No takeovers but dynamic divestitures marked 2015 groceries retail

The Croatian Competition Agency (CCA) carried out the groceries retail market investigation, covering food, beverages and sanitary products for households. The 2015 market investigation involved a sample of 50 undertakings that in accordance with their turnover and the number of groceries outlets i.e. food chains represent significant participants in the market. In comparison with the previous year the market research included two undertakings less due to the fact that the outlets of Merkur 5, which is not engaged in retail any more, had been taken over by Studenac whereas Mercator-H had been taken over by Konzum in 2014. At the same time the market research included one new undertaking – Istaski supermarketi d.o.o. from Poreč that leased a number of Dinova-Diona outlets in Istria and Primorje-Gorski Kotar County.

This market investigation, on the other hand, did not include the groceries retailers that carry out their businesses under the Trades Act or the shops whose primary activity is not the selling of food, such as petrol stations or chemists or other specialized stores that sell particular groups of food products, such as bakers and butchers shops etc.

The realized turnover of all the undertakings that were included in the market investigation for 2015 amounted to 33.1 billion Kuna and compared with 2014 rose by 4.5 %. The market shares held by the first ten retailers in 2015 compared with 2014 indicated a slight increase in the market concentration primarily due to the fact that some undertakings withdrew from the market whereas the retail turnover of the largest retail establishments (big chain stores) rose. The concentration ratio CR10 (the market shares of the 10 biggest retailers in the market) has been rising year after year.

Asymmetry in the retail market has continued to decline, in other words, the discrepancy between the leaders in the market (like Konzum) and its competitors has been diminished.

However, the withdrawal from the market of Mercator-H and the divestiture and/or lease of the outlets to the direct rivals (the same happened in the case of Dinova-Diona) was simultaneously followed by the strengthening of other, smaller and medium-sized retailers in some counties and the market entry of the previously mentioned new competitor (Istarski supermarketi in Istria County).

The retail market in Croatia is also known for a big number of competitors of different market power where big retail chains or the top five (Konzum, Lidl, Plodine, Kaufland and Tommy) together hold some 65 % market share or roughly two thirds of the retail market.

In 2015 no takeovers of competitors were recorded. Nevertheless, the market was dynamic thanks to divestitures of parts of assets or outlets of certain retailers.

Concretely, this refers to the decision of the CCA on the basis of which the concentration between Agrokor and Mercator-H was conditionally approved involving the committments of Agrokor (Konzum) to implement divestiture measures in the course of 2015. Namely, a number of undertakings – competitors of Konzum took over the outlets of Konzum and/or Mercator-H, such as Trgostil, Prehrana Trgovina, Metss, Mlin i Pekare, Lonia, Trgocentar Zabok, Pevec.

The groceries market investigation proved that the competitive structure of the market was retained and the interests of the consumers protected, which both are seen as competition efficiencies.

In comparison with 2014 the turnover of 40 groceries retailers rose, whereas 10 retailers recorded the fall in their turnover. A more significant decline was recorded by Dinova-Diona, which resulted in the drop of this undertaking from the 11th to the 26th position on the list of the biggest retailers with respect to the turnover they realized form the groceries retail. The reason for the fall of Dinova-Diona can be detected in its business decision dating from 2013 when it decided to abandon its retail business and let its competitors like Ribola, Gavranović, Spar, Lonia, Konzum and Istarski supermarketi take over its outlets.

In 2015 the leading ten retailers – Konzum, Lidl, Plodine, Kaufland, Tommy, Spar, Billa, Studenac, KTC and NTL had a compound turnover from the groceries retail worth 27.3 billion Kuna, which is an increase of 6.3 % compared with the previous year.

The concentration ratio CR10 (the market shares of the 10 biggest retailers in the market) in 2015 was 82.4 %, which is a moderate increase if compared with 2014 when CR10 was 81 %.

It was the first time that Narodni trgovački lanac d.o.o. (NTL) had joined the “top 10 retailers list” but this was in the first place due to the fact that Mercator-H, which was taken over by Konzum, was not active in the groceries retail market. NTL’s turnover has also been increasing.

Besides NTL there are to more retailers who have indicated a rising trend compared with the previous year. KTC jumped from place 10 to place 9 on the “top 10 retailers list”, whereas Studenac moved from place 9 to place 8.

In 2015 Konzum recorded the rise of the turnover and remained the most significant groceries retailer in Croatia. However, its market share (a compound market share of Konzum and Mercator-H) lowered from [30-35] in 2014 to [25-30] in 2015.

A double-digit growth of the turnover in 2015 compared with the previous year was also recorded by Spar, NTL, Plodine, Lidl, Tommy, Studenac etc.

In the “top 10 retailers” group Spar had the highest double-digit growth in 2015 compared with the previous year. This was first of all the result of the takeover of 20 outlets of Dinova-Diona dating from summer 2014. 19 out of 20 outlets were taken over in the City of Zagreb. Stepping into the category of the convenience store around the corner Spar took the second position in the retail turnover in the City of Zagreb.

Compared with 2014 the report year shows the fall in asymmetry, in other words indicates a smaller difference between the leading Konzum and the second retailer on the list – Lidl. Namely, Lidl increased its market share. So did Kaufland (both are the members of the Schwarz group), making the Schwarz Group members taken together the biggest competitor of Konzum. Together, these two retailers for the first time had reached the market share higher than 20 %.

In comparison with the previous year higher market shares were realized by Plodine, Spar, Tommy and Studenac. It must be noted that Tommy and Studenac have been in the first place regional retailers given the fact that they realized 60 to 70 % of their retail turnover in Split-Dalmatia County. NTL and KTC also recorded a slight growth of their market share. Regionally, the leading position is held by Konzum in twelve counties and in the City of Zagreb. This is one county more than in the previous year on the account of the fact that in 2015 Konzum took a leading retailer positon in Požega-Slavonia County for the first time.

From the total turnover realized from the retail in Croatia in 2015 Konzum realized 19 % in the City of Zagreb, 13.1 % in Split-Dalmatia County, 9.2 % in Primorje-Gorski-Kotar County, 6.9 % in Istria, 6.3 % in Zagreb County, 6.1 % in Zadar-County and 5.2 % in Osijek-Baranja County.

This means that almost two thirds of the total turnover from the retail in the Republic of Croatia was realized in the City of Zagreb and the six above mentioned counties. In other words, some 34.2 % or about one third of the total turnover was realized in the fourteen remaining counties.

The highest number of retail chains is situated in the City of Zagreb (a total of 18 retail chains), followed by Zagreb County and Primorje-Gorski Kotar County (17) and Varaždin County (16), whereas the lowest number of chain stores can be found in Dubrovnik-Neretva County (6) and Lika-Sinj County (6) and in Vukovar-Srijem County (8).

The most significant markets in Croatia are big cities – the City of Zagreb, Rijeka, Split and Osijek. The first three leading retailers in Rijeka and Osijek retained their positions also in 2015. In Rijeka the leading position has been taken by Plodine, followed by Konzum and Brodokomerc Nova whereas Lidl jumped from the fifth place to the fourth leading retailer in this town. In Osijek the top three retailers – Konzum, Kaufland und Spar have kept their positions. In Split Tommy has remained the leader followed by Konzum. The biggest change that happened in Split was Lidl jumping from number five in 2014 to number three in 2015.

The results of the market investigation indicate that 70 % of the turnover was realized in large format stores. In the analysis by shop type it is the supermarkets that realized the highest turnover of 47 %, whereas their domination of 45 % is also indicated in the net average sales area.

In addition, hypermarkets and supermarkets and self-service markets have all recorded turnover growth in 2015. Concretely, hypermarkets’ turnover grew by 11 %, self-service markets’ by 4 % and supermarkets’ by 3 %. On the other hand, the turnover of small shops declined by 4 % in 2015 compared with the previous year.

The most powerful retail group in Croatia has been Schwarz Group (Lidl and Kaufland) whereas Ultragros has had the highest number of members (22) in the retail market at the moment. In 2015 a local retailer Istarski supermarketi became an Ultragros member by leasing a significant number of former Dinova-Diona and Istracommerce outlets.

NTL Group had nine members in 2015 including the parent company Ntl d.o.o. and the indirectly connected companies Trgovina Krk and Trgostil (linked by Čakovečki mlinovi). The big majority of the outlets belonging to the former member Biljemarkant remained in the Group on the account of the extension of the lease agreement. This means positive effects for the consumers throughout Slavonia taking into account that these outlets operate in small towns and villages.

In that sense, the market investigation shows that regional and local retailers were successful in 2015 and increased their turnover and market shares in certain counties, at the local or regional level, like Studenac, Mlin i Pekare, Lonia, KTC, Djelo, Metss, Pemo, Ribola and Boso. For example, Studenac was able to significantly increase its turnover first of all due to its expansion based on the acquisition of a noteworthy number of outlets from the local retailer Merkur 5 similarly as in the takeover of Kerum outlets before. The raising trend of local retailers has been well illustrated by the retailer Mlin i Pekare from Sisak, a retailer that indicated a double-digit revenue growth compared with 2014 whereas it has expanded its retail activities from two to six counties in the last four years.

Finally, it is worth mentioning that NTL took the second position overthrowing Lidl from this position as early as in 2014 and kept that position in 2015 primarily due to the lease of the majority of outlets of Biljemerkant in Osijek-Baranja County. NTL is turning into a national retailer given the fact that since 2015 it has had outlets in a total of nine counties and the City of Zagreb (one in Soblinec and one in Lučko).