Retailers seek a shopping El Dorado in the east

Date: 28/01/1999

By Chris Johnstone

CENTRAL and eastern Europe became an El Dorado for west European retailers in the 1990s, with little local competition, low prices for land, and the prospect of rapidly rising consumer spending offering expansion prospects unimaginable at home.

More than 100 foreign retailers of food and household goods are estimated to have entered the market over the last decade.

Western retailers such as Delhaize's unit Delvita, Dutch retailer Ahold, Julius Meinl, Rewe and the UK's Tesco rub shoulders and compete in the Czech Republic, in what some believe could be a testing ground for bigger battles to come.

While some companies are consolidating, others believe there is still plenty of room for expansion. Delvita, which has 58 supermarkets in the Czech Republic and one in Slovakia, has climbed to third place in the Czech market, behind local chains Interkontact and Ahold. It is now looking to concentrate on building up profits rather than constructing new stores, opening just ten new shops in the Czech Republic this year compared with 16 last year.

Tesco, which recently opened a flagship superstore close to Prague's St Wenceslaus Square, is still investing heavily in the region, with around €300 million earmarked for expansion in the Czech Republic, Poland, Hungary and Slovakia this year.

The large number of small corner shops which have survived the onslaught of new supermarkets suggests that there may still be room for foreign companies to make further inroads in these areas.

French retailers are also making a late dash for a stake in the central and east European market. Carrefour, which only has four stores in the region, plans to triple that number over the next 18 months, with most of its expansion focused on Poland.

But it is likely to clash with domestic rival Casino, which has announced plans to increase the number of hypermarkets it has in the country from four to 20 over the next two years as it bids to become the second-biggest player in the Polish market.

In the long term, however, retail analysts believe a shake-out of foreign retailers in central and eastern Europe is inevitable. As in the West, two or three companies are expected to emerge eventually as the dominant players in each national market.