ZAGREB (Croatia), July 22 (SeeNews) – The recently announced acquisition by Croatian privately-held concern Agrokor of a majority stake in Slovenian retailer Mercator [LJE:MELR] is set to create a business entity with a combined market share of 13% in Southeast Europe (SEE), unseating Germany’s Schwarz Beteiligungs from the spot of the region’s top grocer, Euromonitor International research manager Nikola Kosutic said.
However, assuming that the German retailer - which in 2012 still led the SEE market with 9.0% value market share, retains the same growth rates as in the last five years, it should regain its top ranking as early as 2016-2017, Kosutic told SeeNews in an emailed interview.
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In June, Agrokor signed a sale and purchase agreement with a consortium of shareholders that is selling a 53.1% stake in Mercator, a deal that the expert sees as impacting Serbia the most among the SEE markets where it might represent a step back in terms of competitive environment and quality of service provided by retailers.
EU ENTRY MAY SPUR AGROKOR INVESTMENTS IN CEFTA-BASED PRODUCTION
Croatia’s EU accession on July 1 and its simultaneous exit from the Central European Free Trade Agreement (CEFTA) club is expected to hurt Agrokor’s sales of fast-moving consumer goods (FMCG) brands produced in Croatia which will motivate it to make new investments in production or distribution facilities in the CEFTA region, Kosutic said.
The presence of the Croatian concern in the agribusiness sector in Macedonia may indicate that Agrokor plans to expand its business interests there beyond the current investment and look into retailing opportunities as the Macedonian market, although lagging behind most of the countries in the region, continues to consolidate.
“Also, this deal [with Mercator] will make it harder for Agrokor to move its retailing profits out of CEFTA markets by using its FMCG manufacturing companies, which will in turn increase their investment capacity in the CEFTA region,” Kosutic said.
AGROKOR MAY SHED MERCATOR’S NON-GROCERY BRANDS
The expert does not expect markets such as Bosnia and Herzegovina to present any anti-trust hurdles for the Agrokor/Mercator merger given the political power Agrokor has in the region and the still high levels of market fragmentation but does not rule out the possibility that the Croatian concern could dispose of Mercator’s non-grocery retail brands – apparel retailer Modiana, cosmetics retailer Beautique and sporting goods retailer Intersport.
In Croatia, the excess stores of Agrokor’s retail arm Konzum will probably be sold piecemeal to local players, depending on their location. No new players are expected to enter the market by acquiring the Mercator stores in Croatia.
Kosutic also sees smooth sailing for the merger in Serbia where there should be no anti-trust issues given the fact that independent small grocers still cover more than a half of the grocery retailing segment there and the combined Agrokor/Mercator market share in the country will be just over 17%.
Agrokor is not expected to replace the well-established Mercator brand in Slovenia but Mercator's private labels will most certainly be displaced by Agrokor's, which can introduce bigger issues for the Slovenian companies producing them.
CARREFOUR ENTRY IN SERBIA TO BOOST HYPERMARKET SEGMENT
The market implications from the announced medium-term entry of Carrefour in Serbia are expected to be similar to those in Macedonia where the French retailer began operations in late 2012 and thus far has managed to capture close to 3.0% of modern grocery retailing sales.
In February, Belgrade-based Delta Holding said Carrefour had leased 10,000 square meters for its first hypermarket in Serbia which will be located at the Delta Planet shopping mall scheduled to open in the country’s capital in 2015.
The arrival of the French retailer will boost the hypermarket sector in Serbia while at the same time eat into the footprint of other competitors, most notably Mercator, which in 2012 led the segment with a 37% share, the expert said.
ALBANIAN BOON FOR MARINOPOULOS
Delhaize’s recent pullout from Albania, Kosutic believes, has opened the door for another international powerhouse, Marinopoulos, Carrefour’s Greek-based regional franchisee, to increase its presence there and lead the modern grocery retail sector.
Montenegro, where the Belgian grocer sold its 25 outlets to local distributor Expo Commerce, is a different case in the sense that that market void will not be filled by any multinational or a strong regional player as these outlets will continue to operate under Delhaize’s brands Tempo and Maxi as part of a franchising agreement.
“I don’t expect to see Delhaize making more franchise deals in the SEE region unless, like in Montenegro’s case, they will be selling assets to a company which does not have its own retail brand.”
The expert sees the effect from Mercator’s pullout from Bulgaria as almost negligible, since its Roda brand never managed to gain any tangible market traction, but the Bulgarian market - highly fragmented and with low per capita value, is still potentially interesting and he does not rule out the possibility that Mercator could make a comeback through an acquisition at a later stage.
Looking ahead to possible hotspots for mergers and acquisitions (M&A) activity in the region’s FMCG sector in 2013, Kosutic said he expects Austrian retailer Spar to finally decide to expand through an acquisition in Croatia.
In Macedonia, no M&A moves are seen until 2014 when Spar and France’s Auchan may attempt to join the fray.
Still, for retailers looking for a foothold in Macedonia, Kosutic pointed to Tinex as presenting possibly one of the most attractive take-over opportunities with its 39 locations nationwide not counting its stores operating under the Cosmo Tinex health and beauty brand.
In Bosnia, neither Bingo - the country’s top grocer - nor fast-growing peers Fis, Robot and Tus are seen as being in a position to raise Agrokor-scale financial resources in order to step up and drive the consolidation of the market, leaving the possible formation of a domestic alliance as the only option going forward if the power that the Croatian concern has gained over the value chain is to be counterbalanced.
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