The ongoing economic crisis is causing changes in the grocery retail market and creating a totally different environment from the one addressed up until 2008.

Declining revenues and a loss suggest Makro will exit Greece

The Greek economy and consumer spending has been steadily declining over the past few years - by 3.5% in 2011, 4.8% in 2012 and a forecast 4.6% in 2013. This trend is mainly in the traditional grocery channel, sharply in contrast to Schwarz Group’s Lidl and Delhaize Group which are performing well.

Most retailers have tried to enhance their private-label assortment, especially in the grocery and health and beauty product categories. As the economy has shrunk and native businesses have disappeared, shoppers’ demand for Greek products has increased as they attempt to support the country’s recovery. Almost all retailers and many manufacturers have introduced special signs and labels highlighting the local origin of products.

A significant trend is the declining sales in hypermarkets and the decrease of sales areas in this sector. In terms of volume, the hypermarket sector shrank by 3% in 2011 and a further 3.4% in 2012. The reason is the shift in consumer behaviour towards more visits to neighbourhood stores and the reduced value of the average shopper basket.

Copycat discount formats are popping up. A few local retailers such as Bazaar are trying to copy Lidl’s discount format with the introduction of a limited assortment per category.

The strategy has been successfully applied by local retailer Discount Markt in northern Greece.

Competition among symbol groups is growing and Elomas and Symmetron - the two leading buying groups in the country - are fighting for members. The market consolidation is inevitable and will be further boosted by development in the independent retail sector.

The recession has led to a high level of debt for independent retailers as buying groups have reduced their credit arrangements or demanded cash.

Metro Group’s Makro cash and carry could take advantage of the situation faced by independents, but it does not appear it will. In contrast to other markets such as Poland and Romania, Makro is not building up any franchising network in Greece and has not launched its compact cash and carry format.

Along with declining revenues and losses this could indicate that Metro Group may exit the market.

  • Petros Karagiannis, retail analyst and Milos Ryba, research director, Planet Retail.

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