GROCERY RETAILING ANDLATVIAN FOOD MARKETING

CHAIN

by

Ingūna�Gulbe,�Dr.oec

June,�2004

Data:�Agricultural�Market�Promotion�Center 2

Sectors�in�the�Latvian�food�marketing�chain�and�flow�of�materials�in�value�terms,�MLs

Data:�Central�Statistical�Bureau 3

Grocery�and�total�retail�turnover, MLs

0

1250

2500

1990 92 94 96 98 00 2002

Total�retail�turnover

Food,�beverages,�tobacco

Data:�Central�Statistical�Bureau 4

Share�of�food�in�total�expenditures

5147

41 38 37 35

0

300

600

900

1200

96 97 98 99 00 02

MLs

0

20

40

60

%

Spendings�on�food Other�expenses Share�of�food,�%

Data:�STC�Consulting,�Central�Statistical�Bureau 5

Store�sizes,�expected�development�of�retail�concepts

Hypermarkets

Supermarkets

Discounters

Other�stores

0

3000

6000

1999 2000 2001 2002

0

125

250

120-400 50-120 20-50

<20 >400

Data:�Agricultural�Market�Promotion�Center 6

Purchasing�criteria

Introductory�period

• trial�period�2-12�weeks

• demand

• customer�response

• margins

First�stage

• price

• brand

• supply�continuity

• quality

• origin

Data:�Agricultural�Market�Promotion�Center 7

• listing�fee,�shelf�space�allowances,�end-of�aisle�display�fees

• terms�of�payment,�retrospective�discounts

• return�of�unsold�units

• special�promotions�like�“3�for�2”�deals

• bulk�purchase�discounts

• special�contributions�at�openings,�remodelings,�extensions,�

mergers

• replacement�of�weaker�20%�of�brands�upon�a�quarterly�

performance

Concrete�conditions�of�supply�relationship

Data:�Baltic�Data�House 8

At�least�on�shopping�per�year,�%�of�total�shoppers

1

1

1

24

40

48

83

86

87

Gas�station

Kiosk

Mobile�truck

Warehouse

Hypermarket

Shopping�center

Market�place

Supermarket

Small�store

Data:�Baltic�Data�House 9

Number�of�shoppings�per�year�in�largest�retail�networks,�million

0.39

0.72

1.07

0.78

0.55

1.21

0.35

0.42

0.21

Nelda

Elvi

CityMarket-Supernetto

Mego�

RIMI

Maxima-TMarket

Other

Supermarkets/convenience�stores Discounters

Data:�Baltic�Data�House 10

Main�reasons�in�retail�outlet�selection,�%�of�total�shoppers

33

42

46

38

54

76

Bulk�shopping

Wide�assortment

Discount�offers

Fresh�produce

Good�price

Closeness�to�home

Supermarkets

Small�stores

Market�places

Data:�Baltic�Data�House 11

Product�value�ratings,�%�of�total�shoppers

29

32

38

46

46

55

89

Labelling�information

Appearance

Producer,�brand

Best�before

Country�of�origin

Price

Taste

Data:�Central�Statistical�Bureau 12

Breakdown�of�per�capita�expenditures�on�food�2002,�value�terms

Data:�Central�Statistical�Bureau 13

Level�of�self�consumption

0% 50% 100%

Vegetables

Fruits

Dairy

Eggs

Sugar,�sweets

Fish

Meat

Oils,�fats

Bakery

Purchased Self-consumed

14

Serious�problems�in�obtaining�data�on�food�convergence�are�identified

Farm�sales

• data�on�volumes�sold�through�retail�outlets�are�not�collected

Manufacturing�output

• only aggregate�data�provided�by�Governmental�Statistics�are�available

• in some�sectors�with�high�concentration�even�aggregate�data�are�not�available�because�of�confidentiality,�supported�by�Law

Retail�sales:

• retail market�product�specific�information�offered�by�a�few�commercialcompanies�is�very�expensive

• turnover�and�sales�estimates�usually�do�not�correct�firms�non-food�sales

• no�data�are�available�on�specialist�stores�sales�in�bakery,�dairy,�meat,�fish,�confectionery�segments

Data�and�information�issues�in�determining�the�performance�of�the�food�chain

15

• lack�of�communication�and�understanding�between�sectors�of�the�

food�chain

• fragmented�and�inefficient�farming�sector

• rather�fragmented�food�processing

• low�consumer�purchasing�power

• limited�data�on�cost�structures and�sales�volumes�necessary�for�in-

depth�analysis�of�the�food�chain�performance

• growing�impact�of�cross-border�alliances�within�grocery�retailing

• limited�possibilities�to�protect�domestic�agricultural�production�

Main�problems�limiting�the�competitiveness�of�the�Latvian�food�marketing�chain

16

• creating�of�a�constructive�dialogue�between�partners�in�the�food�chain

• better�communication�with�the�consumers,�including�more�targeted�media�coverage

• assistance�to�producers,�better�equipping�them�to�meet�the�needs�of�the�major�players�in�the�marketquality

Proposals�for�increasing�the�competitiveness�of�Latvian�food�marketing�

chain• Ministry�of�Agriculture

• Cooperation�Board�of�Latvian�

Agricultural�Association

• Federation�of�Latvian�Food�

Processors

• Traders�Association

• Latvian�State�Institute�of�

Agrarian�Economics

• Marketing�Council

Parties involved