Polish retail wags the Portuguese dog

By bne IntelliNews February 16, 2011

Jaroslaw Adamowski in Warsaw -

It's a case of the Polish retail wagging the dog. Last year, the tills were ringing so fast for Poland's leading discount retailer Biedronka, which is owned by the Portugal-based Jeronimo Martins Group, that with a surge in sales of 29% to about €4.8bn, the Polish subsidiary now accounts for 55% of the group's aggregate net sales and has gradually become the backbone of the Portuguese group.

"This remarkable sales performance was helped by the double-digit LFL [like-for-like] growth and by the opening of new stores," Jeronimo Martins said in a 2010 preliminary sales release, whose own consolidated sales grew 18.7% to €8.69bn, an increase from €7.32bn in 2009. "With regards to the LFL sales, in 2010 Biedronka posted growth of 11.6%... as a result of a strong performance throughout the four quarters."

In 2011, Biedronka, which means "ladybird" in Polish, is expected to fly even higher, with its Portuguese owner planning to invest €1.27bn in boosting its expansion in Poland. Since 1995, Jeronimo Martins has invested more than PLN5bn (€1.28bn) in its most successful chain of stores. "The factors behind our success are competitiveness, high-quality products at stable, low prices... [and] also various private label products that are created solely for our network of stores," says Pawel Tyminski, spokesman for Jeronimo Martins Dystrybucja, the subsidiary that owns the local Polish stores.

At present, the chain's aim is to double its local presence over the next four years. The retailer currently boasts 1,650 stores in the Polish market, and plans to open a further 1,400 stores by 2015. Throughout last year, Biedronka added some 197 stores to its network and closed 14 stores, as a result increasing its total retail surface in Poland to nearly 1m square metres. "We try to maintain a high rate of expansion," says Tyminski. "This year, we aim to open about 200 new stores."

Discount Poles

The rapid growth of the retailer is part of a wider trend of the discount sector becoming Poland's fastest growing retail sector. According to data from PMR, a consultancy and market research firm based in Krakow, Poland's discount sales expanded 27% in 2010, and the segment's share in the country's food retail market is expected to reach 16% by 2013. Moreover, it is estimated the food retail market itself will be worth at that time some PLN280bn (€71.8bn), the consultancy said in a report.

The Polish discount market is carved up between three heavy-weights: Biedronka; Germany's Lidl, which operates around 405 stores in Poland; and Denmark's Netto, with about 212 stores located in the country's western regions. Smaller discount retailers, like the Germany-based Aldi, operator of some 48 stores in Poland, are struggling to grab a piece of the fast-growing and increasingly competitive market. "Polish customers are mostly very price-sensitive, but not even low prices alone are enough to secure a significant share of the discount market," says Andrzej Kondej, an expert on the Polish retail market and head of Kondej Marketing, a consultancy. "Biedronka has managed to convince many Poles that it is a local chain of stores, and its assortment of products is generally perceived as well suited for Polish tastes."

Kondej says Biedronka's strategy has been to expand to smaller cities and newly built estates, while other chains are still acting with extreme caution. At present, Biedronka has its foothold in more than 650 primarily small and medium-sized cities and towns across Poland. "The chain is also very flexible in what concerns the surface of particular stores."

Meanwhile, the Portugese retailer is seeking to diversify its portfolio in Poland by expanding into other parts of retailing. Its current plans include setting up a coffee shop chain, as well as developing Biedronka's network of 33 both company-owned and franchised pharmacies operating under the brand Bliska. "Poland's retail market has big potential, and it is estimated that it could absorb twice as much discount stores," says Kondej. "However, in the long run, the differences between distinct store formats, such as supermarkets and discount stores, will progressively disappear."

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