ISSN 1333-2422

UDK = 339.138 (497/11) ORIGINAL SCIENTIFIC PAPER

The Supermarket Revolution in the

Balkan Countries: The Case of Serbia
Koviljko Lovre1, Tatjana Papic Brankov2

1
Faculty of Economics, University of Novi Sad, Segedinski put 9-11, Subotica, Serbia
2
Institute of Agricultural Economics, Volgina 15, Belgrade, Serbia (brankov.tatjana@gmail.com)

ABSTRACT
In this paper, we have analyzed the modern grocery retail trends in Serbia in the transition
process as well as its influence on the end consumer. Our research has shown that the retail market
in Serbia is still immature, as it is of low concentration; it has poor format structure and under-
represented private label market share. The supermarket revolution has so far not brought any
benefits to the consumers in the sense of lowering food prices. Compared to the base year (2004-
2006=100), in the year of 2012 the prices of apples in retail grew by 83%, retail prices of milk grew
by 119%, potato by 87%, beans by 106%, pork by 60% and chicken by 83%.

Key words: supermarket revolution, profit margin, transition, food prices, monopoly

INTRODUCTION Berdegu 2002; Dries et al., 2004; Muendo and

Tschirley, 2004). On the other hand, if adequate
Retailing globalization has an enormous state policy is established, the retail revolution
impact on the market structure in transition can also bring benefits to small farmers and
and developing countries (Currah and Wrigley, processors, as well as the end consumers. The
2004; Wrigley et al., 2005) and it has influenced small farmers and processors gain access to
the development of trade in these countries, quality-differentiated food markets, which
their industry and their consumers. creates possibilities for increasing income,
The supermarket revolution has imposed while the benefits for the end consumers lie in
its own rules and changed the institutional and potential lowering of food prices (Reardon and
organizational food processing system in these Gulati, 2008). In the countries of Central and
countries, thus forcing them to, among other East Europe (CEE), retail globalization can also
things, adjust their system of standards relating be seen as an additional stimulus to improving
to food quality and safety. It is known that this the competitiveness of local farms, and the
kind of change can mostly hurt smaller farmers finalization of the restructuring of the agri-
who are often unable to adapt quickly to the food chain (Dries et al., 2004). Considering
new demands on the food market (Reardon and that supermarkets have moved beyond

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 2 Koviljko Lovre, Tatjana Papi Brankov

targeting affluent consumers to attending the Based on the basic indices (2004-2006=100)
needs of middle and low income consumers of producer and retail prices of fruit (apples),
(Humphrey, 2007), it is not surprising that vegetables (potato and beans) milk, and meat
the economic difficulties in countries of CEE (pork and chicken) in the period of 2000-2012,
have not destroyed their popularity. Up to 30% we have analyzed the influence that changes in
of 44.3 million shoppers in the 11 monitored the retail trade sector have on the development
CEE countries (Bosnia and Herzegovina, of food prices. The most important source of
Bulgaria, Croatia, Czech Republic, Hungary, data for the analysis was the Statistical Office
Poland, Romania, Serbia, Slovakia, Slovenia of the Republic of Serbia and the Statistics
and Ukraine) prefer supermarkets as the main Division of FAO. The approximate timeframe
FMCG1 retail channel (GFK, 2010). of the analysis of the presented phenomena
was the period of 2000-2012. It is necessary to
The latest analysis of global movements emphasize that there are certain variations in the
on the retail market shows that modern retail analyzed period, caused by data unavailability
industry is successfully recovering from the and by frequent methodological and statistical
World Economic Crisis. The revenue of the changes in the work of the Statistical Office.
worlds top 250 retailers rose 5.1% in the The beginning of the research is the year 2000,
fiscal year of 2011, up to US$4.271 trillion. the year of democratic changes which can
The average size of the Top 250 in 2011, as be considered the year when the process of
measured by retail revenue, topped $17 billion, complete trade liberalization started.
the composite net profit margin maintained
its level at 3.8% from 2010, and the composite
return on assets was 5.9% - slightly up from
5.8% in 2010 (Deloitte, 2013). Modern Grocery Retail Trends in
Serbia
MATERIAL AND METHODS Urbanization in CEE, which brought
changes in lifestyle, a growth in income and
In this paper, we have analyzed the modern shifting family structures also resulted in
grocery retail trends in Serbia as well as changes in food habits of the population.
supermarket revolution influence on the end After the privatization of the retail sector in
consumer. CEE in the 1990s and the establishing of the
first supermarket chains, this region faced a
In our research, we started from the massive inflow of foreign supermarket chains.
following hypotheses: The retail sector in CEE countries shifted small
1) The changes in the trade sector in retailers towards larger formats, where foreign
Serbia take place spontaneously, without a clear companies dominate: Metro Group, Auchan,
vision and a development policy. Globus, Rewe Group, Rautakirja Group,
Tesco and Lotte. The biggest retail markets
2) The supermarket revolution has so far for packaged food and alcoholic beverages are
not brought enough benefits to end consumers. Russia (evaluated at over EUR 100.7 billion

1
Fast-moving consumer goods: products that are sold quickly and at relatively low cost.

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 The Supermarket Revolution in the Balkan Countries: The Case of Serbia 3

in 2011), Poland (EUR 22.2 billion), Ukraine 2010). However, Serbia is at the bottom when
(EUR 21.0 billion in 2011) and the Czech it comes to shopping in hypermarkets and
Republic (8.5 billion EUR) (International discount stores. The percent of households
Markets Bureau, 2012). According to data from that supply themselves in supermarkets is
the year 2010 the average sales (of all products, the same as in Croatia (37%). It is noticeable
including food products) in retail chains in that Serbia has no true discount retail stores,
CEE was 1190.9 EUR/capita, and the average which participate with 1-13% in the market
sales through the network of modern grocery turnover in the other countries of the region.
retailers (largely multiples and chain stores) Serbia has a significantly worse structure of
and cash&carry/warehouse clubs was 979.2 retail chains than its neighboring transition
EUR/capita. The average food consumption, countries. A better retail chain structure exists
including spending on food services per capita in Slovenia, Croatia and Bulgaria, even in
in these countries was 1289.6 EUR in 2010. Bosnia and Herzegovina. Traditional stores
Comparison of this data with the data that with a relatively broad, but shallow spectrum
relates to Serbia, we can conclude that food of products, though jeopardized by large trade
consumption per capita in Serbia, as well as subjects, retain their dominance in the retail
the sale of food and non-food products in food turnover, partially due to insufficient
the retail network is close to the average in consumer mobility, slow public transportation
the CEE countries. We can also conclude that and the lack of large establishments in smaller
Serbia falls significantly behind the average in towns and villages (Ministry of Trade and
CEE countries when it comes to sale of food Services, 2008).
and non-food products through networks of
modern grocery retailers and cash&carry/ Besides the already mentioned poor structure
warehouse clubs (801.2 EUR vs. 979.2 EUR), of the retail format and its fragmentation,
which implies the insufficient development the under-represented private labels and the
of these formats. Slovenia, a former Yugoslav low concentration also speak in favor of the
republic, which has a highly consolidated retail immaturity of the Serbian retail market. In the
industry (Dmitrovi and Bodlaj, 2014) has sense of organization, the trade sector in Serbia
achieved the undisputed highest sales through is very fragmented. The data from the Statistical
modern retail formats (2348.6 EUR/capita). Office show that the number of stores in Serbia
doubled in 2005, compared to the year 1999
Household daily shopping structure (Table 1). For comparison, in the year 2006, the
through retail formats shows that Serbia is the trade sector participated with 43% in the total
regions leader in shopping in small grocery number of business entities in the Republic of
shops (55% of total grocery shopping) (GFK, Serbia.

Table 1. Number of stores in Serbia in period 1999-2012

Year 1999 2000 2001 2002 2003 2004 2005
No stores 52.943 86.987 86.291 95.996 95.800 103.657 109.232
2006 2007 2008 2009 2010 2011 2012
105.061 99.362 103.601 101.627 96918 96963 90650
Source: Statistical Office of the Republic of Serbia

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 4 Koviljko Lovre, Tatjana Papi Brankov

In the process of modernizing the trade period, considering Serbias advancement in

network, there were certain changes with the the Europe integration process, which has also
arrival of big retail chains, but these were below brought increased investor interest. The year
the expected level, which speaks of a slow 2011, when the Belgian Delhaize Group bought
modernization and the continued dominance the largest domestic company, Delta Maxi, and
of traditional stores in the distribution thereby became the leader in the Serbian retail
chain. Although the sale surface of the retail market, is also considered a crucial year in
establishments is one of the key parameters the ownership structure, because that is when
for analyzing retail development in a country, a global player took over market dominance
due to the unavailability of current data, we from domestic and Balkan companies. As an
will mention the data from the year 2007, example, we can take the total sales achieved by
stated in the Trade development strategy. The supermarket chains in Serbia in the year 2010.
total trade sale surface in the given year was The mentioned domestic company, Delta Maxi,
estimated at 4,240 thousand square meters, was the absolute leader with participation at
and the surface of the average store at 41.6 16.8%. Other significant companies in this
square meters, which is insufficient for efficient sector are also the German Metro Group and
business. Regional inequality also points out the the French Intermarch, as well as regional
fragmented retail sector. Up to 40% of the retail companies, such as the Slovenian Mercator
network is in the capital, Belgrade. The sale and the Croatian Agrokor (Van Berkum and
surface has undoubtedly increased in the later Bogdanov, 2012) (Table 2).

Table 2. The most important supermarket chains in Serbia, 2010

Country Total sales Grocery sales Grocery retail Number of
owner (Em) (Em) market share (%) stores
Delta Maksi Serbia 1.720 1.238 16.8 325
Mercator*/ Slovenia 342 320 4.3 59
Rodi
Metro Swith./Ger- 187 187 2.5 5
many
Idea Croatia 164 164 2.2 41
(Konzum)
Simpo (Si Serbia 15 156 2.1 171
market)
Interex (Inter- France 75 75 1.0 6
march)
Super Vero Greece 69 69 0.9 3
(Veropoulos)
Source: van Berkum and Bogdanov (2012); *Agrokor has purshased 53.1% of Mercator shares

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 The Supermarket Revolution in the Balkan Countries: The Case of Serbia 5

Retail internationalization and 2001), as well as their relatively small number

regionalization have also caused the spread and assortment cause a lower level of price gap
of private label (PLs) into new markets. This benefit of PLs in Serbia (31-33%) compared to
process is also taking place in the Republic of Croatia (37%) and Hungary (38%). The low
Serbia, by the arrival of PLs of international and level of retail concentration also speaks in favor
regional brands such as Mercator, Interex, and of the immaturity of the Serbian retail market
Idea (Table 3). In a second phase, even national (Markovi et al., 2013). Konar et al., 2010
retail chains such as Delta Maxi, Univerexport, think that one of the reasons for this markets
DIS and Lilly have developed their PLs low concentration compared to other CEE
(Konar et al., 2010). Yet, their participation countries and EU members is that the larger
in the market with 5% cannot be deemed retail chains such as Aldi, Spar, Tesco, Billa,
as sufficient, which indicates Serbias initial Auchan, Carefour, Cora etc., are not entering
phase of development towards the so-called the market.
fast-growing market compared to other CEE
countries (Markovi et al., 2013). The relatively
late arrival of PLs at the Serbian market (since

Table 3. Review of the most important private labels in Serbia

DELHAIZE* DIS Univerexport Mercator S Metro CC Gomex
Delhaize, Dobro, UNI, Baba, Ambienti, Aro, Fine Panoni, Fado,
Premia, Ukusi Srbije Dajdaj, Buzbi, Bonus plus, Food, Horeca Twist, All
365,Care, Merzer Lumpi, Select, H- Day
Bio, Taste Lumpitekstil, line, Rioba,
of Inspira- Merkator- Sigma
tion, Od linija, Merka-
naezemlje tortekstil, My
Body, Active
Life, Pro
Magic
Source: Authors search on the websites of companies; *Delhaize group, Belgium-based grocery and supermar-
ket chain has acquired Delta Maxi group in 2011, by far the largest food retailer chain in Serbia

Food Prices in Serbia comes from the Statistical Base of FAO, while
the data on retail prices comes from the
Based on the basic indices (2004-2006=100) Statistical Office of the Republic of Serbia. As
of producer and retail prices of fruit (apples), seen from the attached graphs, there is a trend
vegetables (potato and beans) milk, and meat in price growth for all chosen foods (Figures 1,
(pork and chicken) in the period of 2000-20122, 2, 3, 4, 5, 6).
we have analyzed the influence that changes in
the retail trade sector have on the development
of food prices. The data on producer prices
2
Except for beans, where the first year of analysis is
2006, due to data unavailability.
Agroeconomia Croatica 5:2015 (1) 1-10
 6 Koviljko Lovre, Tatjana Papi Brankov

Figure 1. Apple prices in Republic of Serbia (2000-2012)

Source: Authors calculation based on Statistical Office of the Republic of Serbia data

Figure 2. Milk prices in Republic of Serbia (2000-2012)

Source: Authors calculation based on Statistical Office of the Republic of Serbia data

Figure 3. Potatoes prices in Republic of Serbia (2000-2012)

Source: Authors calculation based on Statistical Office of the Republic of Serbia data

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 The Supermarket Revolution in the Balkan Countries: The Case of Serbia 7

Figure 4. Pork prices in Republic of Serbia (2000-2012)

Source: Authors calculation based on Statistical Office of the Republic of Serbia data

Figure 5. Beans prices in Republic of Serbia (2004-2012)

Source: Authors calculation based on Statistical Office of the Republic of Serbia data

Figure 6. Chicken prices in Republic of Serbia (2000-2012)

Source: Authors calculation based on Statistical Office of the Republic of Serbia data

Agroeconomia Croatica 5:2015 (1) 1-10

 8 Koviljko Lovre, Tatjana Papi Brankov

CONCLUSIONS performance of the Commission for Protection

of Competition. Besides, it is necessary to offer
Serbia is facing one of the most demanding the consumers the ability to shop in different
tasks in the process of economic transition formats. In that sense, the announced arrival
building a modern market and modern trade. of the discount chain Lidl (known for its
Unfortunately, a unique retail revolution price competitiveness) into fifteen cities and
that plays a deciding role in creating market municipalities in Serbia seems reassuring.
conditions for doing business, is not developing
at a desired pace, envisaged by the state
document from 2008 the Trade Development ACKNOWLEDGMENT
Strategy.
This paper is a part of project III 46006
There are a number of structural problems Sustainable agriculture and rural development
in trade in Serbia, that confirm our first in function of achieving strategic goals of
hypothesis that the changes in the trade sector Republic of Serbia within Danube region,
happen spontaneously and without a clear financed by Ministry of Education, Science
vision and development policy. There are an and Technological Development of Republic of
excessive number of establishments, as well Serbia, for the period 2011-2015.
as a fragmented trading network through the
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 10 Koviljko Lovre, Tatjana Papi Brankov

Supermarket revolucija u balkanskim

zemljama: sluaj Srbije
SAETAK
U ovom smo radu analizirali tranzicijske trendove u maloprodajnom prehrambenom
sektoru Srbije, kao i njihov utjecaj na krajnjeg potroaa. Nae istraivanje je pokazalo nezrelost
maloprodajnog sektora ije odlike su: niska koncentracija, slaba struktura formata i nedovoljna
zastupljenost privatnih marki. Supermarket revolucija do sada nije donijela korist krajnjim
potroaima u smislu smanjivanja cijena hrane. U 2012. godini u odnosu na baznu godinu (2004-
2006=100) maloprodajne su cijene jabuka porasle za 83%, mlijeka 119%, krumpira 87%, graha
106%, svinjskoga mesa 60% i pileega mesa za 83%.

Kljune rijei: supermarket revolucija, profitna margina, tranzicija, cijene hrane,

monopol

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