Jan Cienski in Warsaw -
The bright yellow building adorned with a smiling ladybug is the most common retail sight in Poland, and will be even thicker on the ground as Jeronimo Martins, the Portuguese parent of Poland's Biedronka discount grocery chain, announces that it plans to add almost a thousand new shops by 2015.
Biedronka was founded in the 1995 by Polish retail genius Mariusz Switalski (who went on to found the highly successful Zabka convenience shop chain), and was bought by the Portuguese retailer in 1998. At the time, the chain had 243 shops; it now has more than 2,100 and has become the main earner for Jeronimo Martins, accounting for almost two-thirds of the company's total turnover.
Biedronka racked up €6.7bn in sales last year, an increase of 16% over a year earlier - this at a time when Polish retail sales have slumped as the economy slows. "We started to prepare for a possible slowdown in the growth of the economy a year ago and are now completing the process," Pedro Pereira da Silva, Poland country manager for Jeronimo Martins, told the Rzeczpospolita newspaper. "We increased our offering of fresh produce and changed the look and redesigned all of our shops."
Wood & Company, a Central European investment bank, notes that while Polish food retail grew by only 1.3% in the final quarter of last year, Biedronka grew its market share by almost 19% - as of the end of 2012 it controlled almost 15% of the Polish retail market. "Notwithstanding the challenging competitive environment, we see reasons to be sanguine," wrote Wood in a research note, adding that it foresees that Biedronka's like-for-like sales - the most fundamental measure of retail success - will grow by about 10% this year, a far higher figure than for retail overall.
The reason is that the chain has hit a sweet spot in Polish retailing - first aiming at poorer consumers in small and medium-sized towns, and then moving to larger cities and going upmarket as the country has become wealthier. While a few years ago Biedronka was the kind of the place where people who had any money would steer clear of, now the chain features fresh produce and a growing selection of wines and even the occasional lobster, aiming at a more status-conscious but still price-sensitive shopper.
The inside of a typical shop is a mix of cheap and cheerful products - most still packed in original shopping boxes - mixed with quite good produce. Cashiers only take cash, as the chain refuses to deal with the credit card companies.
As a sign of its new aspirations, its latest advertising campaign uses Daniel Olbrychski, one of Poland's best-known actors, who stands in a sun-dappled farm kitchen extolling the virtues of Polish produce.
Biedronka, which has become Poland's largest private sector employer with almost 40,000 workers, has also sought to go slightly upmarket in terms of labour relations. A few years ago it was hit with a lawsuit filed by disgruntled workers claiming they had been forced to work unpaid hours. It now says that it pays about a fifth more than the minimum wage, and problems with workers have subsided.
Biedronka's dominance of Poland's retail landscape looks like it will continue to grow. The firm plans to invest almost €390m this year to open 290 new shops, and by 2015 it hopes to have 3,000 shops.
While there are few additional possibilities of expanding in small towns of about 20,000 people because the market is pretty well saturated - Market Side, a retail analysis company, finds that such towns average about one discount grocery shop per 5,000 inhabitants - there is still scope for growth by either going smaller and moving into villages or by continuing to grow in larger towns and cities.
Market Side finds that half of all Poles live within 1 kilometre of a discount shop, and the penetration is likely to increase, with the company predicting that the total carrying capacity for such shops in Poland is about 5,000 stores - of which the lion's share will belong to Biedronka. Biedronka is also using its market heft to open a network of cafÃ©s and pharmacies.
As Biedronka becomes more urban and goes upmarket, big-city hypermarket chains are bearing the brunt of the growing competition. In recent months big Polish supermarket chains like Tesco and Real have reacted by launching advertising campaigns stressing their low costs. "We are determined, if Biedronka decides to lower their prices, then we will do the same," Jaroslaw Moc, sales director at Real, a German chain, told the Gazeta Wyborcza newspaper.
But Biedronka's agility and market power make it a formidable foe. "It appears that the discounters have won the war for clients ... they have been able to attract not only the customers from large hypermarkets but above all those shopping in small neighbourhood convenience shops," says Tomasz Starzyk, retail expert at Bisonde Polska, an analysis firm.
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