The chief executive of Salling Group, Per Bank, has told ESM that the group's acquisition of Tesco's Poland operations will enable the business to become "much more relevant" to Polish consumers and suppliers.
Bank was commenting following the announcement earlier today that Salling Group will be acquiring 301 stores and two distribution centres from the UK retail giant, subject to EU competition approval.
As Bank told ESM, Salling Group sees Polish expansion as one of its "two big growth opportunities", alongside developing its e-commerce platforms in Denmark.
"It's absolutely a strategic move for us," he explained. "Poland is one of Europe's biggest markets, and before this acquisition, we only had around 370 stores, therefore we were a minor player. For us to grow organically has been quite difficult – we might be able to open 30 or 40 stores a year."
Geographical Advantage
Salling Group currently operates 386 Netto stores in Poland, and the deal also presents a geographical advantage for the retailer, Bank added.
"With this acquisition, we can now build our presence in the southern part of Poland, and cover nationwide," he said. "We will be close to doubling our size, so we will become much more relevant for our Polish suppliers, and for our customers.
"In Denmark, we have about 35% of the market already, so there's no need to get much bigger there – it would be much wiser for us to try to grow in Poland."
While not hitting the sales heights of its Danish operation, Salling Group's Poland business has exceeded expectations in recent years, according to Bank.
"In 2019, Poland delivered around 4% EBIT, which I don't think is bad in the current retail environment, particularly for a small player. I don't see many businesses doing that. We have a very satisfactory business already in Poland, and that's what we can build from."
Some 100 stores in the country have been upgraded to the new Netto 3.0 concept, he added, which have seen "strong like-for-like growth. That really encourages us to do what we are about to do here."
Conversion Process
In terms of the conversation process, Bank said that Salling Group will look to refit "as many of the stores as possible" from the acquisition, once EU competition is granted.
"We will look at it from a Netto perspective," he said. "We give ourselves around 18 months to refit all the stores that we want to continue with, and that will be most of the stores.
"Of course, some stores will be too big, and there are some we will need to downscale, and there will be a few that we will abandon, but the clear majority of stores will be future Netto stores.We're going to be very busy over the next 18 months, converting around three to four stores a week."
Elsewhere, Tesco has said that the deal enables it to focus on Czech Republic, Hungary and Slovakia, where it has 'stronger market positions with good growth prospects and achieve margins, cashflows and returns which are accretive to the Group'.
© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
