Tesco and Wal-Mart push further into Eastern Europe
Tesco and Wal-Mart have both announced plans to expand operations
further in the Czech Republic and Hungary respectively.
The UK's largest supermarket Tesco will buy 27 stores in northwest Bohemia, close to the German-Czech border, from German retailer Edeka. The deal currently awaits Czech competition commission approval. This follows a store swap between Carrefour and Tesco that saw the British retailer acquire 11 Czech supermarkets, strengthening its position as the fifth biggest retailer in the country.
And American Wal-Mart, although not in the Czech Republic, announced plans to buy all of Delhaize's Hungarian stores, according to local newspaper Napi Gazdasag.
This puts the firm in head-to-head competition with the Hungarian arm of Tesco, which has just opened two new stores and petrol stations in Szolnok and Szentes adding to its portfolio of 57 outlets.
These deals come as Mintel predicts food sales in Hungary and the Czech Republic will drive European economic growth over the first decade of the 21st century. The research group expects a 74 per cent rise in food retail sales from €783bn in 2000 to an estimated €1063bn by 2010.
During this period, sales will triple in Hungary and double in the Czech Republic as consumers switch from small stores and local markets, preferring a homogenised supermarket format.
But international retailers have long been attracted to the area. Hungary's retail sector is currently dominated by foreign-owned hypermarkets like Tesco, Auchan, Cora and Metro - names already firmly rooted in countries across Central and Eastern Europe (CEE).
Tesco has been established in the Hungarian market for 11 years and is the largest retail chain in the country employing around 17,000 people.
But the region is much more price sensitive than the West, suggesting renowned price-buster Wal-Mart stands a good chance of appealing to local consumers that typically favour price over quality or brand.
Wal-Mart's entrance into Hungary represents a direct challenge to the retailer's position, following news that Tesco plans to open stores on America's west coast by 2007.
Recent research from PricewaterhouseCoopers' (PwC) asserts that retailers cannot afford to ignore emerging Eastern European markets - but warns that only the most exploratory and adaptable food retailers will succeed.
It identifies a second wave of opportunity for companies entering the transitional CEE economies. Primary cities in Poland, Bulgaria, Hungary and the Czech Republic are reaching saturation point and retailers should explore opportunities further afield in more rural areas, it suggests.