Country Presentation Slovakia

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Country Presentation Slovakia
Updated November 2007
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Contents

• Retailers covered include

• Map
• Demographics
• Political Outlook
• Economic Overview
• The Retail Market
• Europanel Data
• Top Retailers
• Challenges and Opportunities

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Summary

• Area 49,030 sq.km
• Capital City Bratislava
• National Currency Koruna
• Population (2007) 5.38 million inhabitants
• Population Density109.73 people/km

• PresidentIvan Gasparovic
• Ruling Party The Smer Party
• Prime Minister Robert Fico

Source CIA
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Demography Population Split By Region (2007)
Source World Gazetteer 2007
5
Demographics
Population Split by Age, 2006 ()
Population Growth Forecast (000s)
www.igd.com/analysis/datacentre
Source IGD Datacentre, Eurostat
6
Political Outlook

• Robert Fico, leader of the left-wing Smer Party,
  was appointed Prime Minister in the last general
  election in June 2006.
• However, Mr Fico did not win enough seats to
  govern alone.
• The Smer Party has put social welfare at the top
  of the agenda, reversing some of the policies of
  the previous government, which focussed on fast
  tracking economic development.
• Analysts are watching closely to see what impact
  his policies will have on the 2009 target date
  for euro entry

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Economy and Consumer Spending

• Consumer expenditure is set for further growth in
  2007, driven by annual real wage growth and the
  likely drop in interest rates as the koruna
  continues to strengthen and inflation slows.
• Due to favourable global oil price developments,
  the government decided to decrease gas and water
  prices from January 2007.
• This is likely to stimulate further expenditure
  on consumer goods going forward as people begin
  to accumulate more disposable income.

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Economic Overview
Source IGD Datacentre estimates, CEE Quarterly
Q1/2007, Eurostat
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Grocery Retail Market Sizes 2007e
Top 10 Global Markets
Top 10 Eastern European Markets
www.igd.com/analysis/datacentre
Source IGD Datacentre estimates
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The Retail Market
Source IGD Datacentre estimates
www.igd.com/analysis/datacentre

• IGD Grocery Retail Market corresponds to the
  total annual turnover (excluding VAT) of retail
  outlets predominantly selling food. It includes
  the sales of non-food articles (i.e. health
  beauty, pet care, clothing, DIY etc) sold by
  hypermarkets, supermarkets, discounters,
  neighborhood stores, specialised food stores
  (bakeries, butchers, etc) and open markets. It
  excludes all cash carry, delivered wholesale,
  foodservice and drugstores/chemists.
• IGD Total Grocery Market includes is a wider
  definition of the grocery universe and is the sum
  of the grocery retail market and the cash and
  carry outlets.

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Retail Consumer Spend Per Capita in Slovakia
Source IGD Datacentre
www.igd.com/analysis/datacentre
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Format Development, Value Share ()
Share of Trade
Source GfK ConsumerScan/Household Panel
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The Grocery Market Structure By Format

• Most modern retail activity in the country is
  still concentrated in Bratislava, which boasts
  25 of the Slovakian population and an even
  higher percentage of the country's purchasing
  power.
• In Bratislava, the hypermarket is highly
  competitive. Because of this, the larger format
  sector is nearing saturation.
• Since 2001, the number of small and medium-sized
  independent retailers has declined rapidly.
  Nevertheless, these stores will continue to play
  an important role in more rural areas.
• Lidl is the only discounter active in the market
  but is in the middle of establishing a presence
  in the Slovakian market. Tesco is also set to
  roll-out its new discount format in the coming
  years.

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Market Share
Note Grocery data. Total may not add up to 100
due to rounding. Bracketed figures 2005 data
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Private Label Share
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Breakdown of Spend by Housewife Age
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Breakdown of Spend by Household Size
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Top Retailers 2006
(1) Constant currency. Grocery Retail market
Shares exclude cash and carry operations. Note
Data is for grocery formats only except Total
Sales which includes non-grocery if applicable.
Total Sales Grocery Sales are Net.
Source IGD Datacentre, 2006 estimates
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• Coop Jednota comprises 33 autonomous cooperative
  companies in Slovakia.

Key S/S Superstore/Supermarket C/F
Convenience/Forecourt
www.igd.com/analysis/datacentre
Source IGD Datacentre, 2006 estimates. Data is
for grocery formats only. Total sales are Net.
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Coop Jednota and Terno stores in Bratislava

• Clear market leader in Slovakia.
• Operator of over 2,000 Progaviny convenience
  stores, nearly 200 Jednota Supermarkets and 12
  Terno superstores.
• Since 2004, Coop Jednota has rationalised the
  Progaviny chain. Between 2004 and 2006, over 180
  Progaviny stores closed in Slovakia.
• Coop Jednota is focuses on the continued roll-out
  of Terno superstores. 3 new stores are planned to
  open in 2007.

Source Retail Analysis photo gallery
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• Tesco entered Slovakia in 1996 though the
  acquisition of K Mart.
• Tescos operations in Slovakia accounted for 9.0
  of total European sales outside of the UK in
  2006/07.

Key H Hypermarket S/S Superstore/Supermarket
H/SD Hard/Soft Discount O Other (Department
Stores)
www.igd.com/analysis/datacentre
Source IGD Datacentre, 2006 estimates. Data is
for grocery formats only. Total sales are Net.
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Tesco in Bratislava and Pezinok

• Tesco has driven growth in Slovakia using its
  compact hypermarket model.
• Tesco's compact hypermarket format is based on a
  3,000 sq m (c32,500 sq ft) store with an
  'everything under one roof' product offering.
• Tesco implements a local management structure
  rather than centralised decision making in
  Slovakia.
• There has been a recent focus on developing
  capability for Tesco in Slovakia, not least
  through a new 500,000 sq ft fresh foods central
  distribution depot at Beckov, which came on
  stream in April 2006.
• Tesco has recently launched a new discount
  oriented 1k (1,000 sq m)  format.  The first
  store opened in Vrable, with the number of 1k
  stores increasing to six by April 2007. 
• A further nine discount stores are set to open
  over 2007/08, with total store numbers and space
  set to reach 48 and 2.9m sq ft respectively by
  February 2008, representing a 15 increase in
  space.

Source Retail Analysis photo gallery
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• Lidl Schwarz entered Slovakia in 2000 through
  its Kaufland division.
• The group opened its first Lidl discount stores
  on 9th September 2004. In doing so, Lidl became
  the first international discount operator to
  establish operations in the country.
• Sales in Slovakia accounted for an estimated 1.4
  of total group turnover in 2006.

Key H Hypermarket H/S D Hard/Soft Discount
Source IGD Datacentre, 2006 estimates. Data is
for grocery formats only. Total Sales are Net.
www.igd.com/analysis/datacentre
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Kaufland and Lidl in Bratislava

• Lidls entry into Slovakia was expected to have
  occurred in May 2004, on entry into the
  EU.However its entry was delayed as a result of
  a law passed in Slovakia in 2001, which stated
  that at least 65 of a foreign operators
  assortment must be sourced in the national
  market.
• This clearly highlights the importance of its
  pan-European sourcing strategy in Europe.
• Lidls future priorities include
• Rapidly expanding its discount portfolio.
• Capitalising on cross-divisional synergies.

Source Retail Analysis photo gallery
25

• Entered Slovakia in 2000.
• Method of market entry Organic growth (Cash
  Carry).
• Sales in Slovakia account for less than 1 of
  total group turnover.

Key CC (Clubs) Cash Carry Members Club
www.igd.com/analysis/datacentre
Source IGD Datacentre, 2006 estimates. Data is
for grocery formats only. Total Sales are Net.
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Metro Cash Carry

• Slovakia remains Metros smallest operating
  market in Central/Eastern Europe.
• Metro opened no new store in 2006, yet reported a
  11.0 increase in sales.

Source Retail Analysis photo gallery
27

• Rewe entered the Slovakian market in 1994.
• Since then, Rewe has channelled growth by
  rolling-out the Billa chain of stores.
• Rewe operates in Slovakia through its subsidiary
  Rewe Zentrale AG.

Key S/S Superstore/Supermarket
www.igd.com/analysis/datacentre
Source IGD Datacentre, 2006 estimates. Data is
for grocery formats only. Total sales are Net.
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Billa in Bratislava

• Rewe has undergone strong organic growth through
  the Billa chain since market entry.
• In addition to its standard supermarket format,
  Rewe also operates the Big Billa format. The
  store has a sales area of 2,000 sqm. The
  pre-requisite for this format is a catchment area
  of at least 30,000 inhabitants.
• In February 2005, Rewe purchased Delhaize's
  Slovakian subsidiary, Delvita SK, for 7.7 million
  euro, adding 11 stores to its portfolio.
• In October 2005, Rewe Austria's Managing Director
  Peter Seidner announced plans to nearly double
  the number of Billa supermarkets in Slovakia over
  the next three years.

Source Retail Analysis photo gallery
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• Since signing an agreement to divest its stores
  in Slovakia to Tesco, Carrefour has treated its
  Slovakian operations as a discontinued
  operation.
• However, the stores have still not been divested
  due to Slovakian Competition Authorities blocking
  the deal.

Key H Hypermarket
www.igd.com/analysis/datacentre
Source IGD Datacentre, 2006 estimates. Data is
for grocery formats only. Total sales are Net.
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• No.7 in Slovakia.
• Like the Czech Republic, Slovakia has not been a
  priority market for Carrefour in Europe since its
  market entry in 2000. 
• In September 2005, Carrefour signed an agreement
  with Tesco to divest its 4 Slovakian hypermarkets
  and 11 stores in the Czech Republic, in exchange
  for its Taiwanese operations.
• However, in December 2005 the divestment was
  referred to the Slovak competition authorities
  for them to look at competition issues in
  Bratislava, Kosice and Zilnia. 
• On 5th January 2007, Slovakia's Antimonopoly
  Office announced that it had prevented Tesco from
  acquiring Carrefour's four stores in the
  country. 

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Key H Hypermarket S/S Superstore/Supermarket

• Ahold opened its first stores in Slovakia in
  December 2001.
• Slovakia joins the Czech Republic in forming
  Aholds Central European Arena.

Source IGD Datacentre, 2006 estimates. Data is
for grocery formats only. Total Sales are Net.
32
Hypernova in Pezinok

• Aholds Slovakian portfolio is limited to the
  Hypernova chain of compact hypermarket stores and
  Albert supermarkets.
• In November 2006, Ahold announced that it is set
  to divest all operations in Slovakia as result of
  a strategic review of the company.
• Ahold has failed to gain a leading position in
  the Slovakian market and would require a
  significant level of investment and management
  attention to do so.

Source Retail Analysis photo gallery
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Challenges and Opportunities

• Grocery spend per capita remains significantly
  lower than in Western Europe and the market is
  very price sensitive. This limits the opportunity
  to improve margins through added-value products.
• Retailers and suppliers should prepare for
  further expansion of Lidl's discount store
  network in the country.
• Entry-price private label is being aggressively
  developed in response to the increased popularity
  of the discount format.
• Slovakia plans to adopt the euro in 2009. As
  retailers convert their prices from the local
  currency, there is the potential for greater
  consumer sensitivity to prices. Retailers need to
  manage the transition effectively to maintain
  their price image.
• The large number of small towns offers
  opportunities for discounters to capitalise on
  the consumer demand for convenience and value.
• The removal of sourcing legislation in 2004,
  (which stated that 65 of a foreign retailer's
  assortment must be sourced in Slovakia), enables
  retailers to seek global sourcing efficiencies.

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Market Share Definitions

• IGD defines the grocery retail market as all
  food, drink and non-food products (i.e. health
  beauty, pet care, clothing, DIY, tobacco etc)
  sold through all retail outlets selling
  predominantly food in a given country. This
  definition includes modern retail formats such
  supermarkets and hypermarkets as well as
  traditional retail formats such as open air
  markets and traditional food stores such as
  bakers. However, it excludes cash carry and
  drugstores.
• IGD Market sizes are derived from national
  statistical sites wherever possible. In all other
  cases, the figures published in this report
  represent IGD estimates and are based on a
  consistent methodology and knowledge of local
  markets.
• For each retailer, the turnover used is total
  grocery (rather than total company), and
  therefore excludes non-food formats (such as DIY,
  electrical stores, department stores etc). IGD
  also excludes cash carry formats and retailers
  and drugstores / chemists from this measure to
  ensure a consistent market share figure.
  Therefore these shares are based on IGD Grocery
  Retail Market Sizes.
• 1.Retail turnover is excluding VAT
• 2.Retail turnover is excluding non-food formats
  (e.g. furniture, electrical stores etc)
• 3.Metro cash carry operations are excluded
• 4.Where known, we have subtracted the cash
  carry operations of players such as Carrefour and
  Rewe to use a pure grocery retail estimate of
  turnover.
• IGDs market shares differ from ACNielsen or TNS
  data due to the different methodologies applied
  to calculate the market shares (till roll data
  and customer panel information respectively
  from limited categories).
• Europanel Data
• Europanel market shares are based on purchases
  made by private households, and cover the
  purchasing of fmcg products bought in all outlets
  even if they do not sell primarily food
  (e.g. pharmacies).
• In many countries, the definition excludes large
  items bought in hypermarkets (e.g. television,
  washing machine).
• It does not cover Cash Carry (except where
  private households buy directly from them),
  institutions who may buy some of their products
  from retail outlets (e.g. hospitals, schools etc)
  and purchases made for out of home consumption
  (e.g. caterers, offices etc).

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For More Information

• Visit the Slovakia hubpage on Retail Analysis.
• Use the IGD Datacentre for key macroeconomic data
  on Slovakia, plus statistics on retailers
  operations by banner and format.
• Visit the photo archive for images of retailers
  operating in Slovakia.
• Got an iReports subscription? Try checking our
  International Research reports.
• To find out how an IGD Customised Briefing can
  bring you up to speed on the market and the key
  players, email nick.everitt_at_igd.com
• Still cant find what youre looking for?
  Contact us igd_at_igd.com or 01923 857141.