After a long and drawn-out courtship, it was announced yesterday (3 March) that Belgium’s Delhaize has acquired Delta Maxi, the retail arm of Serbia’s largest company by turnover, Delta Holdings. The move represents the first significant foray by one of Europe’s retail giants into the region and significantly expands Delhaize’s reach in the area. Katy Humphries reports.
Delhaize has announced a deal that will see it take control Serbia’s largest food retailer, Delta Maxi, for a combined sum of EUR932.5m (US$1.3bn). At around 11 times 2011 EBITDA, the price tag may appear a little weighty, nonetheless, Delhaize insists that control of the 450 stores in five markets is well worth it.
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Combined with its existing businesses in the region, the acquisition will provide Delhaize with an 800-store strong retail network spanning seven Balkan states. Complementing the group’s operations in Greece and Romania, Delhaize will now also have operations in Serbia, Bulgaria, Bosnia and Herzegovina, Montenegro and Albania.
Delhaize said that, as from the end of 2013, it plans to realise more than EUR16m in annual synergies. A spokesperson for the company told just-food that the group will maintain separate formats in each market, but would combine some back-end functions, such as purchasing.
“We will keep the local businesses as they are with distinct formats, separate offices and management. The synergies will come from improved procurement – because we will have bigger buying power – better inventory management and improved IT and supply chain systems,” the spokesperson revealed.
Commenting on the move, Delhaize CEO Pierre-Olivier Beckers said that the company expects its enlarged Balkan business to generate annual consolidated revenues in the region of EUR3.4bn.
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By GlobalDataBeckers added that the company anticipates revenues in the region to grow by 10-20% over the next four years.
Indeed, according to the European Bank of Reconstruction and Development, the Bulkans is expected to undergo a period of economic expansion in 2011. EBRD predicts that Serbia and Macedonia will witness economic growth of 3.2% and 3.8% respectively, while Slovenia’s economy is expected to trail at a 2.7% rate of expansion. Croatia, Montenegro, and Bosnia and Herzegovina should each see economic growth of around 2%, EBRD economists predict.
Announcing Delhaize’s investment in the region, Beckers went a step further and suggested that household incomes and consumer spending power would receive a further boost as more of the region joined the European Union.
However, with such strong growth prospects Delhaize is likely to find that competition in the region will intensify in the coming years.
Currently, the Balkans retail scene is rather fragmented and the big multinationals have little or no market presence. Of the international retailers, Germany’s Metro Group operates five cash-and-carry outlets in the area while France’s Interex has seven stores in the region.
In fact, the only other retail giant with a significant footprint in south-eastern Europe is Lidl. The German discounter operates approximately 30 stores in Bulgaria, 70 stores in Croatia and 50 in Slovenia. The group is also awaiting antitrust clearance for its proposed acquisition of 96 Plus stores in Romania from fellow German food retailer Tengelmann.
When contacted by just-food, Lidl declined to comment on whether it planned to step-up expansion in the Balkans. However, it seems clear that Lidl has established a solid base for expansion in the expanding Balkan economies.
Nevertheless, the greatest competition Delhaize will face currently comes from regional conglomerates, namely Croatia’s Agrokor and Slovenia’s Mercator.
With the possibility of another big takeover in the offing, the promising and rapidly developing Balkans retail scene would seem to be in a state of flux. Developments will be closely watched by both local and international players as they vie for a slice of this growing pie.
