Carrefour finally confirmed today an agreement to acquire Billa Romania from Rewe Group despite initial denials from the latter to sell.
FFrench grocer Carrefour will strengthen its coverage in the country by adding the 86 Billa supermarkets to its portfolio, whic has a total sales area of 893,433 sq ft.
It appears that Rewe Group is steadily streamlining its central and eastern Europe business. In September, Rewe pulled its Penny business from Bulgaria.
Interestingly, Rewe Group originally planned to focus more on its core supermarket business, Billa, in the region as opposed to Penny, which has seen strong competition from other discounters such as Lidl.
However, Rewe recorded 2.3% negative growth in 2014 in the region, and profitability concerns seemed to override future plans for growth.
Although mostly owing to the currency impact, the figures also show that Rewe Group may need to downsize in order to focus on its growth markets.
Lidl expansion challenges Rewe
Needless to say, Lidl’s unstoppable expansion in the region and its latest store concepts that challenge supermarkets are not making the Game any easier for Rewe Group.
Despite the fact that Billa is to be discontinued in Romania, Rewe Group intends to further focus on Penny.
Penny is the second largest discount store operator in the country after market leader Schwarz Group’s Lidl – both are also the only two value channel operators of a significant size.
Despite this, the channel is one of the strongest growing ones in the market. This is probably the reason why recently Carrefour also tapped into this field with the Romanian iteration of the Supeco price-focused supermarket chain.
Carrefour is one of the key international players that continue expansion plans in markets they already operate, as well as entering new markets.
In this regard, it rises as the no-surprise buyer of the deal. Carrefour has a special focus on Romania as it tests out tailored store concepts in a market where modern retail penetration is lower than other key CEE countries such as Poland or the Czech Republic.
Looking to 2016, the central and eastern Europe region may see further consolidation as not only Rewe Group but also Tesco prioritise streamlining over growth.
They may seem to operate in different channels, but both face challenges from the same company: Schwarz Group with its Lidl discount stores and Kaufland hypermarkets.