the winning formats in europe

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The winning formats in Europe

Planet Retail Ltd | September 2010

www.planetretail.netThe winning formats in Europe2 of 21

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1. Consolidation in the European retail scene

2. Channel development in Europe

3. The most successful retailers and formats

4. The battle of domestic players with foreign retailers

5. Attractiveness of CEE

6. Conclusions

Agenda


Market consolidation in Europe

Russia

Azerbaijan

Armenia

Georgia

Ukraine

Belarus

Moldova

Romania

Hungary

Poland

Bulgaria

Greece

Cyprus

FYROMacedoniaAlbania

Serbia

Bosnia & Herzegovina

CroatiaSlovenia

Italy

SlovakiaCzech Rep

Germany

Sweden

Lithuania

Latvia

Estonia

FinlandNorway

France

AustriaSwitzerland

Luxembourg

Belgium

Netherlands

SpainPortugal

UnitedKingdom

Ireland

Iceland

Denmark

Europe

Western Europe is a homogenous market

Central and Eastern Europe is diverse

Market share of TOP 5 grocery retailers up to 30%

Market share of TOP 5 grocery retailers 30% - 60%

Market share of TOP 5 grocery retailers over 60%


Channel CAGR Growth

Western Europe Central Europe Eastern Europe0

2

4

6

8

10

12

14

16

18

4.09

8.02

15.63

3.94

5.54

13.34

5.82

14.34

0

5.32

7.96 7.82

2.33

6.4

10.3

4.17

7.85

3.93

Chart: Europe, Channel CAGR Growth, 2009e – 2014f

Hypermarkets & Superstores Supermarkets & Neighbourhood storesDiscount stores Convenience storesCash&Carry Drugstores

% G

row

th

Source: Planet Retail Ltd – www.planetretail.nete = estimatedf = forecast

http://www.planetretail.net/


Western Europe – TOP leading retailers

Carrefour losing its share, while Tesco and Schwarz Group set to grow fast

Metro Group

Sainsbury's

Leclerc

Edeka

Auchan

Rewe Group

Aldi

Schwarz Group

Tesco

Carrefour

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000

33,465

33,652

39,378

46,607

47,729

48,666

52,013

66,602

72,536

81,921

32,575

23,621

34,100

42,499

38,893

40,772

41,032

49,169

49,502

74,693

Western Europe: Retail Banner Sales, 2009e – 2014f (EUR mn)

2009

2014




Central Europe – TOP leading retailers

Schwarz Group will become the clear leader in Central Europe by 2014.

Auchan

Ahold

Agrokor

CBA

Jerónimo Martins

Rewe Group

Carrefour

Tesco

Metro Group

Schwarz Group

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000

4,052

4,071

4,074

4,209

7,909

9,226

10,543

11,726

13,464

18,275

2,828

3,324

2,631

3,318

3,989

5,652

6,521

7,301

10,056

9,851

Central Europe: Retail Banner Sales, 2009e – 2014f (EUR mn)

2009

2014




Eastern Europe – TOP leading retailers

Foreign retailers in EE in the shadow of domestic players

Sedmoi Kontinent

Kopeika

Rewe Group

Lenta

Dixy Group

O'Key

Auchan

Metro Group

Magnit

X5 Retail Group

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000

2,488

2,816

2,821

3,267

4,211

5,804

6,914

8,090

10,327

18,351

1,109

1,431

599

1,454

1,409

1,752

4,129

4,529

4,409

7,134

Eastern Europe: Retail Banner Sales, 2009e – 2014f (EUR mn)

2009

2014




Schwarz Group Present in 26 European countries

with sales of EUR59 billion (USD82 billion) in 2009.

72% of revenue - Lidl discount stores

28% of revenue - Kaufland price orientated compact hypermarkets

Around 18% of Schwarz Group’s total revenue generated in CE

Leading discounter and second largest hypermarket operator in CE

Aggressive expansion in almost all Central European countries

Potential new markets: Romania, Bulgaria

Lidl needs several years to break even in some markets

The most successful formats and retailers



Schwarz Group’s Lidl - the most successful discount format in Europe

Soft discount concept with around 2,000 items on offer

Sales area 700 – 1,000 square metres

PL account for around 70% of Lidl’s turnover

Move into convenience locations in city centres

fresh bakery, instore oven

Butcher’s counter

Expansion of F&V



Jeronimo Martin’s Biedronka is an impressive phenomena in the Polish discount scene

1,500 Biedronka stores across Poland

Stores located in residential areas and city neighbourhoods

Sales area of around 550 square metres

Soft discount concept with up to 1,000 items on offer

PL account for around 60% of Biedronka’s turnover

Focus on private label products sourced from local manufacturers



Tesco has introduced a convenience store format Tesco Express into Central Europe

Tesco operates over 1,000 Tesco Express stores in the UK

Product range up to 3,000 items

Sales area - 300 square metres

Strong focus on lunch time snacks, ready meals and F&V

Expansion of the concept in the CEE



Carrefour has introduced its new hypermarket format Carrefour Planet

Sales area around 14,000 sq m

Each hypermarket focuses on 9 key areas which include a market zone, organics, frozen foods, beauty, fashion, baby care, home and multimedia

The share of Carrefour-branded products within the concept has been increased

Estimated renovation cost at EUR20 million (USD24.4 million) per store


Stiff competition in the Czech Republic

Domestic players fighting with foreign retailers


CBA Hungary successfully competes with Tesco

CBA operates around 3,300 supermarkets and neighbourhood stores across Hungary

Its revenues grew by 0.5% to HUF548 billion in 2009, whereas Tesco saw decline by -3.6% to HUF634 billion

CBA has introduced a limeted range of private label products (only 500 SKUs in 2010)

Business consolidation - around 250 unprofitable stores closed in 2009

Domestic players fighting with foreign retailers


Walmart interested only in large markets in CEE

Walmart

Walmart can use its cash-rich US operations to bank-roll international development

Has bitter experience from market entry into Germany. Apart from the UK, no experience of European retailing

Focus on expansion in Mexico, India and China

Walmart has been eyeing Russia and Turkey Source: Planet Retail Ltd – www.planetretail.net



Carrefour will not become a leader in CEE

Carrefour

Leading position in Western Europe

However, a marginal position in many countries, without any obvious opportunity to achieve a TOP 3 position

Operations in Latin America and China have high growth rates

Exited the Czech Republic and Slovakia (2005) and Russia (2009)

Allocated funds for expansion in the Balkans

Carrefour’s expansion will depend on its recovery in France

Source: Planet Retail Ltd – www.planetretail.net



Tesco likely to continue in its CEE success story at a smaller scale

Tesco

Tesco focus on expansion in Turkey and Asia GBP500 million investment in

China in 2010

Market entry into India in 2010

Investment into the struggling US operations

New market entry in CEE likely through M&A of a strong local player

Tesco is likely to expand into a smaller country in CEE as a part of its regional expansion




Metro Group to consolidate its position in CEE

Metro Group

Metro Group is a pan-European retailer

Early mover advantage in most of the countries

Expansion areas for the long-term will be China, CEE with focus on Russia and Ukraine

A smaller cash & carry concept to be tested in many CEE countries (Russia 2011) may be rolled out across Europe




Discount stores in WE and CE together with hypermarkets and price orientated supermarkets in EE will be the fastest growing channel

Schwarz Group will be the fastest growing retailer in CE soon with good prospects for success in the whole CEE region

Tesco - the pioneer of the convenience store concept in CE. Large potential for the concept in the long-term across CEE

Soft discount format like Lidl and Biedronka are the most successful

Domestic players losing their battles in many CE countries

Global market players focus on Asia. Russia and Balkans seem to be the only regions they are interested in in CEE

Retailing in CEE to be driven by the European retailers like Schwarz Group and Metro Group in the next few years

Conclusions


Miloš RybaSenior Retail Analyst

Planet Retail LtdT: +44 (0)207 728 5600F: +44 (0)207 728 4999

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www.planetretail.net

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the winning formats in europe

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