Jeronimo Martins staying focused on Polish market
retailer Jeronimo Martins intends to maintain its focus on the
smaller store format. Success in this market is helping the company
remain profitable, despite stagnant sales in the Portuguese market.
The latest Biedronka store to be opened by Jeronimo Martins was in the small town of Buk, close to the city of Gniezo. It is a typical target town for the company, with a population hovering around the 20,000 mark and close proximity to the larger urban population of Gniezo. Also typical is the store size, which at 600 square metres carries enough retail space to stock a wide selection of food and beverage, including a large proportion of own label products.
"The Biedronka store format has proved to be incredibly successful for Jeronimo Martins," said M+M Planet Retails Boris Planer. "These are small, clean and well designed stores that also benefit from a stylish image. On top of this, the high proportion of high quality own label products helps to keep prices down and the customers statisfied."
But things have not always gone so smoothly for Jeronimo Martins in Poland. Only two years ago the company was struggling against a flat domestic market in Portugal, compounded by the fact that its operations in Poland were not the success they are today. The company had invested heavily in both the supermarket and hypermarket formats in Poland which also culminated in the sale of its Cash & Carry unit, Eurocash, for €30 million at the start of 2003.
"The problem with larger store formats in Poland lies in the country's demographics," said Planer. "The population of Poland is highly dispersed, consisting of lots of small towns and cities. Indeed, the country's capital only accounts for around 4 per cent of the population. Because of this, it makes the market for larger food retail stores much smaller than in most other European countries, where the majority of the population lives in a handful of major urban areas.
"The point is, in order to be successful, the larger store format needs to have a substantial catchment area. In Poland there is only limited scope for this, which has already been well developed by larger western European retailers such as Tesco, Auchan and Ahold. This is why, despite have much smaller financial resources, Jeronimo Martins has proved to be more successful with the smaller format roll outs."
This was proved when Jeronimo Martins revealed its half yearly financial results at the end of August. The results showed a 78 per cent jump in profits to €30 million. And with the domestic market continuing to be flat, it was the Polish operations that had driven the results, with sales there up 14.9 per cent. This figure proved to be even higher than the strong performance in 2003, when sales for the financial year topped €1 billion, up 14 per cent on 2002, which accounted for 29 per cent of the company's total sales.
"Biedronka will be around for a long time in Poland and will continue to expand in the immediate future," says Planer. "Careful planning and good management have all served to create a strong identity that consumers can easily familiarise and relate to."
However, Planer is not convinced of the company's ability to expand beyond the Polish market and into other markets in Central Europe. "This is not likely to happen because the company remains small in international terms. Jeronimo Martins got a foothold on the Polish market early on, now such a position is difficult to obtain in other markets unless the retailer has deep pockets.
"The company has said that it is interested in entering the Ukraine market, but this is relatively undeveloped, which means it would take a long time to build up a substantial presence. For the time being it needs to remain concentrated on the Polish market for future growth."
