Carrefour to buy Ahold's Polish stores
in the Polish market with an agreement to buy 13 stores formerly
operated by Dutch rival Ahold, writes Chris Jones.
The hypermarkets, which traded under Ahold's Hypernova banner, are located in Poland's major cities, and will transfer to the Carrefour banner sometime early in 2005. The price paid by the French group was not disclosed.
Ahold has been selling off a number of its assets over the last year after widespread accounting fraud left it with a €1 billion hole in its accounts. Having already withdrawn completely from Asia and much of Latin America, Ahold had said that it intended to retain control of the majority of its operations in central and eastern Europe - although this has not prevented the piecemeal sale of underperforming or non-core stores.
"In Poland, we have decided to fully focus on the further development of the supermarket and compact hyper formats," said Anders Moberg, Ahold president & CEO.
"Moreover, the divestment of all the larger hypermarkets contributes to reduction of our debt. Our 170 Albert supermarkets and 12 Hypernova compact hypers are popular shopping destinations for 2.5 million loyal customers every week. We are committed to continuing to provide them with the products and services they demand and deserve."
Ahold's decision to divest its larger hypermarkets makes sense, according to Boris Planer, analyst at M+M Planet Retail. "The hypermarket sector in Poland is extremely competitive and most operators in the arena are still loss-making, and have entered this emerging market for a long-term pespective rather than fast profits. Given the current need of Ahold to raise cash and restructure, Carrefour clearly is the player with the deeper pockets.
"Also, when travelling across CEE, it is remarkable to see how much more professinally the Carrefour hypers are run, and how much more attractive they look to shoppers. The stores are more likely to have a future in Carrefour's hands than Ahold's."
Carrefour has already taken advantage of Ahold's new strategy of focusing on smaller stores in Poland, snapping up two other Hypernova outlets there back in November last year.
Carrefour's professionalism also appears to have given it the vital competitive edge in what is one of Europe's most concentrated retail markets, Planer suggests.
"The dynamic behind the strong competition in the retail scene is the invasion of international retailers since the 1990s who are battling for customers in relatively small urban conglomerates. The Polish population is mainly spread across a huge number of small and medium-sized towns, as well as a wide countryside, which results in just a small number of cities that are large enough to support more than one or two hypermarkets.
"These are the cities where the foreign hypermarket operators have all moved to, resulting in a competition intensity that is probably topped only by the levels found in the Czech capital, Prague. This oversaturation effect also combines with the still-low and slow-growing per capita spending power in Poland."
But Planer also believes that the large hypermarket format does have a future in the Polish market, provided it is properly managed. "Large hypers in CEE are a promising format for highly specialised and experienced retail companies with deep pockets, such as Carrefour (at the top end) and Schwarz Group's Kaufland (at the low-price end).
"For retailers with smaller cash reserves and less experience, compact hypers are a good format as these can be opened in hundreds of small towns across Poland where they will never have competition from a large hypermarket, which means they will have a good chance of being the most attractive store in town."
He continued: "These compact hypers will, in the medium to long term, be complemented by discounters, but the two formats should turn out to be a good match."
Given this dynamic, the question now must surely be whether Ahold plans to follow a similar pattern in the Czech and Slovak markets, where it also operates Hypernova stores under the large and compact formats. Carrefour also operates hypermarkets in both those countries, and would be the obvious buyer should Ahold decide to sell its larger stores.
Carrefour has been active in Poland since 1997, and operates 15 hypermarkets and 67 supermarkets there, with the most recent store opening coming last month in what the company claims is the largest shopping centre in central Europe, located in central Warsaw.
Carrefour does not give sales breakdowns per country for most of its European operations, but in its latest quarterly earnings report published last month the company said that the Polish hypermarket operations had shown solid growth during the third quarter with a same-store improvement in sales of 3.7 per cent.
