Greek Grocery Segment in Turmoil
Grocery spending per capita ($3,543) is below 2008 levels; consumer behavior has changed significantly, resulting in empty hypermarkets and more frequent shopping in small formats. Carrefour’s sales are plummeting, whereas Delhaize is reporting solid growth; Aldi has withdrawn from the country, but Lidl has store openings in the pipeline.
As a result of the difficult economic conditions, Greek consumers have abandoned hypermarkets in droves because traveling to and from these stores increases the overall cost of a shopping trip. In addition, the concept of bulk buying has become irrelevant as consumers have less disposable income and prefer to spend small amounts more frequently. This presents a great opportunity for smaller formats like supermarkets, discount stores and convenience stores.
Carrefour, the leading hypermarket operator in Greece, seems to have been hurt most by the shift in consumer behavior. The retailer is facing liquidity problems and has delayed payments to suppliers, who in turn have refused to stock its stores. As a result, Carrefour hypermarkets are suffering out-of-stocks. Carrefour plans to convert hypermarkets to its new planet concept, but this project has been delayed — and one might rightly ask if planet’s services (opticians, health and beauty treatment) are a match for the landscape.
In addition, the conversion of Dia discount stores to Carrefour Marinopoulos and Carrefour Express supermarkets is not likely to be completed by the end of 2011 as the retailer initially planned. Carrefour’s year-over-year sales declined 7.5 percent in the first quarter of 2011, and same-store sales were off 8.1 percent.
By contrast, Delhaize’s Greek fortunes have been flourishing: Net revenues increased 6.3 percent in 2010, results achieved primarily through the selective acquisition of local chains, organic expansion and buying stores from bankrupt local players. Its strong buying power and an exceptionally well-developed private label product range have been integral to its success.
Another rapidly expanding retailer is Schwarz Group’s Lidl, the only significant player representing the Greek discount scene following Dia’s conversion and the withdrawal of Aldi. Schwarz Group’s recent acquisitions of Tengelmann’s Plus stores in Romania and Bulgaria, coupled with its planned entry into Serbia, are proof of the retailer’s interest in the Balkans; Schwarz Group could become the leading retailer in Greece over the next decade.
Masoutis, which holds the leading position in Northern Greece, acquired some of Atlantic’s stores in lucrative locations — along with a share of Carrefour’s disappointed consumers. It has expanded to the region of Ipiros and the islands of the North Aegean.
Another important player worth monitoring is Veropoulos. In contrast to Masoutis, Veropoulos has postponed expansion plans and is looking for a new business strategy. It has restructured and hired several experienced managers from Aldi, but the challenge for top management with a discount background may be to convert a traditional grocery retail chain into an efficient business.
The first domestic victim of the Greek financial crisis was retailer and wholesaler Atlantic. Once a top-five retailer, Atlantic was weakened by problems among shareholders and sold its wholesale operations last year to make its retail business more efficient and profitable. This strategy failed, however, and the retailer filed for bankruptcy and sold the majority of its outlets.
The crisis in Greece has created a completely new retail grocery environment, conditions in which many retailers and suppliers have never operated. Retailers have been fighting for consumers’ shrinking disposable income; many are working on the edge of profitability, and only those that can quickly adapt their strategies to the new market conditions will have much of a future.