IKI: WILL CHANGING OF FADED BANNERS WILL INCREASE MARKET SHARE

IKI retail chain had very hard recent years – lethargic sleep for almost 2 years ( I am just reminding that there was plans to sell IKI to RIMI), final change of the owners. And finally, all shares are concentrated in REWE hands, finally becoming part of international retail and tourism group family, BILLA (one of REWE retail chain banner) brands Clever, Bon Via appearing on IKI shelves. Opening of refurbished IKI Neris according REWE standards. And everything looks like, that “new” modern player and strong competitor will appear in Lithuanian market.  Unfortunately, we do not think so.

RETAIL CHAIN OF LOST OPPORTUNITIES

From 2008 when retail chain was sold to COOPERNICUS group, IKI was going down – loss of Latvian market, loss of assortment uniqueness (original French assortment part was borrowed from INTERMARCHE), later they retuned this assortment again, now INTERMARCHE products will probably disappear finally, inhouse French bakery specialists left company (one of them now working in Maxima, other opened own chain of bakeries).

If You want to evaluate level of bakery there is simple baguette test.  If prebaked frozen baguette (probably supplied by Mantinga) looks and tastes better than product from full cycle instore bakery – it is time to review all technology of bakery. (if You are interested photos are from IKI Ąžuolas  and IKI Papartis, where already half a year baguettes look like that).

So, deal of IKI sale to RIMI was broken and REWE decided or was forced to concentrate shares of retail chain IKI in their hands. And seems like that they have to start seriously develop Lithuanian retail chain. But not for this moment.

WHO ARE THOSE REWE AND BILLA?

REWE is retail and tourism services group founded 1927 in Koln.  Thera are 350 000 employees in 21 European countries in 15 000 stores. 2018 years turnover was 60 billion EUR.

There are REWE, BILLA, PENNY and about 20 other retail tourism business banners in this group who are operating in FMCG, drogery, DIY, traveling and internet trade industries. 

REWE RETAIL CHAIN

In 2017 REWE developed 2020 supermarket concept and started to implement it.

If somebody needs to see details – he can look to annual  REWE report – there are a lot of photos and store review video:

https://www.rewe-group-geschaeftsbericht.de/en/what-will-the-stores-of-the-future-look-like/index.html

Those actions let REWE to become one of the fastest growing supermarket chain in Central Europe? According to LZ Retailytics (by German Lebensmittel Zeitung).

BILLA RETAIL CHAIN

BILLA is simplified version of REWE, which REWE group is using to develop in East European markets – Bulgaria, Czech, Slovakia, Ukraine and Russia.

Simplified doesn’t means worse. BILLA used all strongest elements from REWE. And BILLA get very strong supermarket which not only can easily compete with discounters like ALDI and LIDL, but also delivers high service level and big choice in fresh and ready to eat foods.

What Sebastian Rennack, Senior Retail Analyst for Central & Eastern Europe LZ Retailytics (Lebensmittel Zeitung) says about BILLA:

"BILLA new concept is almost perfect for a supermarket. When I am in CZ, SK I see them doing everything right in direct neighborhood to Kaufland and Lidl.

 

Own brands aggressively placed and priced in dry departments, at the same time special assortment like Alnatura organice that LIDL and KAUFLAND do not have.

F&V regionality. Excellent fresh and own production. Hot dishes take-away. Pushing food-to-go own brand. And the customer guarantees they partly copied from Kaufland approach."

 

Such BILLA stores are opening in all countries where BILLA operates.

 

Russia

Bulgaria

Such assortment and service mix help to deliver to customers the best prices for basic products, but in the save way it helps to supply high quality everyday fresh products and ready to eat food assortment motivates customer to visit such store every day. Isn’t it the best option for refurbished IKI stores?

IKI NEW STORES – NICE PACKAGING WITH OUTDATED CONTENT.

Let’s come back to Lithuania. IKI also presented new concept store and very happy with +5% in turnover and +6% in clients flow. Is it possible that IKI did sudden change and we will get “new” refreshed player with all REWE group strong points?

As You see store is look alike or at some points almost identic to stores what we see in Bulgaria, Czech, Slovakia, Ukraine and Russia.

But it is only outside glitter. Let’s say that price level of IKI is not on the level like expert from LZ Retailytics says.

Price level of cheapest products, which includes private labels, basket on June 2019 according price comparison portal Pricer.lt is not the best.

More: https://public.tableau.com/profile/pricer.lietuva#!/vizhome/PIGIAUSIMAISTOPREKIKREPELIOKAINREITINGAS/Pigiausimaistoprekikrepeliokainreitingas

And what about “Excellent fresh and own production. Hot dishes take-away.”? Unfortunately, you can’t call existing assortment modern – the same grilled chicken, pieces of meat, sausages and salads as was 10 years ago – no new solutions or popular street food.

But maybe IKI introduced more strong private labels from REWE group. If not count strange selection of CLEVER brand and occasional BON VIA appearance there is nothing new. Existing selection of IKI private labels looks poor to compare with BILLA Bulgaria as example:

https://www.billa.bg/asortiment

Assortment of IKI name private labels is narrow to compare with BILLA private labels.

IKI Gourmet – is outdated by design and by choice.

IKI Meat be without locality guarantee

Made in IKI – looks like week brand which is not covering modern needs of customer. BILLA looks way better.

And BILLA have more private label assortment specialties that IKI have not.

And IKI almost incomparable with REWE retail chain offer.

https://www.rewe.de/marken/eigenmarken/

The way IKI is selecting and working with their private labels on shelves is very specific. If in small Slovakian BILLA there are no questions what they are saying with private labels to customer – for the same price we are making double value with our private labels to compare with international brand. And retailer is not decreasing value of average basket.

But what IKI wants to say to client with his product offer, pricing and layout stays unclear – maybe – we have here something cheaper than unclear Kiddy brand and we competing with it by losing value in average basket (not speaking about that rich Lithuanians have to pay more for international brands than poor Slovaks and that Lithuanians are bigger eaters of peanut butter than Americans – it could be interesting to see turnability of this product group, if in small IKI store we have even 3 brands of peanut butter in the same price level)

What could be conclusions. Despite changes in store view and layout – nothing has changed in general. So, happiness about turnover and traffic increase is very questionable – specially if there are no information about decrease in 2017 and 2018.

From fact that IKI is part of big retail group there is no use to IKI – local personnel are not looking what and how are doing their colleagues in other countries, what concepts are implementing and also no use to IKI client, which is not getting full, modern product and service offer with great value.

In general, what is happening – it is just change of packaging for outdated content, that’s why there will be no big turning point in IKI and will be no gain of lost market share, except that they could start price war what is in general dead end in such small market.

Location in European crossroad and nonconnection to any REWE group banner gives IKI great opportunity to use all group products, knowhow, ideas to do unique, strong interesting to customer retail chain. But there is feeling that IKI is not interested to do better for customer and themselves and performing at lowest acceptable to shareholder level.

 

ADVICE TO REWE GENERAL MANAGERS

It is not clear why group is keeping IKI banner. From 2008 IKI lost almost all competition advances, structure of assortment, general offer doesn’t meet modern customer requirements, they are not using strong REWE group sides. IKI are just good stores with loyal but decreasing circle of customers, but without modern content, which could help increase market share, because market share is gained not by store design, but by unique and valuable product and service mix.

So, advice is simple – stop letting locals do experiments, introduce BILLA banner with full product and service mix and do not torture Yourself anymore.

The final, most interesting and funny things are, that because of weak local competition, Lithuanians in 2018 officially left in stores of Poland 360 million Eur (we think, that the same amount of money is left unofficially) when, for example IKI early turnover is 649 million Eur (https://www.15min.lt/verslas/naujiena/finansai/lenkijos-parduotuvese-lietuviai-per-metus-paliko-rekordine-suma-360-mln-euru-662-1080262), and that Lithuanian government wants more competitive retail players in market, but in country there are already two, if not count LIDL, powerful international retail chains which are underperforming – REWE (IKI) and another “sleeping beauty” RIMI, about which we will write next time.

 

ALWAYS HAVE FREEDOM OF CHOICE!

More information:

Pricer.lt FMCG direction manager

Petras Čepkauskas

Tel.: +37068512156, 

[email protected]

www.pricer.lt

 

In article are used data and images from following sources

retailytics.com

rewe-group-geschaeftsbericht.de

rewe.de

billa.bg

billa.cz

iki.lt

Rafail Salikhov, Sebastian Rennack, Petras Cepkauskas private photos

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