Russian hard discounter Svetofor, operating under the brand Mere in Europe, is to continue its European rollout with the launch of its operations in Hungary, according to Haszon.hu.

Based on the letter obtained by the economic portal, the company is set to open 200 stores and achieve a turnover of €700mn within three years.

"We are pleased to inform you that the European MERE supermarket network will now be available in Hungary," says to the email sent by representatives of the Russian discount chain to potential business partners at the end of February.

It targets to open 20 stores in Budapest and the surrounding areas within "the coming year".

The Russian discount chain, operating with a similar model as Penny, Lidl and Aldi, was founded in 2009 and currently operates around 2,500 stores in 20 countries, including Belgium, Czechia, Estonia, Germany, Greece, Kazakhstan and Spain. The brand is also present in the Baltic countries and Romania,

The company faced challenges in its supply chain and expansion due to war and the sanctions affecting the Russian economy, nevertheless last year it announced plans to expand in Eastern Europe and it is now searching for suppliers in Hungary.

In 2020, Svetofor entered the top ten largest Russian grocery retailers with a revenue of RUB200bn ($2.4bn). Over the past two years, the company's business has doubled, making it one of the five biggest players in Russia’s burgeoning retail sector.

Although the economy has been hit by multiple shocks in recent years, retail is one of the sectors that is doing well and the outlook is improving as the Russian economy returns to growth and both nominal and real incomes start to rise thanks to an extremely tight labour market.

Looking at it from a market standpoint, the arrival of another retail chain to Hungary is interesting, given the unfavourable market conditions facing foreign retailers. The Hungarian government has levied windfall taxes and introduced a number of unorthodox measures targeting foreign firms in what it claims to level the playing field in favour of local players.

The largest firms with annual revenue of HUF100bn (€250mn) pay a 4.1% revenue-based tax  and they are also compelled to give mandatory discounts weekly on a certain group of products.

In the latest round of conflict involving foreign players, Dutch-based Spar announced a corporate reorganisation affecting its Hungarian assets to safeguard them from a possible takeover by cronies close to the ruling Fidesz party.

The conflict escalated after Spar filed a complaint to the EU against the windfall tax. Company CEO Hans Reisch in interviews with the German and Austrian press said that they received an offer from government to have the windfall tax lowered if they allow a minority stake in the firm to a family member of the prime minister.

Despite the unfavourable unlevel playing field, the windfall taxes and extra regulatory burdens, foreign companies have managed to boost their market share in recent years, while local retailers, CBA, Real and Coop have seen a decline.