Convenience opportunity in Central and Eastern Europe

Simon Chinn: convenience opportunity in CEE

Convenience retailing is poised to grow in Central and Eastern Europe (CEE), according to Verdict Research.

In its report, Retailing in Central & Eastern Europe 2008, Verdict claims CEE’s growth potential remains massive, attracting retailers and developers to the region.

To date, growth has been driven by hypermarket and shopping centre development.

In 2007 CEE’s total retail market was worth €179bn, equivalent to half the size of the German market, and had grown by 56.4% between 2002 and 2007.

“Format diversification and regionalisation are driving retailers’ expansion in CEE, whilst local players are seeking out further growth opportunities abroad,” says Verdict. However, as the retail market in CEE’s largest urban centres becomes increasingly saturated, retailers have begun to turn their attention to smaller up-and-coming regions, and developing new formats to tap into a burgeoning convenience sector, Verdict adds.

“There is definitely an opportunity in CEE for the convenience format,” said Verdict analyst, Simon Chinn.

Zabka: expanding in Poland and the Czech Republic

Chinn highlighted the expansion of Poland’s leading convenience store chain, Zabka, in the region.

It was acquired by the Czech-Slovak private equity company, Penta, in 2007 and has subsequently expanded into the Czech Republic.

Zabka operates around 1,800 stores in Poland and has a target for 2,500 by 2012.

Zabka entered the Czech Republic in April 2008. It opened its first 10 stores in and around Prague and is aiming for a chain of 250 stores across the Czech Republic.

“I expect that Prague could have up to 100 Zabka stores,” said Zdenek Linhart, managing director of Zabka.

“Our expansion focuses mainly on opening stores in new locations, but we are also open to consideration of takeover of existing stores or smaller chains.”

Convenience is a new retail model in the Czech Republic.

Zabka’s stores range from 50sq m to 100sq m and offer pre-packaged fresh and long-life food and beverages, alcohol, newspapers, toiletries plus services such as mobile credit top-ups.

“Our model of convenience retail means first and foremost convenient and accessible shopping. On top of the basic items, of which Zabka stocks 1,600, our shelves are always stocked with fresh bread, fruit and vegetables, and customers can soon look forward to a broader range of products, as well as of services. Home delivery or online shopping is also on the menu for the future,” revealed Linhart.

Zabka stores are open from 6 am until 11pm daily, including weekends and public holidays. The first Zabka outside Prague opened in Slany.

Chinn told Global Convenience Store Focus, Zabka was growing strongly and further expansion into Slovakia and Ukraine was on the cards.

Chinn predicted the next likely development in CEE would be a response from western Europe with retailers such as Carrefour, Auchan and Tesco launching convenience formats in the region.

Verdict’s Retailing in Central & Eastern Europe 2008 report profiles retailers in the Baltic States, Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia and Slovenia.