Polish grocery retail market: good prospects and advancing consolidation

Citation

(2007), "Polish grocery retail market: good prospects and advancing consolidation", International Journal of Retail & Distribution Management, Vol. 35 No. 3. https://doi.org/10.1108/ijrdm.2007.08935cab.002

Polish grocery retail market: good prospects and advancing consolidation

Polish grocery retail market: good prospects and advancing consolidation

Following the lower growth rate in 2005, the Polish grocery retail market is once again poised for an uptrend. We anticipate that it will exceed PLN 200bn at the end of this year. Though the market is still highly dispersed, the changes taking shape, including the recently announced Carrefour group's take over of the operations of the exiting Ahold, are steadily yielding greater market consolidation.

6 per cent market growth in 2006

According to the “Grocery retail in Poland 2006” report published at the end of November 2006 by PMR, a research and consulting firm, total sales of grocery stores in Poland amounted to PLN 190bn in 2005 (Figure 3). This means a slight decrease compared to 2004, primarily caused by lower sales of non-foodstuffs:

One of the factors that determined non-foodstuffs' lower sales value in 2005 was the significant reduction of their prices with the concurrent, though slight, increase in prices of food, beverages and tobacco.

Figure 3 Grocery retail market in Poland (PLN bn), 2004-2007

Malgorzata Machnicka, PMR's senior retail analyst and report co-author, stated. Additionally, the drop resulted from a high comparison base (generated by the intensified buying of non-foodstuffs in 2004, in particular, directly preceding Poland's accession to the European Union).

According to PMR's estimates, this year the value of the grocery retail market in Poland will expand by 6 per cent to over PLN 200bn, and in 2007 it will exceed PLN 211bn. Malgorzata Machnicka explained:

Market growth will be powered by dynamic increases in store counts, in particular in the supermarket and discount segments which are actively seeking to penetrate less populated areas, and by higher value of sales of non-foodstuffs in grocery stores.

According to the report's authors, sales will rise also as a result of better conditions on the Polish labour market – growing employment and wages – which will improve Poles' purchasing power.

High dispersion

The Polish retail market is highly dispersed; no retail operator or chain integrator holds more than 3 per cent of the market. According to PMR's data, in 2005 the ten top grocery outlet operators accounted for close to 20 per cent of the market, while a year earlier they had represented slightly 18 per cent. This means these companies had developed more rapidly than the market.

From among the retailers and chain integrators active on the Polish grocery market, Jeronimo Martins Dystrybucja (JMD) was the largest player in terms of sales revenue (Figure 4). In 2005 JMD, as the operator of the largest discount store chain in Poland (Biedronka), generated 2.83 per cent of aggregate market sales. Its good semi-annual results and dynamic expansion (approximately 100 new stores a year) make it highly likely that JMD will also be at market helm as at the end of 2006, though the second largest revenue generator – Tesco (with outlets under the Tesco and Savia banners) also has a chance to assume the top ranking in Poland (2.81 per cent market share in 2005).

Figure 4 Market shares of the largest grocery retailers in Poland (per cent), 2005

The fight over the winner's crown will get even tougher in 2007. Tesco, which at the end of the second half of 2006 had 108 stores in Poland (hyper and supermarkets), recently received the approval of the Office for Competition and Consumer Protection (UOKiK) to acquire a network of 142 outlets from the French Casino Group which is withdrawing from the Polish market. The market repercussions of this transaction will become clear next year. According to PMR's estimates, the target stores, operating under the Leader Price banner, generated PLN 600m sales revenue in 2005. Their acquisition will mean Tesco will significantly enlarge its sales area and sales potential.

Similarly, the sale of the stores of the exiting Ahold to the French Carrefour group, announced at the top of December, will fortify the latter's market position and fuel further market consolidation. In 2005, Ahold stores' sales revenue gave the company only 1.1 per cent share in the Polish retail grocery market, yet with them in hand Carrefour will be able to effectively battle over the top ranking.

Other interesting information from the report

Since, in Poland JMD operates only one chain – Biedronka – this chain is also the largest in terms of revenue. Second place is occupied by one of the networks owned by Tesco (operating under the Tesco banner (Figure 5)). The two are followed by hypermarket chains operated by French retailers which also have supermarket chains in Poland managed under different banners.

Figure 5 Market shares of the largest grocery retail chains^* in Poland, 2005

You are welcome to contact the authors of the report: Malgorzata Machnicka, Senior Retail Analyst, Tel: /+48 12/ 618 90 63; e-mail: malgorzata.machnicka@pmrpublications.com; Patrycja Ciosek, Retail Analyst, Tel: /+48 12/ 618 90 59; e-mail: patrycja.ciosek@pmrpublications.com

More information on the report: Marketing Department, Tel: /+48 12/ 618 90 20; e-mail: marketing@pmrpublications.com

Towards consolidation

Given the enormous competition, consolidation processes on the retail grocery market have markedly intensified over the past 12 or so months. Foreign players who have failed to secure a satisfactory slice are pulling out. The acquisitions finalised over the recent months did not concern only the largest players, as in the case of the purchase of the Julius Meinl and Leader Price chains by Tesco, or Geant stores by Real, or Carrefour's take over of Ahold's premises.

The dynamically developing Polomarket network took over the Krakow-based ABC chain, while Eldorado merged with the BOS group (in addition to wholesaling, both manage company-owned and franchise-operated retail networks). Eurocash, another retail and wholesale market player, acquired Carment, a company operating in the same segment together with its network of Delikatesy Centrum supermarkets.

Over the next few years, further market consolidation seems unavoidable. In comparison to Western European markets or other CEE markets, in Poland, the three largest players have a significantly smaller aggregate market share. This means that more foreign firms are likely to depart while existing chains will be taken over by stronger competitors.