Rewe taps Eastern European retail potential

By Leah Vyse

- Last updated on GMT

Related tags Eastern europe European union Europe

Rewe, Europe's fourth biggest retailer, plans to invest around €220
million into Bulgaria over the next three to five years as entry
into the Eastern European market eases.

Following the introduction of the Investment Promotion Act by the Bulgarian Executive Investment Agency in August 2004, the process of obtaining licenses and permits has been simplified in order to increase the number of foreign investors in the run up to Bulgaria's admission into the EU in 2007.

With confidence high, German-based Rewe is also investing €120 million in the expansion of its Austrian supermarket subsidiary Billa, from 18 stores to 50. The retailer, which is active in 13 countries, continues to invest in Eastern Europe after increasing its turnover there by 10 per cent in 2004 to €2.6 billion.

International retailers have sought to capitalize on the emerging markets of Eastern Europe since the mid-1990s as the Western European markets became increasingly saturated. Figures from retail research group IGD show that food retail per capita is significantly lower in Eastern Europe than Central Europe, suggesting there is real potential when these markets mature.

At present Eastern Europe as a whole has a grocery market of €187.8 billion, compared to that of the UK, which is €176.7 billion.

Russia, Bulgaria and Romania, where Rewe is already active, are the focus of future investment for the German company, the aim being to increase the percentage turnover received abroad from 28 per cent to 60 per cent.

Russian authorities are said to be keen to welcome foreign investors in order to reduce black market activity and increase the VAT income for the government.

Similar to the Bulgarian authorities they are helping to attract foreign investors through financial support, as they believe investments will help fuel the economy and create growth.

Developments in the Eastern European market are happening all the time. Belgian retail group Louis Delhaize today opened its €40 million hypermarket in Romania with another store already under construction.

A recent report from Planet Retail claimed sales in the supermarket sector are likely to expand by 150 per cent to just under €9 billion for market leaders by 2009.

IGD claims that Russia is set to become Europe's biggest grocery market by 2020.

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