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Supermarket challenge

Czech grocery stores see major changes in 2007

By Curtis M. Wong
Staff Writer, The Prague Post
October 17th, 2007 issue

VLADIMÍR WEISS/THE PRAGUE POST
Billa is moving in. The Austrian grocery chain bought out Delvita stores eariler this year.
VLADIMÍR WEISS/THE PRAGUE POST
Tesco Express recently opened near I.P. Pavalova. More stores like this are in the works.
Call it the year that shook up Czech supermarkets.
In 2007, all the Czech Republic’s largest retailers raised the competitive stakes in the supermarket industry with visible increases in their domestic business presence. The local Delvita franchise was acquired by the Austrian-based Billa supermarket chain in a landmark 100-million-euro ($142.8 million/2.8 billion Kč) deal. Similarly, the UK-based Tesco chain, which operates a total of 90 Czech stores including hypermarkets, supermarkets and gas stations, branched out in a more subtle — but vital — way, introducing the country’s first Tesco Express convenience stores, which offer a scaled-down selection of Tesco products. The first Express store opened this summer near the I.P. Pavlova metro stop, while a sister shop recently opened in Černošice, a village 10 kilometers (6.2 miles) outside Prague.    
Following the Delvita acquisition, foreign conglomerates now largely control the Czech supermarket industry. In 2006, Tesco finalized the takeover of 27 Edeka and 11 Carrefour stores nationwide, and the company’s sales promptly rose to a record high of 34.7 billion Kč.
Meanwhile, Albert and Hypernova stores have started undergoing their own major overhaul and expansion this year. Both owned by the Dutch company Ahold, all Hypernova will be re-branded as Albert by the end of 2008.
“We think a single brand will allow us to differentiate from our rivals on the Czech market,” explains Libor Kytýr, director of communications for Ahold Czech Republic. “We want to build a strong recognition of our brand in the market and react to changing customer demands.”  
Indeed, according to industry insiders, these new developments on the Czech supermarket scene reflect the changing needs of shoppers, who are becoming increasingly choosy and detail-oriented — and, some say, more Westernized — in terms of service quality and product selection.
“Our main goal is to be a great place to shop and to be popular with our customers,” says Jana Matoušková, corporate affairs manager for Tesco Stores Czech Republic. “The Czech retail market is very competitive, so we constantly listen to our customers and try to do what they want. We try to meet their expectations and wishes.”
Jarosław Szczypka, CEO of Billa Czech Republic, echoes this sentiment, adding that the company saw the Delvita acquisition mainly as an opportunity to expand its services to a larger group of customers.
“With the acquisition of Delvita, the number of Billa supermarkets in the Czech Republic doubled,” Szczypka says. “It’s too early to say whether the number of customers grew accordingly, but judging by the turnover, they must have.”
Since the Austrian company entered the Czech market in 1991 with the opening of their first store in Brno, Billa’s domestic growth has been steady, with an average of seven to eight new shops opening each year, according to Szczypka, who notes that the Delvita acquisition is Billa’s largest expansion thus far within the Czech Republic. The company hopes to have all existing Delvita shops re-branded under the Billa name by the end of 2008.
Ahold also landed here in 1991, opening a store called Mana, which was changed to Albert in 2000. The Hypernova brand, originally known as Prima, showed up a year later.
Kytýr says Ahold started remodeling all of its Albert stores earlier this year while at the same time launching a string of new locations, a process that will “continue well into the next years.”
Tesco didn’t break into the Czech market until 1996, when the British company bought a chain of six department stores throughout the country. The company’s first hypermarket, which combined a traditional supermarket with the offerings of a department store, opened in Prague near Zličín in 1998.
The Tesco Express stores are based on a successful chain of the same name, which operates throughout the United Kingdom. The company’s marketing campaign for Tesco Express has been curiously minimal. Although Tesco issues advertising leaflets for its supermarkets and hypermarkets, the company chose not to do so for Tesco Express. This is partly due to the company’s desire to appeal to a core local group of customers, Matoušková says.
Although she cannot confirm any locations at the moment, Matoušková says the company is hoping to open more Tesco Express stores throughout Prague and the Czech Republic.
However, she is quick to deny any accusation that the Tesco company is seeking to monopolize the market of Czech-based convenience stores, saying Tesco Express will complement the offerings of smaller businesses rather than compete with them.
“Tesco Express is a format that’s been developed for busy areas with high attendance, and it’s been designed for quick and comfortable shopping,” Matoušková says. “In some cases, it’s actually a reason for small businesses to grow and offer different services that Tesco doesn’t offer. Small businesses have the opportunity to differ and offer what we do not have, such as a specialized number of goods, special services and a more personal approach.”
It sounds as though Albert may not be too far behind this strategy. Kytýr says the company hopes to present shoppers with three different options in the near future: The smallest Alberts at 200 to 500 square meters will focus on “everyday shopping for immediate consumption.” Regular Albert stores, measuring 500 to 1,800 square meters, will be geared for everyday users as well as “weekly, one-stop shopping” trips. And the Albert Hypers, which could be as big as 5,000 square meters will also offer nonfood items and seasonal good, Kytýr says.  
Officials downplay any rivalry with their industry competitors, adding that their stores were more focused on individual customers rather than corporate antagonism.
“Of course we monitor what our competitors do,” Matoušková says. “But [our customers are] most important for us. We will continue to improve our services for our customers so that we can offer them comfortable shopping.”
Kytýr agrees. “We respect all players on the market,” he stresses. That said, “we react to our customer demands, not our competitors.”
Tesco and Albert “are serious and respected competitors,” Szczypka adds. But, ultimately, “we mind our own business.”
Curtis M. Wong can be reached at realestate@praguepost.com

Curtis M. Wong can be reached at specialsection@praguepost.com


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