Country Presentation Serbia

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Country Presentation Serbia
Updated November 2007
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Contents

• Retailers covered include

• Map
• Demographics
• Political Outlook
• Economic Overview
• The Retail Market
• Europanel Data
• Top 10 Retailers
• Challenges and Opportunities

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Summary

• Area 102,170 sq. km
• Capital City Belgrade
• National Currency Dinar
• Population (2006)8.17 million inhabitants
• Population Density 80 people/km
• President Boris Tadic
• Ruling PartyDemocratic Party of Serbia
• Prime Minister Vojislav Kostunica

Source CIA
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Demography 10 most populated Cities
Source City Population, 2002
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Demographics
Population Growth Forecast (000s) Serbia
Montenegro
Population Split by Age, 2006 ()
www.igd.com/analysis/datacentre
Source IGD Datacentre, 2006, UN
6
Political Outlook

• The Socialist Federal Republic of Yugoslavia
  broke up in 1991/1992 following the independence
  of Slovenia, Croatia, Bosnia and Herzegovina, and
  Macedonia. Two remaining republics of Yugoslavia,
  Serbia and Montenegro, formed in 1992 a new
  federation named Federal Republic of Yugoslavia
  (In 2003 this state was transformed into the
  State Union of Serbia and Montenegro).
• The Government of Serbia and new Yugoslavia
  supported Croatian and Bosnian Serbs in the wars
  from 1991 to 1995. During this time, the country
  was under economical and political sanctions,
  which resulted in economical disaster that forced
  thousands of young Serbian citizens to emigrate
  from the country.
• Serbia declared its independence on June 5 2006,
  following Montenegro's declaration the previous
  month. This marked the final dissolution of the
  State Union of Serbia and Montenegro, and the
  re-emergence of Serbia as an independent state,
  under its own name, for the first time since
  1918.
• Fiercely independent and recovering from
  political turmoil, Serbia is now working towards
  EU membership, although problems concerning war
  crimes have halted proceedings.
• The country is supported by international
  agencies with funds directed at developing
  frameworks within which civil society
  organisations can develop.

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Economic Overview
www.igd.com/analysis/datacentre
Source IGD Datacentre estimates, Unicredit, IMF
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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 Serbia
Source IGD Datacentre
www.igd.com/analysis/datacentre
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Retail Legislation

• New custom and tax laws have reduced illegal
  imports into the country, but corruption and the
  black market remain a major problem.
• The state retains discretionary authority over
  price changes of basic grocery goods, including
  milk, bread and cooking oil.
• The Law on Trade regulates the activities of
  wholesalers and retailers. Wholesalers act as a
  distribution intermediary for retailers.
• Franchise operations are not widely practiced,
  although there is no specific law affecting them.
  
• Joint ventures are ruled by the Foreign
  Investment Law (2002). International investors
  are expected to provide capital, equipment and
  merchandise, whilst domestic investors provide
  personnel, warehouse space and channels for
  distribution.
• On September 24 2005, the new Competition
  Protection Law (CPL) took effect in Serbia. The
  competition law regulates instances where
• control over all or a part of one or more
  enterprises is acquired by another enterprise (a
  concentration)
• there is an agreement between parties that would
  materially prevent, restrict or distort
  competition on the Serbian market
• there is abuse of a dominant position on the
  market.

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The Grocery Retail Market Format Development
Source IGD
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The Grocery Retail Market Structure By Format

• Traditional retail formats dominate the grocery
  sector, with approximately 30,000 independent
  stores operating the country.
• Modern retail development is focused in Belgrade
  and other large cities, with cash carry formats
  first represented by Delta Ms first Tempo store
  in 2004 and Metro in 2005.
• The discount sector is undeveloped in the
  country, providing an opportunity for
  international discounters to capitalise on the
  price-sensitive Serbian consumers.
• Foreign investment laws, adopted in 2004, have
  proved beneficial to investors. It has given
  investors the right of free profit repatriation,
  duty free equipment imports and simplifies the
  employment procedure.

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Breakdown of Shoppers by Housewife Age (Europanel
Data)
of buyers
52 w/e December 06
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Breakdown of Shoppers by Household Size
(Europanel Data)
of buyers
52 w/e December 06
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Breakdown of Shoppers by Presence of Children
(Europanel Data)
of buyers
52 w/e December 06
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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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Top Retailers 2006
Grocery Retail Market Shares excludes cash
carry operations. Data is for grocery formats
only except Total Sales which includes
non-grocery if applicable.
Source IGD Datacentre, Company Reports
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• Serbian conglomerate Delta Holding operates four
  retail chains under its Delta M subsidiary
• Maxi supermarkets
• C-Market- supermarkets (51 stake acquired in
  2005).
• Pekabeta convenience stores
• Tempo cash carry

Key C/F Convenience Forecourt, CC Cash
Carry, S/S Superstore/Supermarket, HHypermarket
Source IGD estimates, 2006.
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• Maxi operates under three banners Mini Maxi
  (convenience), Maxi (supermarkets) and Super Maxi
  (hypermarkets). It also operates shopping
  centres.
• Sales areas range between 500 sqm and 3,000 sqm
  and stores offer an average of 8,000 SKUs. It
  operated approximately 80 stores in 2006.
• Delta M plans to invest 700m by 2009 with the
  expansion of Maxi into Montenegro and Macedonia.

• Pekabeta is Delta Ms convenience store format.
• The retailer currently operates approximately 160
  stores, mainly in Belgrade.
• The stores have an average sales area of 200sqm
  and offer between 3,500 and 7,500 SKUs.
• Expansion planned into the densely populated
  urban areas around Serbias main cities and towns.

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• C Market was acquired by Delta M in 2005.
• The retailer currently operates approximately 250
  supermarkets. 60 of the chains turnover comes
  from its Belgrade stores.
• C Market is considering diversifying into a
  hypermarket format.
• It has also been reported that it is considering
  acquiring fellow Serbian retailer Si-Market.

• Delta M opened its first cash carry store in
  2004. It currently operates one store in
  Belgrade.
• The store has a sales space of 10,000sqm and
  offers 20,000 SKUs.
• Further expansion of the chain, with stores
  planned in Novi Sad, Belgrade, Kragujevac and Nis.

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Delta M Delta Agrokor merger

• In November 2006, it was reported in the Serbian
  press that domestic conglomerate Delta Holding
  and Agrokor, owners of Croatian retailer Konzum,
  had started the merger process between their
  retail divisions.
• The collaboration will strengthen the retailers'
  positions in Eastern Europe and enable access of
  Serbian goods onto the Croatian market and vice
  versa. The merger is likely to be completed in
  2008.
• Delta M has reportedly forecast sales of 5bn in
  2009 when it plans to float the merged company on
  the London Stock Exchange.
• The collaboration between Agrokor and Delta M
  will result in strong competition for Slovenian
  retailer Mercator, who challenged Delta M's
  leading position with its joint-venture with
  Serbian chain Rodic MB in May 2006.
• The Mercator-Rodic alliance came amidst rumours
  that Delta M was planning a hostile takeover of
  the Slovenian chain, and recent press reports
  suggest that Mercator had been considered as a
  potential third party in the Agrokor-Delta M
  collaboration.

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• In April 2006, Rodic negotiated a joint-venture
  with Slovenian retailer Mercator.
• Rodic MB became a co-owner of Mercators
  Slovenian stores and Mercator acquired Rodics
  Serbian stores.
• The new joint-companies, named M-Rodic in Serbia,
  are operated centrally from a single
  headquarters. New trade centres are planned in
  Novi Beograd and Novi Sad.

Key S/S Superstore/Supermarket
Source IGD, 2006 estimates. Total sales are Net.
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• Metro entered the Serbian market in January 2005.
  It opened two new cash carry stores in the
  country in 2006.
• In 2006, turnover increased 97 from 69m to
  136m, making it one of Metro's fastest growing
  markets.
• The company plans to have eight to 10 stores in
  Serbia over the next three years.

Key CC Cash Carry
www.igd.com/analysis/datacentre
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• Simpo is a production company with interests in
  furniture, food beverages, trade
  transportation.
• It established its food retail subsidiary in 1997
  through a merger with PC Vema.
• Simpo currently operates approximately 85
  Si-Market stores in Vranje and 90 in Belgrade and
  Pancevo.
• It has been speculated that Delta Holdings C
  Market subsidiary is considering acquiring the
  chain.

Source IGD 2006 estimates.
Key S/S Superstore/Supermarket
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• Vero is owned by Greek company Veropoulos.
• It entered the Serbian market in 2002 and
  currently operates 3 hypermarkets, under the
  Super Vero fascia, in Belgrade.
• It plans to invest 20m euro in 5 Serbian
  hypermarkets by 2008.

Source IGD estimates 2006.
Key H Hypermarket
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• Mercator entered the Serbia Montenegro market
  in 2002 with the opening of a hypermarket in
  Belgrade.
• In September 2006, Mercator received a 40m loan
  from the IFC to fund its Bosnia-Herzegovina and
  Serbian expansion plans.
• In April 2006, Mercator entered a joint-venture
  with Serbian retailer Rodic MB.
• Rodic MB became a co-owner of Mercators
  Slovenian stores and Mercator acquired Rodics
  Serbian stores.
• The group plans to invest 200m in expansion in
  Serbia  Montenegro by 2008.

Key H Hypermarket, SSupermarket,
C/FConvenience Forecourt
Source IGD 2006. Total Sales are Net.
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• Intermarchés entry into the Serbian market in
  2004 formed part of the groups move eastwards
  and followed previous entries into Bosnia
  and Romania. 
• ITM plans to operate 11 stores in Serbia over
  time and aims to make Belgrade the centre of its
  southeast European region. Future developments
  include expansion into Bulgaria and Macedonia.

Source IGD Datacentre estimates, 2006.
Key S/S Superstore/Supermarket
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Challenges and Opportunities

• Serbia remains one of the poorest CEE market.
  Furthermore, political uncertainty has hampered
  economic development and will remain a challenge
  until a clear programme for EU accession can be
  agreed.
• The potential EU accession does, however,
  highlight that the country has strong growth
  prospects.
• High inflation and unemployment undermines
  business and investor confidence. The government
  tackling FDI by creating a one-stop-shop for
  investors to reduce bureaucracy and corruption.
• Delta Holding is the clear market leader making
  it difficult for foreign retailers to enter the
  country through acquisition.
• Mercator and Rodics joint-venture has provided a
  strong challenger to Delta Holding and will
  provide opportunities for suppliers seeking to
  grow their business in the country.

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Market Share Definitions

• IGD Market Shares
• 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 Serbia hubpage on Retail Analysis.
• Use the IGD Datacentre for key macroeconomic data
  on Serbia, plus statistics on retailers
  operations by banner and format.
• 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.