Domestic companies just cannot keep up with the investment and expansion rate of foreign outlets.
Foreign stores made massive investments, their annual turnover has grown to several billion crowns and domestic companies can no longer keep up with them.
In 2000, when the annual turnover of the Top 10 companies trading perishable goods stood at Sk35.25 billion, there were only two foreign players occupying the first and second place: British Tesco and Austrian Billa. However in 2001, when the Top 10 ended with the annual turnover of Sk50.81 billion, five of ten were foreign retail chains, three of them holding the top spots (see chart).
What is special about the Slovak grocers which made it to Top 10 in 2001 is that are united in different trade associations which have helped them survive the tough competition from abroad.
"Slovak companies in this sector will never be as powerful as large foreign retailers, but they can manage to keep a certain market share when they form alliances and associations," said Oľga Drahovská of TERNO agency for trade analyses which conducted the survey.
According to Drahovská, 60 per cent of Slovak grocers have already formed trade associations and established access to cheaper goods because they are able to buy larger amounts from wholesalers for less and pass the benefits on to their customers.
Pavol Konštiak, president of the Slovakia's Committee of Trade said that unlike the situation the Czech Republic, Slovak grocers have performed well despite the boom foreigner retail chains are currently enjoying.
Konštiak added that domestic traders have realised that survival was impossible if they did not act in a co-ordinated way.
The first Slovak trade associations were launched in the mid-90s but experts and government officials say they are still lacking the finances and know-how which would make them real competition.
"They can compete only to certain extent. What they desperately need is the capital," said Anastázia Lešková, head of the business and service industry section at the Ministry of Economy.
Drahovská said that the domestic trade associations were not be able to generate the necessary capital for growth themselves and needed to look for finance from abroad.
"Foreign capital also provides know-how which can help them survive and even compete with much more powerful foreign players," Drahovská said.
And know-how is urgently needed when not only existing foreign retail chains promise further growth but when new players are eager to take a piece of the market's cake.
One new investor, Dutch chain Ahold is opening two Hypernova hypermarkets this year, Tesco will open at least one more, and Metro and Carrefour say more outlets are in the pipeline. Billa and Kaufland are also planning to continue their expansion by opening several new supermarkets across country. Domestic growth is expected to be, at best, sporadic.
Analysts say that with the foreign retailers' aggressive plans for expansion, domestic entities will be pushed even further down the Top 10 list.
"Development in Slovakia will pretty much copy that in the Czech Republic. Nothing special can happen here," said Róbert Prega, an analyst with Tatra Banka.
But domestic businesses which are operating on the principle of association say that what happens next door does not have to be the case in Slovakia.
"Foreign retail chains enjoyed their biggest ever boom last year, but we managed to keep roughly the same turnover as in 2000. I am persuaded that it was thanks to trade associations we have established," said Adrián Ďurček, the head of the largest domestic food retailer Jednota.
In order to become stronger competition to the foreign players, Jednota created a multinational alliance last year with similar domestic food retailers from Hungary and Czech Republic, mainly to offer cheaper products from these countries.
"In general for domestic alliances or associations it is important to improve marketing, offer more competitive prices and even manage a good environment for people in their stores. This is the way to become more efficient competition against foreign retail chains," Ďurček said.
21. Jan 2002 at 0:00 | Peter Barecz