You can also listen to the interview in the audio version.
Over the past year, food prices have gone up by 15 to 20 percent – and they probably won’t go down any time soon.
“We are part of the entire chain. Before us is manufacturing, processing and production, after us hotels, restaurants, cafes and retail, and all of them are affected by the price increase. Therefore, with the exception of ultra-fresh commodities, I do not expect any significant discounting,” says Jiří Nehasil, who heads operations and sales at Makro, in an interview for SZ Byznys.
As a wholesaler, it is Makro that offers food at lower prices than retail chains and end sellers. That is also why it deviates a bit from the current trend, while in retail sales have been falling for the seventh month in a row, they are growing here.
Pre-cooked, pre-cut
“We are seeing a change in customer behavior, but we are growing above inflation and also in the number of units sold. Within horeca (hotels and restaurants), we are above 2019, which was our most successful year in history,” says Nehasil, adding that even here, however, customers are changing.
About five percent of classic restaurants have closed, but they have been replaced by new operators of “trendy” bistros and cafes. “They end up mostly those who failed to offer any added value,” adds Nehasil.
“Customers began to think more about the economy. The frequency of purchases has decreased, they are thinking about who will oblige them and are trying, for example, to take more from one supplier. Also because of the energy, they calculate much more whether they buy a raw or a processed product,” he says, adding that even though, for example, pre-cooked and pre-cut goods are more expensive, now they are sold significantly more than in the past.
“We perceive this trend. In combination with energy savings, personnel savings and processing efficiency, it is more advantageous for them,” he adds.
Fewer customers, but more spending
While in 2021 Makro fell to a loss of 13 million crowns with sales of 26 billion due to the closure of catering establishments, for the last financial year (ending in September) the economic result will be positive. And the outlook for the next months?
Largest retail chains by revenue
| Chain | Sales (in billion CZK 2020/2021) |
|---|---|
| Lidl | 63,6 |
| Kaufland | 59,0 |
| Albert | 55,3 |
| Penny Market | 42,2 |
| Tesco Stores | 41,8 |
| Gecko | 38,6 |
| Billa | 31,9 |
| COOP | 31,4 |
| Makro Cash & Carry | 27,3 |
| Globus | 24,2 |
“For example, when I look at the segment of hotels and restaurants, the operators confirm that fewer customers are coming, but they are spending more. So maybe there will be fewer customers, you will have to offer them more, but they will spend more,” adds Nehasil. But he is not thinking about opening it up to end customers.
Small stores? The Vietnamese community can succeed
“We serve professional customers and we want to keep that,” says Nehasil, adding that the company addresses end customers through cooperation with Košík.cz and the partner network Můj obchod, where 650 stores already operate today.
However, especially in small stores, operators now often have trouble maintaining profit – also due to high personnel costs and energy costs. However, this is not the case for everyone.
“We must say that an integral part is the Vietnamese community, which, thanks to its flexibility, replaces the aging Czech population. The whole family is involved in the business here, they don’t look at the time they invest in it, everyone devotes themselves to it with the maximum possible time investment, ” Nehasil describes, adding that the Vietnamese community already serves half of the stores, and expects that its share will continue to grow.
The end of leaflets and the hunt for discounts
Currently, Makro has decided to limit leaflets and promotional prices.
“We are trying to change customer perception and the pursuit of bargain prices. The Czech market is the European leader in this regard. I believe we can change the market trend. We were all a bit influenced by the manufacturers as such, as some sell 90 percent of their products at events. It needs to be changed, it will allow you to plan better and it should be a win-win. We want a price that is stable and competitive in the long term,” says Nehasil.
According to him, from this change, Makro also promises that it will not have to focus on product promotions and the number of changes to individual price tags will also decrease.
How retail sales developed in individual product categories
| Sales (million CZK) | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 ↓ |
|---|---|---|---|---|---|---|---|
| In total | 948 342 | 980 024 | 1 013 840 | 1 087 742 | 1 154 456 | 1 215 200 | 1 225 973 |
| Food, beverages and tobacco products | 403 135 | 410 042 | 421 020 | 448 049 | 463 303 | 483 314 | 498 693 |
| Online retail or mail order service* | 48 443 | 62 485 | 74 091 | 85 130 | 107 791 | 125 019 | 163 071 |
| Fuel | 126 539 | 118 870 | 106 942 | 119 574 | 131 778 | 135 103 | 113 907 |
| Hardware, paint, glass and DIY supplies | 50 481 | 54 772 | 58 207 | 62 712 | 66 547 | 71 101 | 74 548 |
| Pharmaceutical preparations, medical and orthopedic products | 52 892 | 54 582 | 56 612 | 58 384 | 58 776 | 64 290 | 68 622 |
| Clothing, footwear, leather goods, textiles | 50 691 | 56 056 | 60 560 | 68 858 | 71 664 | 75 311 | 55 875 |
| Computers, communication equipment, electrical appliances and electronics | 38 716 | 40 092 | 41 492 | 40 507 | 45 881 | 48 391 | 52 973 |
| Furniture, lamps, carpets, floor coverings | 27 326 | 29 895 | 30 615 | 34 169 | 37 935 | 39 084 | 38 093 |
| Sport equipment | 17 577 | 19 011 | 21 862 | 24 277 | 25 528 | 27 424 | 26 943 |
| Cosmetic and toiletry products | 18 296 | 19 660 | 21 480 | 22 268 | 24 138 | 25 770 | 26 207 |
| Flowers, plants, seeds, fertilizers, pets and feed for them | 6 856 | 7 665 | 8 331 | 8 736 | 8 649 | 9 158 | 10 002 |
| Books, newspapers, magazines, stationery, audio + video recordings | 11 681 | 11 918 | 12 180 | 10 129 | 9 655 | 10 031 | 7 909 |
| Clocks, watches and jewelry | 6 782 | 7 616 | 8 195 | 8 349 | 8 084 | 8 226 | 7 821 |
| Toys | 4 221 | 4 834 | 5 683 | 6 043 | 6 178 | 6 397 | 5 445 |
| Other | 84 705 | 82 526 | 86 570 | 90 556 | 88 547 | 86 580 | 75 865 |
Notes: Retail sales are listed according to the CZ-NACE classification, which is a system for classifying economic activities.
* These sales do not correspond to the information on e-commerce sales published by APEK and Heureka, because the Czech Statistical Office (ČSÚ) only includes the sales of companies with a predominant retail activity via the Internet in these figures, so online sales, for example, are not included primarily brick-and-mortar retailers.
The company took eight thousand items – both private labels and from suppliers, where it will hold the price. It is the private series, which is cheaper, that should expand significantly in the future. “In the segment of hotels and restaurants, we already have more than a thirty percent share of our own brands, and we are trying to come up with our own offer for retailers as well. The ideal situation should be half of own brand and half of branded products,” adds Nehasil, adding that the chain should achieve this within five years.
In the Czech Republic, more than 60 percent of goods are sold in leaflets, and chains have been talking about the fact that they should be reduced for several years. However, no one has yet been able to get out of this “carousel”.
Already during last year, however, the chains began to limit them. The reason was the sharp increase in the price of paper, which shot up the price of the flyer by half. Instead of paper leaflets, they rely on loyalty programs or their own applications. According to experts’ estimates, however, approximately 50 million paper leaflets are still produced in the Czech Republic per week.
But even the goods from the leaflets are becoming more expensive – according to an analysis of the promotional leaflets of seven retail chains of the company Česká distribuční, “promotional food” is 37 percent more expensive year-on-year.
