Contrary to the Government promises and predictions that the economic situation in Bulgaria would improve in 2010, it actually deteriorated further.

According to recent data of the GfK marketing agency, quoted by one of the leading Bulgarian national TV channels, Bulgaria is at the lowest position in purchasing power among the EU countries with €2618 per capita.

The state Employment Agency published data, according to which the unemployment rate in the country for 2010 was 9.47%, which is by two percent higher than the rate in 2009.

The average annual inflation for 2010 was 2.4%, whereas in 2009 it was 2.8%, shows the data of the National Statistics Institute.

Here come the discounters

Given the economic situation in the country and the justified financial worries of the majority of Bulgarians, it is not surprising that the discounters gained popularity as the preferred shopping destination. The data for Q3 of 2010, provided by GfK for Progressive, shows that for the first nine months of the year the discounters (Penny, Plus and Kaufland (soft discounter)) gained 3.6% of the market and their share rose to 12%. This was even before Lidl opened its first stores, causing mass hysteria.

The GfK consumer index and tracking for the first three quarters of 2010 show that 61.2% of the respondents have shopped in a discounter, visit those shops more frequently (twice a month) and for each visit there they spent more than in super- hypermarkets (8.7 leva vs. 6 leva, respectively).

The data does not include the Q4, in which the long-awaited German discounter Lidl finally opened for business. In November the discounter chain opened simultaneously 14 stores in 11 towns and cities. It also took over from Tengelmann the 20+ Plus stores in the country and it is expected that by the end of 2011 Lidl will climb into the Top 3 of the large grocery chains in Bulgaria (at least considering the number of stores).

The launch of Lidl was preceded by an unprecedented advertising campaign in all channels – radio, internet, print media, outdoor advertising, direct mail brochures, TV spots and product placement in the most popular Bulgarian TV series. It is being advertised even in the luggage claim area of the Sofia airport.

Correspondingly, the opening of Lidl was anticipated with great interest and in the run-up to Christmas the stores were literally besieged by crowds of customers, attracted by the promises of low prices and good quality.

Cash&Carry

2010 was the year in which two new cash&carry chains entered this channel, still dominated by Metro Cash&Carry Bulgaria.

First were Merkator’s Roda Megamarket, which launched in the end of October and currently has four stores – one in Sofia, two in Stara Zagora (one of which being the revamped Merkator supermarket, which opened in 2009) and one in Varna.

The first hypermarket of the Delta Holding’s Tempo swiftly followed suit and opened its first store in the beginning of December in Sofia. It is expected that it will continue its expansion in 2011.

Both chains offer wholesale deals to businesses customers as well as retail prices to household customers. 

The GfK data shows that in Q3 the cash&carry channel continues its slow decline to just 1.7% of the market (in value).

Everybody else

As expected, the traditional trade and the street vendors and open markets continue to lose positions, but it seems from the GfK data, that both channels have somewhat slowed down their decline. The data also suggests that the discounters are gaining positions at the expense of the hyper- supermarkets and the cash&carry channel, whereas the small grocery stores with a salesperson behind the counter are even on the rebound and hold 43.7% of the market (in value) – as much as in Q1 of 2008.

In 2010 Billa has become omnipresent and plans to continue its expansion. As of the end of December, at national level it had 84 stores, 20 of which are in Sofia. Most of the newly opened stores were of the compact format, situated in the central areas of the cities.

Piccadilly continued its expansion, mostly with the Piccadilly Express convenience format. Currently there are 25 Piccadilly supermarkets, mostly in Sofia and Varna and 10 Piccadilly Express convenience stores, nine of which are in Sofia.

Kaufland opened several new stores in 2010 and their current number is 35.

In the spring of 2010 the French Carrefour finally entered Sofia and currently is present in five cities – Burgas, Varna, Sofia, Plovdiv and Russe.

The dm drugstore chain doubled the number of their stores, while the Serbian chain Lilly Drogerie entered the market and opened its first several shops in the newly-built shopping malls in Sofia and in the centre.

It is hard to predict what will happen in 2011, but most likely the discounters will continue their expansion. Experts are also suggesting that fairly soon the retail trade sector in Bulgaria will reach the point of saturation and there will be no room for new players.

Hristina Dimitrova