Head of Maxima Grupė: prices in Poland and Lithuania can hardly be compared

Dalius Misiūnas

Maxima Grupė [Maxima Group] has entered the Polish market and sees the biggest potential for the company’s growth in this particular country. The head of the company Dalius Misiūnas is confident that a greater scale of operation and innovation will enable the company to make its activities more efficient and economical, which will allow the company to offer better conditions for those who shop in Lithuania.

In an interview with DELFI, the head of Maxima Grupė Dalius Misiūnas told that for the meantime the most important market for the group has been Poland. This market has the greatest potential for growth and establishment of new contacts with suppliers and manufacturers, therefore, Maxima Grupė expects to offer lower prices in other markets, including Lithuania. Although the main focus is devoted to Poland, some news may be expected in Lithuania as well. This year, a few new things have already been introduced and others are still waiting ahead; according to plans, a new mobile application will be launched, therefore shopping will be made more convenient. In the interview, Mr Misiūnas revealed the plans on the innovations' development and also talked about differences in the retail markets of Lithuania and Poland and about the impact of the Sunday trading ban.

You have around 500 retail stores in Poland but they account for only 1.6% of the market. What are your growth plans? Are you planning to move from the level of regional players to the level of the main players, such as Biedronka?

– First, it is important to note that the growth must be sustainable. This commitment is clear. Our second priority is organic growth – we increase the number of stores by opening new ones and taking advantage of the synergy between the Baltic countries and Poland as the source of growth. We have no specific goal stating how much we want to grow but we want the growth to be significant. We will not reach the level of Biedronka very soon because this retail chain is immensely big. Whereas our turnover is about EUR 600 million, Biedronka's turnover amounts to EUR 10 billion. However, looking from a non-monetary perspective, we strive to move from the position of a regional player to the league of national scale players gradually.

How many years might it take to become a national player?

– As many as it takes to reach this goal in an organic and sustainable way. There is a general rule within Maxima Grupė that everything we do must be well measured; we need to understand the mechanism of operation in the Polish market better, to perceive what we can do in cooperation with the Baltic countries and to grow as much as these two aspects allow us to. We understand that this is important to us but we see no necessity in reaching any specific figure within any specific timeframe.

– Do you plan to change the name of your retail stores in Poland, i.e. from Stokrotka to Maxima?

– We have no such plans at the moment but who knows what the future holds. We have decided to stay with the name of Stokrotka. It is true that this has happened with the integration of Aldik and Sano. However, the latter names were changed because Stokrotka is more popular and well-known brand. It liked by the customers; for this reason, there is no point in changing it.

Interestingly, you are the biggest in Lithuania but in Poland you find yourself in a position of a small regional player. We might even make a comparison: in Lithuania, small retailers complain that it is difficult to expand when all the best positions have been occupied by big supermarkets. Don't you find yourself in a position where all the market is taken by big players in Poland?

– It is partly true. Naturally, in Poland people speak of Biedronka in the same way as people speak of Maxima in Lithuania. On the other hand, the market in Poland is different; this is not only our opinion. The Polish market potential is very big. Actually, it is among the TOP three markets in Europe in terms of retail sales growth. The growth of the market, increasing purchasing power, economic growth and positive demographic indicators open new opportunities. For this reason, there is no feeling that there is nowhere to expand. (...) Compared to Lithuania, it is true that demographic conditions in Poland differ from those in Lithuania. Nevertheless, there is another side of the coin in Lithuania: the market here is highly concentrated and there are issues regarding location, rental and land plot prices in Vilnius. In Poland, the distribution is wider, thus there is much more potential, accordingly.

Lithuanians who go to Poland claim that everything is cheaper there. Is it more difficult to compete with other chain supermarkets in terms of prices?

– The competition in Lithuania in terms of prices is very high, meanwhile, in Poland it has always been like this. Biedronka competes with Lidl: which will make a better offer, all the others certainly cannot stay still and do nothing and they also try to catch up. It was particularly evident last year, when retailers had to close stores on some Sundays; a new dimension of marketing and pricing emerged where everyone tried to attract customers on Fridays, Saturdays and Mondays. We were watching the situation and saw some cases which were aggressive in terms of prices and offers: coupons for an additional shopping, two for the price of one, or three for the price of one and etc. When the situation changes, everyone does their best to win.

There is an ongoing discussion in Lithuania on whether to prohibit supermarkets from working on Sundays. You have witnessed the impact of such decision in Poland. What was it and would, in your opinion, it be the same in Lithuania?

– Most probably, the impact would be similar. Obviously, if people don't come on Sunday, some of their purchases are re-distributed but some of them disappear altogether. Another question is whether it is convenient to people. We have talked to our Polish colleagues. Some customers had a habit to do shopping on Sundays and they had to change that. (...) Yet, in Poland, small retailers, which are found next to petrol stations, and small family shops are allowed to work.

In principle, it is small businesses. It looks like the Polish government has promoted its small businesses in this way?

– Yes, it has.

Does it mean then that in Lithuania we would have similar result?

– This could be some kind of promotion for small businesses, indeed. (...) On the other hand, such decision would have a number of other outcomes. We could discuss whether it is good or bad. The principle is that if regulation changes, all retailers have to adapt to new rules. On the other hand, I guess, the most important aspect here should be the customers and whether they would feel an improvement, deterioration or whether there would be no difference. This is what matters the most. There are various examples of outcomes in this situation. For instance, in Hungary, which also had introduced this prohibition, it was eventually cancelled. Discussions over whether this decision is the best one are still taking place in Poland.

Do purchases increase on Saturday as a result?

– Without a doubt. On Fridays and Saturdays customers simply buy higher quantities. This changes the way of operation of retailers because some products are highly perishable. A day without operation changes the plans of transportation of goods. Retailers always make plans to make sure their customers feel no shortage.

Was much of turnover lost due to non-operation on Sundays? Maybe this share is covered by the increase in purchases on other days?

– It has had its effect. It is difficult to define because there is no established practice yet; the number of Sundays of non-operation increases but, in principle, some turnover is lost. Other days do not fully compensate for the loss.

– If Lithuanians went to a Sokrotka operated by the Maxima Grupė, what prices would they see – similar to the prices of Maxima in Lithuania or the Polish prices?

– This aspect is more complicated because of different tax systems and the value added tax (VAT). Prices we see on the shelves can be hardly compared. On the other hand, there is a number of goods we buy in a centralized way, thus the prices are similar. When the market is as big as in Poland, many suppliers have special prices for Poland as for a big market; this has to do with the quantity sold. In the same way, there are a number of manufacturers in Poland who have developed big volumes of production, which enables them to reduce prices since logistic costs also decrease and transportation is cheaper. That particular share of goods is of similar prices but we see the effect of different VATs everywhere; sometimes some items are cheaper for the mere reason that the products come from the local market; naturally, logistic costs are lower or better supply prices apply due to the size of the market.

– Perhaps your entry into the Polish market has helped you to establish a stronger contact with the local manufacturers and suppliers. Do you have any new suppliers from which you can buy bigger quantities and transport some of them to Lithuania?

– This is one of our strategic ideas. When we decided about the acquisition in Poland, this was seen as a potential which would have its effect in the future. It is not easy though, because of traditions, specific customers' expectations, we also cannot forget the importance of locality aspect. This will always be the backbone and the essence in the Baltics but in addition to that we will offer a wider range assortment and better prices.

What about the Lithuanian manufacturers. Has a bigger market opened to them as well due to your entry into the Polish market?

– Yes, conversations are ongoing and some deals are in the process. I am not saying that we can sell all products on a massive scale. Many suppliers and manufacturers from Lithuania have already tried to enter the Polish market before we started operating there – some of them have been more successful, some – less so, but now we have a full list of suppliers and manufacturers with whom we have been negotiating. We are going to offer our Lithuanian products in our retail stores in Poland as well. Just like in Bulgaria, where in our retail stores you can find some Lithuanian products. However, manufacturers face the same problem – there is a big number of manufacturers in Poland; if we take dairy products, meat, vegetables, normally, these manufacturers are bigger than in Lithuania. It is, therefore, difficult to compete with them.

– You say you will offer the Lithuanian products. Will they have the Lithuanian packaging? Or will you adapt them for the specific market and will offer a different packaging though a product is produced in Lithuania?

– Yes and no. Because some of those products may have a clear Lithuanian "face", while some of them will have a different packaging though will be produced in Lithuania. It may be both cases. A number of Lithuanians go to Poland, but there are not many people from Poland coming to Lithuania; for this reason, it is natural that bigger markets can offer better conditions, given the differences in taxes as well. Some manufacturers from other markets find it difficult to enter the Polish market, not only the Lithuanian manufacturers.

What about the Polish manufacturers and suppliers? Isn't the Lithuanian market too small for them?

– On the one hand, yes; on the other hand, there is the aspect of geographical nearness of this. It is attractive. When we talk to the Polish manufacturers and offer them cooperation on the scale of the three Baltic countries, they find it interesting. We can see some real cases where we find agreement on common supply to Poland and the Baltic countries. They see it as a potential of growth, and growth for us means better conditions.

What is the reaction of the Lithuanian products' suppliers who might be possibly selling the same products but of the Lithuanian origin and for higher prices?

– One might think that there is a fierce competition; actually, the situation is different. Often these are products that are placed next to each other and the customer is the one who decides. We truly appreciate and respect a customer's choice and we will always endeavour to guarantee that people are offered the Lithuanian products, but at the same time we want to offer some other options. In some cases, this is done by offering very attractive prices.

– According to your calculations, Poles tend to go to a shop 1.2 times a day, whereas, Lithuanians - 3.5 times a week. Why are there such differences? Do smaller prices in Poland have anything to do with that?

– This has nothing to do with prices. I guess, this is a matter of tradition and habits which have developed in the course of time. For instance, habit to buy bread in the morning. It is purely a cultural tradition in Poland. Is this related to freshness? – Maybe. But most probably the reasons lie way deeper. They have been doing that for a long time and will continue. (...) We should not forget that the Lithuanians went from this tradition by learning to shop for a longer period of time. We used to speak about people in foreign countries shopping for a week, people in Lithuania eventually also started making purchases for a longer period of time when bigger stores were opened. We took that direction. Whether we will change it and get back or change the course, it is difficult to say. I would say that it is a phenomenon typical of Poland – they used to shop this way before and continue shopping in this fashion further.

Talking about expansion, you have announced about millions of investments and new stores in Poland. What about the Bulgarian market? Will you expand there as well and will try to take a bigger share of the market?

– With regard to Bulgaria, we also have a plan to expand organically by opening new stores without any strictly defined goals. But as we have noticed that the market is growing and there is a good basis for business growth, we will also strive for expansion there. We now have 2.3% share of the market in Bulgaria which is a small part.

Have you defined the number of stores you want to open – a few tens or hundreds?

–Now we have 74 stores there. In recent years, the number has been growing and we will continue following this path. We want the number to grow. But I cannot specify whether this will be the question of hundreds or tens. But the growth will be more moderate than in Poland.

– Are there any plans to open new stores in the Baltic countries?

– Such possibilities are always reviewed and assessed. Historically, stores are opened, closed and reconstructed annually. Among the cases worth mentioning is the store to be soon opened in Akropolis in Riga. This will be our biggest store in Latvia.

You are not as well and strongly established in Latvia and Estonia as in Lithuania. Might there be any openings of more new stores there?

– In a sense, yes, because the share of the market there is smaller; but it should be pointed out that Lithuania is unique. Lithuania is Maxima's home market. The development and growth was primary here. If we take Estonia, apparently, the market share in this country is smaller but the market is much better developed. Any additional development faces direct competition with the local market players. In a sense, it is more complicated there. You can expand by taking small steps, not big leaps.

– In Lithuania there are many discussions about concentration of retail chains. Are there any opposite plans – closing some stores instead of expanding?

– If we see a customer who needs a store, it will be there; in the same way, if we see that for some changes our store became irrelevant, we will always consider, whether it has to be there or we should change its location.

– Do you see any situations where you would consider closing?

– Yes, there are some individual cases, yet only a few ones.

Recently there have also been some reports about various innovations. One of them is self-checkout or "scan and go" solution in Maxima on Mindaugas street. What have been the results so far?

– We see that people are really interested, they try it. Initially, the feedback is good. It is big news and it has required considerable preparations on our side, but the system is working and we will see the results later. Then, we will be able to draw conclusions and decide whether to install the system elsewhere. It is one of the tools designed to make shopping easier, more convenient, faster and our operations more effective. There are some similar solutions, for instance, self-service cash desks, mobile app.

You have also started using digital labels in the fresh vegetable and fruit department. Are you planning to install them everywhere?

– We are now testing them. We have not taken any decision yet. We need some more data to understand how this innovation works and to see the return on investment. Of course, we will use this innovation if it proves to be useful. Most probably this will be implemented step by step, not on a massive scale. This technology decreases manual work in the store and is important since employees there will be able to think more about the assortment and customers; as a result, changing labels will not take as much time as it requires now.

We are talking about more effective operations, self-service, e-labels. It seems that there will be less work for people, might it be that you will need no employees at all?

– The general trend is that the scope of mechanic operations should shrink due to robotisation, automation and digitalisation. This completely corresponds to demographic trends and challenges we encounter: employee attraction, increase in wages. Western Europe has already seen that: increase in wages, decrease in the number of people of working age makes it more difficult to hire people; everyone was looking for and has found the ways to automate the process and enable technology.

Have you encountered the problem of finding employees?

– This is not the biggest problem. I suppose everyone faces this problem, in all industries, not only in retail, but retail is one of the labour intense sectors. We would like our people to do higher value-added jobs and automate mechanical work.

You mentioned an app. What can people expect of it?

– It will make shopping more convenient. The app will include loyalty program and payment options; offers, individual discounts and simple and fast payment. A person simply has to put the device near the QR code, press PAY and choose whether to use his loyalty points. Payments will be linked to bank cards. We have tested and seen that this will make shopping more convenient and faster.

– Talking of some other innovations, you have recently opened a place for take-away food. Will you expand this concept?

– This solution has been introduced only as a test. This place is located on Gediminas Avenue. We believe that there will be more examples of this concept in the future since people value speed and simplicity when they are looking for a snack or lunch. (...) It is more a thing of a city and the city centre. It is fairly new, but the customer has clearly shown the demand and the retailers will try to meet this need. We have decided to test this option for the reason that it is not far from what we do on a daily basis and we see potential in this sphere.

One more new thing is Click & Collect machines. Have they already been put into use, will there be any more of them?

– Click & Collect machines have been offered for the convenience of a customer. Their purpose is to make a purchase without sticking to any specific time and to enable to collect the purchased goods at any time that is convenient for customers. We have two locations today that have also been offered for testing at first. If the concept proves useful, we will analyse the potential and will find out where else such machines would be beneficial. (...) People use them, this is fairly popular but we have to admit that this service is very new and any new service needs time for us to understand how it should be presented and provided.

Numerous economists talk about hard times approaching and the growth of economy slowing down. Do you take that into consideration when drawing up your development plans? Maybe you even slow down with your development plans?

– We do not adopt any special decisions on this basis but like any other business we also assess the risks. Among them is the risk that the economic growth will slow down or there will be a recession but for the meantime we have no special plans and have not taken any measures to this end.

Aren't you getting ready for the hard times?

– Financial health is important at all times. We have always considered it the priority and this will remain so to make sure that we have strong finances. The processes related to bonds have shown that it is very useful to have them strong because in such case you can take advantage of better conditions. This is a constant rule.

Is there any separate strategy for the event of hard times, i.e. what direction to take in such an event? Is there any such plan on the table?

– There is no special plan at the moment; but every business must have one, I mean any business must be prepared for emergencies. There must always be such a plan.

Do you believe that you will need this plan?

– We would like everything to be all right, to have economy growing and take advantage of it but practice shows that from time to time, we have certain cycles and some changes, yet the scope of the changes is only a matter of speculations and guesswork. I guess many specialists talk of hard times because economy naturally undergoes such cycles.

The Maxima Grupė's operational strategy provides for savings in the amount of EUR 500 million in the period of 7 years. How are you going to reach this goal?

– There are technologies which produce effectiveness, better processes, growth; in addition, growth is a result of scale and synergy. Synergy in buying also gives effectiveness because it allows you to save. We say that we want to allocate savings to our customers. In the simplest terms, in this way we will create higher value for our customers through lower prices.

The seven-year strategy also provides for the enhancement of the chain by making a EUR 600 million investment. Doesn't that mean that you save EUR 500 million by making your operations more efficient and actually invest only EUR 100 million in addition?

– These are only technical calculations. In the strategy we said that all efficiency is first of all directed towards our customers, meanwhile, expansion shall be done from the generated result and borrowed funds, as always. These figures are not inter-related in any way, they are separate.

Is Lithuania different from other countries for its business environment?

– I don't think so. On the one hand, it is always clearer for a business when regulation is stable. The more stable it is, the easier it is to forecast and plan for business. But in practice, changes take place everywhere. We are used to that; changes are no special thing.

You have approved your strategy for the period up to 2025. Are there any plans to enter any new markets during this period?

– There is no such specific goal but we are interested in all markets in the Central and East Europe. We surely give priority to the markets in which we already operate. All focus and efforts will be put there but we also observe general trends. Currently, we mostly focus on the Polish market. That is true; and talking of other markets, in which we do not operate, there is no such market which would be of any particular interest to us at the moment.

Thank you for the interview.

This year, Maxima Grupė is planning to open 120-140 stores, in total. Most of them in Poland. It is planned to open up 7-8 new stores in Lithuania.

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