Reasonably optimistic We asked retailers from Serbia and from Montenegro how many stores they had planned to open and how many of them they had opened in 2010 and what their plans for 2011 were. We also asked them for short analysis of the FMCG market in 2010, and to tell us their expectations for 2011.

 BB Trade, Dragoljub Bjeloglav, General Manager

 ’’BB Trade has two retail formats - Persu market, earmarked for everyday shoppings, which presents the greatest part of BB trade portfolio, and Ito market, which represents bigger retail formats, where the price of  products is in first place. Business plan for 2010 was to open new selling space of 1.500 square meters, which was realized when Ito supermarket of 1.200 s.m , and Persu stores of 300 s.m. were opened in Zrenjanin. Opening of new retail objects of 1.400 s.m. was planned for 2011. The sales plan for 2011. predicts increase of income of 30% , 10% of retail objects that already exist and 20% of new retail objects openings. During 2010, the FMCG market showed decline, which is confirmed by the recent analysis. However, when it’s about our company, we recorded increase of income in retail of 9,73%. This growth is recorded in same number of objects in 2010, comparing with 2009. We also recorded decline of average price difference rate, which is the consequence of common retail trends for the retail chains business in Serbia. The market is very impecunious, and retailers are using prices to fight for every consumer and in that way, they are trying to maintain the level of income by putting profit and sustainable development aside. BB Trade has made a plan which goal is to provide normal profit rate, so that we could provide all necessary measures for further development. Since we expect similar market situation, with further decline of trading, BB Trade will direct it’s activities towards implementing new mechanisms for gaining the consumers confidence and towards reduction of variable costs of business operations. The biggest problems in 2010, and they will probably be the same in 2011, are the instability of exchange rate and greater costs of financing, especially for loans in €. Also, the great danger for retail chains is almost certain high rate of inflation in first part of 2011.’’

Delta Maxi, Miloš Ristić, director of Delta Maxi Serbia

’’Delta Maxi Group finished the year of 2010 with 34 new objects, in Serbia and region, and 1.468 new employees. Three new Tempo hypermarkets were opened in December, in three different markets: first Temo in EU and the biggest hypermarket in Bulgaria which was opened in Sofia, then Tempo in Eastern Sarajevo (Bosnia) and in Nikšić (Montenegro). In next year we shall continue the investment cycle, we shall invest 92,4 million € in expanding of retail network. We are planning to open 75 new stores in different formats in Serbia and region: 22 in Serbia, 17 in Bulgaria, 9 in Montenegro, 14 in Bosnia and Herzegovina and 13 in Albania. Global crisis, decline of purchasing power, insufficient investments, insolvency, weakening of RSD, were things that marked year behind us. The decline of purchasing power caused the changes of consumers purchasing habits, and retailers had to adjust. Non food products, electronics, textile were those that suffered the most. Consumers are much more careful, they calculate their household budgets and in the first place are price oriented. In order to face this negative trends in the best way possible, we acted in a proactive way: we cut the spendings and worked on increasment of efficacy of  business processes in all segments. The most important thing is that, thanks to continual investments in price reductions and discounts, assortment optimization, intensive private label development, we managed to maintain demand in satisfying level, and also the number of customers. In first 11 months of 2010. in the Serbian market, Delta Maxi group realized the turnover of  72,6 billion RSD, which is 6% more than in the same period in 2009. In countries in the region, the turnover is 353,3 million €, which is 30% more than in the same time 2009. When it’s about year 2011, it’s unreal to expect some significant improvements and sudden recovery of economic indicators. In next year, both retailers and manufacturers will have to face low standard of customers, and stability of exchange rate will have a leading role in pricing and will affect business operations of all market players, and that’s the reason why it must be the priority in 2011. Providing more investments and opening new workplaces would contribute the recovery of the sector, which is something our retail chain is working on.’’

Dis, Darko Aćimović, General Manager

’’So far, we were known to be good at realistic estimation of situation and moderate decision making about development. Entire income of our company in 2010, increased for about 15%, which, in time when stagnation and preservation of last year’s results are considered as a success, doesn’t give us right to have pessimistic expectations. Last year, no matter how difficult it was, was not the year of stopped investments in Dis. Longstanding work in more or less crisis conditions, experiences from last year,  influence adequate answer to the crisis. We planned to open four objects, and we did that by opening one small object in Krnjevo, two big ones in Pančevo and Kragujevac, and as a crown of a successful year, opening of our first hypermarket in Belgrade. In 2011, we plan to open at least four objects. To estimate a level of crisis and to compare with the one from last year is not a thankful job. I think that, at this moment, the effects of last year crisis are not realistically estimated and that they will be best seen in final account for 2010. Only than we will be able to, completely and with precision, see what the losses involved with negative differences in exchange rate are, which burden companies and minimize the entire result of last year business operations. Macroeconomic instability and trends in monetary sphere, in first place i think of  instability of exchange rate, in great measure will represent challenges in normal business operations in 2011. Besides that, growing of competition in time of decline in life standard may impose serious limitations of development and investment. Our company reacted on time on first signs of crisis. Optimization of business process, significant reduction of costs , careful investment policy in real terms, careful selection of assortment, and above all selection of adequate targeted group and adjustment of prices to chosen group were the basis of good market positioning in our sector. We also directed our efforts on development of our private label, which helped additional expansion of number of consumers in our system. Concern for consumers in all segments, from prices to postselling service is in heart of all strategies of market position development. Racionality in consumers’ behaviour imposes pursuit for rational answers on market demands.’’

Familija, Dejan Rešetar, general manager

’’ The plans of Familija market, first defined in period of foundation, are changed and adjusted to current situation. Revised plan for 2010. predicted opening of two new stores, one of them was opened in Belgrade in a subway passage in Nušić street, and the second one is in Valjevo, and its opening is expected in the beginning of 2011. For the second half of 2011, we are planning the enlargement of retail network by opening five supermarkets and one mega format store. Development of the situation on the FMCG market in 2010 is a logical continuation of happenings that marked the year of 2009, and for all us, the results are not what we expected. During 2010, we recorded the increase of turnover and the total number of consumers, but the growth trend of value of average purchase is lower comparing to previous period because of general weakening of purchasing power, customers orientation on cheaper products and on private label products. As a part of strategy for further development, Familija market team have already started to introduce innovations in their business operations and in realizations of plans for strengthening of market share, with significant support of Verano group and our business partners ’’.

Gomex, Goran Kovačević, general manager:

’’We have planned to open 30 objects in 2010 , and we opened 27, and that is because, in the last quarter of 2010, we stopped expansion, in order to consolidate the system and to completely integrate new opened stores. During 2010 , trends from 2009. continued, and that means disappearance of one part of trading companies, and especially independent stores. Big chains fought for every part of market, what mainly caused bad financial results. The state (Serbia) threw over one part of its obligations on economy and made business operations more difficult. In 2011 , we expect slowdown of crisis but with continuation of negative tendencies, firstly in increase of direct costs and decrease of turnover per capita. Anticrisis measures will, first of all, be increased control of spendings and reexamination of all investments which are not short-term efficient. Gomex will continue to expand retail network, but every project will be carefully reconsidered. We shall avoid to sell if collection of outstanding debts is not guarantied. We’ll put the accent on additional education of employees on all levels’’.

Idea, Viktorija Radojević, marketing director:

’’In 2010 , Idea continued the expanding of it’s retail network – 35 new stores were opened. Today in it’s structure, Idea has more than 130 retail objects in Serbia, and 7 wholesale centers – in Belgrade, Niš, Leskovac, Čačak, Novi Sad and Subotica, and more than 3.800 employees. In 2011. we will continue with further optimization of already existing business process, and improvement of service efficiency and quality in retail. We shall also continue with planned investments, especially with expanding of retail network, in order to make Idea stores of different formats available to customers in entire Serbia. In that way, Idea will increase the number of new employees. It’s obvious that consumers behave more rationally while shopping, so we, as a company which takes care of it’s consumers everyday, continually follow the situation on the market, with a clear goal to adjust ourselves to the customers needs, to expand the offer and conveniences for shopping in Idea stores. During 2011 we expect increase of purchasing power of consumers and slow but successful market recovery’’.

Mercator-S, Goran Sorak, Executive Director for marketing coordination and PR of Mercator trading for southeastern Europe:

’’In 2010, Mercator-S company opened  23 new objects, including Roda megamarket in Bačka Topola, Roda Cash and Carry in Leskovac and supermarket in Belgrade. More than 11,3 million € was invested in construction and adaption, which matched the investment plan for 2010. Despite the crisis Mercator-S kept it’s planned dynamics of investments, thanks to good results on Serbian market. In 2010, Mercator also realized strategic partnership with business system Coka, what increased the number of its stores for 22, especially in districts of Braničevo and Podunavlje, and in that way additionally consolidated the position of the second biggest retailer in Serbian market with more than 8% of market share. In 2011, Mercator will continue to invest in retail network expanding in Serbian market, according to its development plans. Among the most important stores that shall be opened in 2011 are Roda centers in Kruševac, Jagodina and Vrbas. The influence of global financial crisis was felt in retail turnover in 2010, mainly because of decreased demand caused by the fall of life standard and average salaries and changes of customers spending structure. We can say that, because of the crisis, the spending structure is mainly consisted of basic consumer goods, and demand for segments like textile and technique is lower. The position of Mercator-S is to fight with development against the crisis- with enlargement of number of stores (now more than 130 in Serbia), large assortment of products and significant shopping conveniences. In first ten months of 2010, Mercator-S had sales income of 381,6 million €, what represents growth of 11,4% in RSD comparing with the same period 2009, while the growth in € is 2,5%. With more than 4.200 employees, Mercator-S is one of the biggest employers in Serbia and in that way presents a confident partner for stable business operations. Although it is expected that conditions of business operations will be adverse in 2010, Mercator group is planning a growth of sales income in entire region for about 6% in average, and out of Slovenian market expected growth is about 16%.’’

Metro Cash&Carry, Veronika Puncheva, President of Board of Directors

’’Until now, Metro C&C invested about 120 million € in Serbia. Our plan for 2010 was to, besides two current distribution centers in Belgrade and one in Novi Sad, Niš and Kragujevac, open one more distribution center, what we did at the end of October, when we opened an object in Subotica, worth 15 million €. What is also important is that in 2010, on the Serbian market, we launched Metro po meri, new wholesale format, earmarked to smaller cities (with less inhabitants). In 2011 we shall continue to invest in Serbia by opening third distribution center in Belgrade and further development of Metro po meri format. Our plan is to open at least 250 new workplaces and to increase market share by getting closer to buyers through new channels of distribution. Last year was very tough for retail sector in entire Europe. Global financial and economic crisis didn’t go round Serbia and our professional buyers, who were forced to take care of where they buy, what they buy and how much money they spend, which caused increased demand for our private label products. We record strong growth of profit from 2008 and we were also very successful last year. We paid great attention to income growth, rationalization of costs and investments in future projects, we worked hard and focused on specific needs of our professional buyers and offered them good prices. We expect Serbian market will next year continue its dynamic development, and that we will record a stronger growth of sales and income, thanks to plans for new investments and further expending of our wholesale network.’’

Tuš Holding, Public Relations Office

’’Today, in Serbian market, Tuš Holding has seven opened supermarkets- in Belgrade, Novi Sad, Sombor, Subotica, Sremska Mitrovica, Jagodina and Kragujevac. We are very pleased with our business operations in last year. In 2010 we opened supermarket in Kragujevac and plans for 2011 are not finished yet and will depend on development of business situation in global economic market. Tuš holding carefully observes the situation on FMCG market, because forecasts of world macroeconomists are still not optimistic. Financial solvency of citizens is much weaker and with that their purchasing power weakens too. We can see that structure of demands has changed, because sale of products on sales grows, and that structure of sold products is also changed in favor of cheaper ones. For our company, Serbian  market is very interesting, because it grows and has a great potential. Our advantage is that we know it very well, and that’s why there is realistic possibility to develop strong and recognizable trade mark. One of the biggest challenges is to compete with bigger trading chains, because leading retailers from region are already present in Serbia. In 2011, we expect that, with recovery of economics, things begin to improve in this sector and to keep consumer confidence in Serbia that we have, but to increase our market share with the quality that we offer. We in Tuš think that solution is not to offer the cheapest products, but to find the best way and to offer to customers the most they can expect for their money. Because of that we consider that our best ’’weapon’’ against crisis is wide offer of quality products of our own trade mark- Tuš (private label) and our loyalty program- Tuš Klub. If we add well developed logistics, competitive prices, discounts, prize contests...it’s clear then that we are fighting the crisis and doing everything to surpass it the best way we can’’.

Univerexport, Olivera Ćirković, PR manager:

’’2010 was supposed to be the year of fast  recovery. Although the domestic market is affected by all negative economic changes that also hit the world market, recovery in our country always lasts longer, so that our whole domestic market reminds of organism with ’’ slow metabolism ’’. FMCG market and companies that operate within it are not that sensitive on variable economic cycles and because of that, comparing with other sectors, business results of 2010 may be considered successful. In every time and in every market, business skills present one of main causes of success, and 2010 was the right year for this kind of challenges. Univerexport has a successful year behind, in which it managed to accomplish all plans. Midyear was marked by arriving to Belgrade market, and the biggest success for us was creating new workplaces. Main motivating idea for business moves in 2010. was a rational consumer. That kind of development mend solid and secure investments without market experiments. The result is next: in 2010, Univerexport employed around 300 people, with 5 million € total investments in 2010, sales area of retail chain was expanded for 30%. In the end of the year, the income was higher then 12 billion RSD, and for entire business system it was more then 16 billion RSD. In 2011 , we plan to expand our retail network to entire domestic market, our plans are also oriented towards corporate social responsibility and cooperation with local community. We plan the same or higher level of investments and more workplaces. Every year has it’s challenges, 2011 will probably be the year of changes, what will bring more choices to customers’’.

Veropoulos:

’The plan was to open two stores in 2010 , in Voždovac and Žarkovo (parts of Belgrade). But because of some bureaucratic slowdowns at beginning of building, and partly because of economic crisis effects, the plans were not completely realized, but we expect them to be very soon. Ending of these two investments, in Voždovac and Žarkovo, is expected on spring of 2011. But this is not the end of our investments in Serbia. On the contrary, we plan to invest more and to open new stores, in Belgrade and all around the country. Doing business in Serbia is very attractive to us, what can be noticed in our permanent investments in economic potentials. Besides the fact it is one of the biggest markets in region, we cannot ignore the traditional connection between Serbian and Greek people, which is one more reason to invest in Serbia. FMCG market in Serbia in 2010. and also in 2009. is slightly hit by the economic crisis. The fact is that consumption per capita is lower, competition is opening new stores and banks made retailers to put up with bigger costs. But, with all these difficulties, the crisis didn’t affect our business in Serbia significantly. It influenced in the way that slowed expanding of retail network but didnt affect the turnover. Considering the fact that basic consumer goods are necessary, turnover remained relatively stable. Despite the slowdown we had with new openings, decreased financial aids from banks, we intend to expand our retail chain in entire Serbia, and in that way help the recovery of economy in times of crisis, by opening new workplaces’’.

 Višnjica stores, Dragoslav Čihović, general manager:

’’Višnjica stores planned for 2010. to open two stores, and it was done – now, the chain of Višnjica stores has 23 objects. In 2011 , we plan to open 3 new stores, and banks will assist us in that project. New stores will be in the center of Belgrade – The Old Town and Palilula. The presence of consumer goods in 2010 was large and diverse, except for a shortage of milk and milk products in September. We expect that the shortage of milk and milk products will continue in 2011 , until April, as it was announced by milk industry. Expanding our product range, kindness to customers, and openings of 0-24h stores, are our ways to fight the crisis and results and accomplishments are what we expected them to be’’.

Albona, Nataša Lučić, Marketing Director:

’Albona was planning to open 14 new objects in 2010. and that plan was realized. Now, their retail chain has 40 stores, well positioned in seven municipalities in Montenegro. In 2010 , our goal was to expand towards north of Montenegro, so we opened supermarkets in Rožaje and Pljevlja. The second half of 2010 was about opening larger markets, 500-1000 s.m. We wanted to complete the offer, so our stores with widest range offer around 13.000 items. Albona is young retail company. It exists only two and a half years, so this development is noteworthy, especially because of the crisis. But, the fact that we opened 650 workplaces in short time obligates us to maintain current dynamics of development in 2011 too. We explore new, interesting locations at the seaside and in the north. It’s not easy to position in Montenegro market because it is small and saturated by the offer of other, big chains. The competition is impressive. Two foreign chains and domestic chains are fighting for good positions. To build a new system in those conditions, when some industrial giants are disappearing, in time of strikes and unpaid wages, is a little bit risky idea. It’s not very easy to talk about expectations in advance in this situation. It’s sure that big number of retail chains and crisis in Montenegro dictated the business model for all retailers in 2010. To get a ‘piece’ of domestic market, we needed discount policy, which was good for customers, we all, in the end, exist for. Constant margin breakings, achieving a slightly lower prices, especially for basic groceries, could only provide a survival of the company and workplaces preservation. Negligible credit support from banks also had it’s share in this story. It disabled more rapid development and larger investments in expansion. But, Albona managed to implement modern retail standards in all stores opened last year. Improvement and further network expanding is the next step’’.

Mercator-Montenegro, Ivan Karadžić, Executive Director

’’The year of 2010. on the market of Montenegro was marked by strategic alliance with Pantomarket and Plus Commere retail chains. This way, Mercator-Montenegro took 85 stores on long term lease and became the leading retail chain on the market of Montenegro with 20% of market share. This project, worth 30 million € , was strategic investment, which enabled Mercator to strengthen significantly it’s position on this market, where it is already present with Mercator Mex banner. In 2010, we opened Roda stores, and we also accomplished the fusion between Mercator-Montenegro and Mercator Mex, which, from January the first, operate under the name – Mercator-Montenegro. Montenegro, like other markets in region of south-eastern Europe, because of the global financial crisis, recorded a decreased demand, because of the decline in standard of living and wage cuts. The change of structure of consumption was also recorded, they focused on basic groceries and in sections of textile and household appliances we recorded a decline in turnover. Despite the crisis, Mercator had good results in Montenegro, marked by intensive activities related to strategic partnership. In 2011 , business of Mercator-Montenegro will be marked by further strengthening of Roda brand and market position of Mercator-Montenegro. Operations in market of Montenegro will be accorded with developing plans of Mercator Group. We should emphasize that Mercator-Montenegro, with 1.700 employees, is one of the biggest employers in Montenegro.’’

Voli, Dragan Bokan, General Manager:

When it’s about the year behind us, i can say with pleasure that we accomplished everything that we had planned. We opened a hypermarket in Herceg Novi, on the border with Croatia, a specialized butcher shop in Podgorica, at the place where we, 15 years ago, opened a first Voli market, and a hypermarket in Nikšić. Regradless of crisis, we realized all the plans and projections. In 2010, comparing with previous year, gross sales increased 27%, and it was 110 million €. We also invested in another profit center, since we are today in position to implement European distribution standards in our country. Distribution-logistic center Voli will cover almost 7.000 s.m. Realizing this project we provided required size of storage and handling space with controlled temperature regime and we accomplished the best possible level of service, what is, at same time an obligation to the regional leaders that we represent (leading regional producers). Last year was also significant for us because we achieved cooperation with respectable European institution- European Bank for Reconstruction and Development. Partnership with international financial institutions is in line with business policy of the company. This cooperation is huge because it was realized in times of global financial crisis, and the loan was exclusively directed to development plans. The success has never been, and especially not now, a product of random and unorganized activities, it is a result of careful planning and analysis and well-conceived effort. We adjusted the strategy to expected market conditions. Global crisis didn’t affect planned  turnover and investment volume, so we don’t expect that in future period either, unless crisis intensifies or additional consumption decrease happens. The crisis changes the customers buying habits and makes them become more rational, but for retail chains it is a challenge that stimulates innovations, adjustment and growth. The crisis will crystallize the winners for the period to come. Being different from competition must be based on understanding of customers’ needs and adequate price policy.’’

 Marija Smit,

Progressive magazine, Serbia