Retailers must adapt to secure lucrative markets
to ignore emerging Eastern European markets - but warns that only
the most exploratory and adaptable food retailers will succeed.
In a new report, From Beijing to Budapest: Winning Brands, Winning Formats, PWC documents a second wave of opportunity for companies entering the transitional economies of Asia and Eastern Europe.
Primary cities in transitional economies such as Poland, Bulgaria, India and Thailand are reaching saturation point and retailers should explore opportunities further afield in more rural areas, the report suggests.
But as regional cities in these countries become more prosperous, creating greater retail opportunity, brands must find balance, blend and mix of product suitable to each market.
Only those companies able to adapt and grow quickly, says the report, will be able to tap into accelerating consumption trends and economic growth.
"The global image of world class brands needs to be balanced with a keen sensitivity to local tastes," said Jacques-Etienne de T'Serclaes, PWC Global Retail and Consumer Leader.
"A careful blend of local and Western cultures has to be fine-tuned."
The report also identifies the need for a cautious entrance strategy into these markets in order to obtain important local knowledge and contacts.
Partnering with existing regional firms is the most viable option; so foreign retailers can begin to understand consumer trends and are better equipped to deal with local bureaucracy and legislation.
Tesco, which recognises the value of working with local firms, has just entered the Chinese market by taking a 50 per cent interest in Hymall, a leading hypermarket chain.
And Rewe, Europe's fourth biggest retailer, plans to invest €220 million into Bulgaria over the next three years, with Russia and Romania also becoming key focus areas for the German-based retail giants.
But the PWC report also cites franchising as an important alternative entry path for foreign investors, who can learn rapidly from local entrepreneurs.
Russian supermarket chain, Pyaterochka, plans to buy local franchise network Economtorg by the end of 2005 - highlighting the enthusiasm of local retailers to capitalise on new market trends and their general preference for franchises.
From Beijing to Budapest has been published annually since 2002, and follows 20 key transitional economies throughout Asia and Eastern Europe. More than 40 per cent of the world's population live in the areas studied, producing 20 per cent of global GDP.
The latest publication sees the addition of Russia, Bulgaria and Romania as contenders on the seven-country top investment list. And with the whole Eastern European grocery market worth €187.8 billion, compared to the UK's €176.7 billion, this region represents a key growth opportunity for foreign retailers.
Also on the PWC top-seven list are China, India, Turkey and Vietnam.
