarket niches, Pawlowska said. The chain plans to more than double its current number of supermarkets this year, from 17 to 37, and increase hypermarkets from two to five nationwide, Pawlowska said.
Overall, the chain plans to increase its number of stores by 30-40% this year, adding 20-25 new discount stores to its current total of 65, Pawlowska said. Ahold is considering closing its three "cash & carry," or wholesale, outlets in Zakopane, Nowy Sacz and Wadowice, Pawlowska said.
Ahold does not plan to acquire any more stores in deals like the one with Frac, preferring to rent space in existing locations, or less often, building its own locations, Pawlowska said. Ahold rents space for 60% of its stores, with the remaining stores located in space either built or acquired by the company, she added.
