Future of CEE Retail

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1 Future of CEE Retail Potential for brand licensing By Miloš Ryba Senior Retail Analyst Planet Retail Ltd JUNE 2011

2 About Planet Retail We are: The leading Global Retail Analysis firm since We analyse: 9,000 retail operations across 211 retail markets. We serve: 14 of Top 20 Consumer Goods companies 15 of Top 20 Retailers 9 of Top 20 Retail Technology Vendors We deliver: Critical insights that create competitive advantage. 2

3 Agenda 1. Prospects for the retail market in Central & Eastern Europe 2. Direct to retail brand licensing 3

4 4

5 1 Prospects for the retail market in Central & Eastern Europe Market consolidation in Europe Western Europe is a homogenous market Central and Eastern Europe is diverse Sweden Iceland Norway Finland Denmark Estonia Latvia Lithuania Russia Market share of Top 5 grocery retailers up to 30% Market share of Top 5 grocery retailers 30% - 60% Portugal Ireland United Belarus Kingdom Netherlands Poland Germany Belgium Czech Rep Luxembourg Slovakia Ukraine Austria Switzerland Hungary Moldova Slovenia France Croatia Romania Italy Bosnia & Herzegovina Serbia Bulgaria FYRO Albania Macedonia Spain Greece Georgia Armenia Azerbaijan Market share of Top 5 grocery retailers over 60% Cyprus 5

6 X1 Prospects for the retail market in Central Europe 6

7 1 Prospects of the retail market in Eastern Europe X5 Retail Group to remain the clear leader X 7

8 1 Prospects for the retail market in Central Europe Schwarz Group to double its revenues by 2015 X 8

1 Prospects for the retail market in Central Europe The crisis has accelerated consolidation CE retail market was consolidated in 2010 Poland - Eurocash has acquired Emperia Holding s wholesale

9 1 Prospects for the retail market in Central Europe The crisis has accelerated consolidation CE retail market was consolidated in 2010 Poland - Eurocash has acquired Emperia Holding s wholesale division; - Zabka sold to PE Greece - Atlantic has sold its wholesale division Greece Aldi has divested Serbia Delhaize Group acquiring Delta Maxi Serbia Agrokor has acquired TUS stores Czech Republic Slovenia Croatia Poland Slovakia Hungary Bosnia & Herzegovina Lithuania Serbia Estonia Latvia Romania Bulgaria Slovenia - Agrokor almost acquired Mercator Czech Republic - Tesco has acquired Zabka Albania FYRO Macedonia Greece Rewe Group - sold its cash & carries 9

1 Prospects for the retail market in Central Europe Massive potential in the Balkans Slovenia Croatia Bosnia & Herzegovina Serbia Romania Bulgaria Delhaize Group to become

10 1 Prospects for the retail market in Central Europe Massive potential in the Balkans Slovenia Croatia Bosnia & Herzegovina Serbia Romania Bulgaria Delhaize Group to become the key retailer in the Balkans? FYRO Macedonia Albania Greece Tesco to enter Romania, Croatia? What move will Jerónimo Martins make? Metro Group to sell its hypermarkets??? 10

1 Prospects of the retail market in Central Europe Tesco s

Expansion of Tesco compact hypermarkets and Tesco Express

Focus on development of clothing ranges.

11 1 Prospects of the retail market in Central Europe Tesco s competitiveness to increase rapidly. Expansion of Tesco compact hypermarkets and Tesco Express convenience stores format. Introduction of e-commerce. Focus on development of clothing ranges. Competitive advantage of Tesco Clubcard data. Introduction of niche private label product ranges: co-operation with brand licensors. 11

Soft discount concept with around 2,000 items on offer Expansion of sales area to 1,200 square metres

12 1 Prospects for the retail market in Central Europe Schwarz Group s Lidl - the most successful discount format in Europe. Soft discount concept with around 2,000 items on offer Expansion of sales area to 1,200 square metres Private label accounts for around 70% of Lidl s turnover. Move into convenience: locations in city centres; fresh bakery and instore oven; butcher s counter; and expansion of fruit and veg 12

stores and convenience stores to become the leading format in 20 years More international

13 2 Prospects for the retail market in Central Europe Massive potential for small formats Room for expansion of compact hypermarkets (cities with populations of 20,000+) Small formats like discount stores and convenience stores to become the leading format in 20 years More international valueorientated players to enter Romania (Tesco, Jerónimo Martins) Massive potential for convenience stores like Zabka in PL 13

associations are losing members COOP Czech R.

14 1 Prospects for the retail market in Central Europe Future of retail associations? CBA Hungary - one of the best working retail associations in CE However, other retail associations are losing members COOP Czech R., COOP Slovakia CBA Croatia Aibe in the Baltics Lewiatan Polen Lack of a joint strategy is a huge threat for independent retailers, but an opportunity for big players 14

15 1 Prospects for the retail market in Central Europe Stiff competition in small towns 15

16 1 Conclusions Discount stores, drugstores and convenience stores are the fastest growing channels in the medium term Schwarz Group to retain its position as leader in Central Europe The Eastern European retail scene remains in the hands of Russian retailers Market consolidation to continue. Retail associations in jeopardy Massive potential in the Balkans 16

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18 X2 Direct to retail brand licensing Direct to retail (DTR) brand licensing offers mutual benefits for both licensors and retailers Licensors: greater transparency; greater control over contract negotiations and terms; and greater control over brand image Retailers: differentiate their private label products from branded goods; control over product development and sourcing; and gain higher margins 18

19 X2 Direct to retail brand licensing Disney Consumer Products (Disney) is by far the leading global licensor. Worldwide: Top Global Licensor Sales, 2008e-2009e (USD mn) Disney Consumer Products 27,200 30,000 Iconix Brand Group 6,500 9,000 Phillips-Van Heusen Warner Brothers Consumer Products Nickelodeon & Viacom Consumer Products Major League Baseball Sanrio Marvel Entertainment * Hasbro ** The Cherokee Group 5,000 6,600 6,000 6,000 5,500 5,500 5,100 5,000 5,000 5,000 5,700 4,900 4,500 4,000 4, e 2009e Note: *= acquired by Disney Consumer Products in late 2009; ** = 2008 unknown; e -estimate. Source: 19

20 X2 Direct to retail brand licensing Leading licensors have already partnered with some of the largest grocery retailers. Co-operation between brand licensor and retailers, 2010 Disney; Peanuts; Warner Bros; Cherokee; Rainbow Media Pte. 20

Child-orientated products are the most important in the grocery

Currently, only child-specific products are labelled with licensed

dairy products; and pre-packed fruit and vegetables Potential lies in

21 X2 Direct to retail brand licensing: GROCERY Potential in the food category lies in children s and niche product ranges. Child-orientated products are the most important in the grocery ranges. Currently, only child-specific products are labelled with licensed characters in categories such as: ambient (sweets, cereals); drinks; dairy products; and pre-packed fruit and vegetables Potential lies in large product categories with emphasis on the healthy aspects and fun of: 21 niche product categories like local products; pharmacy (OTC products); and alcohol

22 X2 Direct to retail brand licensing: KEY STUDY - TESCO There is great potential for licensors at Tesco in non-food ranges. Tesco also co-operates with Disney in its non-food as well as food lines Tesco plans to expand its clothing range: extend its F&F range into the premium segment; introduce F&F into overseas stores; and possibly roll out standalone F&F clothing stores. 22

Global licensors tied up with leading retailers However, an opportunity

prefer key local brands to international brands.

23 X2 Direct to retail brand licensing: LOCAL VS INTERNATIONAL BRANDS There are great opportunities for local licensors in national markets. Global licensors tied up with leading retailers However, an opportunity arises for local licensors: Consumers in Poland, Germany and Austria prefer key local brands to international brands. Grocery retailers apply a dual strategy (Aldi) Challenge - introduction of a national character overseas 23

international licensors in Poland (Disney, Mattel).

products such as Spiderman school bags (Disney) and Biedronka (Jerónimo Martins)

However, they could be soon replaced with licensors brands.

24 X2 Direct to retail brand licensing: KEY STUDY - JERÓNIMO MARTINS Huge potential for DTR licensing in emerging markets Biedronka co-operates with local as well as international licensors in Poland (Disney, Mattel). Its assortment of brand licensed private label products is wide, offering: non-food products such as Spiderman school bags (Disney) and Biedronka (Jerónimo Martins) uses in-house characters in its grocery product ranges. However, they could be soon replaced with licensors brands. food products like yoghurts with Shrek (DreamWorks Animation). Brand licensing increases consumers trust in private label products, which is low in emerging markets Biedronka 24

25 2 Conclusions DTR brand licensing to expand rapidly, boosted by development of private label product ranges Food - potential in children s categories, offering fun and a healthy lifestyle imagine Non-food - potential in clothing and healthy and beauty sector Discounters successfully implementing DTR strategies DTR in emerging markets in the medium to long term 25

26 Contact Miloš Ryba Senior Retail Analyst Planet Retail Ltd T: +44 (0) F: +44 (0) Link to the Direct to Retail Brand Licensing report: tinyurl.com/dtr-report 26

27 twitter.com/planetretail facebook.com/planetretail tinyurl.com/pr-linkedin United Kingdom: Germany: USA: China: Japan: Greater London House, Hampstead Road, London, NW1 7EJ United Kingdom Dreieichstrasse 59, D Frankfurt am Main, Germany 1600 Golf Road Suite 1200 Rolling Meadows Illinois USA , 88 Tongxing Road, Qingdao , China Minami-Magome , Ohta-ku, Tokyo , Japan T: +44 (0) F: +44 (0) T: +49 (0) F: +49 (0) T: +1 (1) F: +1 (1) T: +86 (0) F: +86 (0) T: +81 (0) F: +81 (0)

The winning formats in CEE Planet Retail Ltd October 2010

The winning formats in CEE Planet Retail Ltd October 2010 part of About Planet Retail We are: The leading Global Retail Analyst firm since 1995. We analyse: 9,000 retail operations across 211 retail markets.