It may seem so, but there is a problem of margin. We understand that consumers are in a difficult time, so we try to lower prices wherever possible. In the last action, we lowered the prices of over a thousand products by nearly 10 percent. It is possible thanks to the resignation from part of the margin. We do not want our customers to turn their backs on us, on the contrary – our ambition is to build ever stronger ties and consolidate our position on the market. We also take into account the fact that with the passage of time some consumers will consciously reduce their baskets due to inflation. We want to prevent this.
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Everyone is affected by high food prices. Store representatives say that it is a matter of huge increases in producers, while farmers are complaining about the huge margins of retail chains. My guess is that you tend to share the first opinion.
The margin is really low. It depends primarily on the current promotional mix, as well as individual articles. Many factors influence the increase in product prices. Supply chains, broken during the COVID-19 pandemic, have still not returned to pre-pandemic capacity. The raw material crisis was deepened by the war in Ukraine. In addition, there are rising costs of transport, packaging and staff salaries. All of this is closely related and results in increases of up to several dozen percent. We are not happy with the more expensive products on store shelves, we do not use it additionally.
Where could this wave of price hikes stop? Is it 20-30 percent?
I would not like to speculate like that, but we will certainly expect further increases of even several percent. The wave of inflation will not pass us by.
Do clients behave differently than before? Are they dropping off a certain product category? Do they choose private labels more often?
We definitely see a growing interest in private labels. These are products at a better price and of comparable quality. Customers are much more interested in promotions. “Nice to have” products, which would be nice to have, but you can do without them, are now slightly less popular. It is mainly about industrial products, but also a premium shelf – e.g. alcohol. Certainly, basic food products such as flour, porridge, rice, eggs and milk are gaining. There is also a growing demand for children’s products – I believe that is also due to the presence of refugees.
You say that you are pursuing low prices, on the other hand, food producers reading this may feel anxious as to whether it will be at their expense. The government has even set up a food holding company to counteract this.
Of course, the price increase is taking place and will continue to be noticeable – we are not able to maintain the current offer. The food holding is in the initial phase of operation. However, I am not sure if this is a good solution. It seems to me that the market should regulate such issues. Nor do I believe that we have a privileged position in relation to farmers. Producer groups that negotiate prices are very strong. Most of the products on our shelves come from Poland. The pandemic has shown more interest in local products – we are following this trend.
Also read: The most expensive bread on the German border. Map of food prices in Poland
Does this make you have a positive view of the EU’s Farm to Fork Strategy of shortening supply chains and organic production?
We are definitely positive about this trend. We already operate in this way with some products – for example, the articles are delivered to us by nearby bakers or small dairies. It all depends on the customer – whether he or she will ultimately want to buy a regional product that is less mass-produced. The share of ecological products in our sales is growing, especially in large cities. It is about the wealth of the wallet and consumer awareness. Though I agree that organic production is less intensive, which leads to these items being more expensive. We also know that most customers say they would be willing to pay more for organic food, but when they find themselves in front of the shelf, they often make different choices.
What about salary increases for employees? Does it pay off to work “on the cash register” today?
Each year, we allocate a large amount to increase the level of remuneration. In the current labor market situation, we must pay well to remain competitive. Our fiscal year starts in March and we have introduced increases since that month. On the other hand, it actually affects the financial results and operating costs.
Wage costs will keep pace with inflation?
It is difficult to give an unambiguous answer. We monitor the market reaction and analyze the actions of the competition on an ongoing basis. However, we will certainly try to follow the market in terms of remuneration for employees.
The rest of the interview under the video:
In Wrocław, Kaufland employees are protesting in front of the company’s headquarters. They are demanding higher wages.
The demands for a wage increase made by WZZ “Employee Unity – Change” are unfounded. Every year we grant salary increases to our employees and we are currently the second retail chain in Poland that offers the best financial conditions in the retail industry. It should also be emphasized that as a company we are struggling with a significant increase in operating costs, and the demands of the aforementioned union do not take this fact into account.
Some of your Polish competitors are still doing business in Russia. Kaufland felt that customers came to you instead of them?
Yes, in part. In locations close to the outlets of competitors operating in Russia, we see a positive increase in turnover. To some extent this is certainly dictated by the boycott, and our group is not present in Russia. We also knew from the beginning of the war what the Poles’ attitude to Russian aggression was, so we withdrew all articles from Russia or Belarus. There were not too many of them in our assortment.
Anything but vodka?
Most of these products actually fell into the strong alcohol category. The withdrawn articles also included russian frozen fish.
And as for imports from Ukraine – are disturbances in receipt from this direction problematic?
There will be plenty of food in Poland, even if there are temporary shortages due to logistical problems or extraordinary demand. If we are talking about any deficits, there may be temporary interruptions in the supply of sunflower oil, because Ukraine is its important supplier. However, its replacements will be available invariably. If there is no sunflower oil, it will certainly be rapeseed, linseed or olive oil.
Are you planning to open new stores?
Nothing has changed in the company’s strategy, we want to open at least 10 facilities every year and develop dynamically. It is not always up to us. In many cases, we wait a long time, among others for the necessary permits. The construction process is also getting longer due to the lack of labor in the construction industry. This is also due to the war.
There are also visible shortages in Kaufland?
We have vacancies, but we have no major problems with recruiting employees. Trade is a woman – in our network, ladies account for over 80 percent. crew. Due to the current situation in Ukraine, many women from Ukraine have found employment in our stores and distribution centers. Polish language course. We also try to meet the needs of refugees and when we know that they live together, we often include it in our schedules so that someone is always at home and can look after the children. We adapt to the situation.
Self-service checkouts do not weaken the demand for employees?
Although self-service checkouts have become the new norm after the pandemic, we still need people to lay out goods or organize stores. The turnover is going up, we are developing, so we need employees.
The development of self-service checkouts will stop employment?
Their popularity will surely grow. However, the level of employment is influenced by many factors, including more customers. So there will be no breakdown. Kaufland invariably focuses on traditional trade, an important element of which is direct contact with the service. This is an important aspect for our clients.
The interview was conducted by Grzegorz Kowalczyk, journalist from Business Insider Polska
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