Country Presentation Slovenia

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Country Presentation Slovenia
Updated November 2007
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Contents

• Map
• Demographics
• Political Outlook
• Economic Overview
• The Retail Market
• Top 10 Retailers
• Challenges and Opportunities

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Summary

• Area 20,273 sq.km
• Capital City Ljubljana
• National Currency Euro (EUR) Note on 1st
  January 2007, the euro became Slovenia's
  currency, replacing the Tolar
• Population (2007) 2.01 million inhabitants
• Population Density 99.16 people/km
• President Janez Drnovsek (since 22nd December
  2002)
• Ruling Party Slovenian Democratic Party or SDS
• Prime Minister Janez Jansa (since 9th November
  2004)

Source CIA, IGD
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Demography 10 most populated regions
Source Statistical Office of the Republic of
Slovenia, 2005 data
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Demographics
Population Split by Age, 2007 ()
Population Growth Forecast (000s)
www.igd.com/analysis/datacentre
Source IGD Datacentre, United Nations 2007
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Political Outlook

• Janez Drnovsek has been President since 22nd
  December 2002. The President is elected for a
  five year term, so the next election is expected
  in Autumn 2007.
• The next General elections will be held in
  October 2008.
• The main opposition party, the centre-left
  Liberal Democracy of Slovenia (LDS), is still in
  disarray and is unlikely to provide a strong
  challenge to the government in the near future.
  The government is expected to accelerate
  implementation of the promised reforms in next
  two years, even if in a somewhat moderated form.
• In October 2006, local elections strengthened the
  position of the coalition, particularly of some
  of its junior members. Opinion polls show that
  the population has confidence in the government.
• Unemployment levels remain moderate, at between
  5.5 and 7.
• Slovenia will assume EU presidency in the first
  half of 2008.

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Economy and Consumer Spending

• GDP growth strengthened in Slovenia in 2006. The
  Euro adoption and tax reforms are likely to lead
  to further growth in 2007.
• In order to remain competitive in international
  markets, structural reforms such as acceleration
  of the privatisation process are essential.
• Private consumption is expected to benefit from
  the simplified personal income tax structure
  which came into force at the beginning of 2007.

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Economic Overview
Note Slovenias currency changed from the
Tolar to the Euro in January 2007.
www.igd.com/analysis/datacentre
Source IGD, UniCredit, Eurostat
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Grocery Retail Market Sizes 2007e
Top 10 Global Markets
Top 10 Eastern European Markets
www.igd.com/analysis/datacentre
Source IGD Datacentre estimates
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The Retail Market
Source IGD Datacentre estimates
www.igd.com/analysis/datacentre

• IGD Grocery Retail Market corresponds to the
  total annual turnover (excluding VAT) of retail
  outlets predominantly selling food. It includes
  the sales of non-food articles (i.e. health
  beauty, pet care, clothing, DIY etc) sold by
  hypermarkets, supermarkets, discounters,
  neighborhood stores, specialised food stores
  (bakeries, butchers, etc) and open markets. It
  excludes all cash carry, delivered wholesale,
  foodservice and drugstores/chemists.
• IGD Total Grocery Market includes is a wider
  definition of the grocery universe and is the sum
  of the grocery retail market and the cash and
  carry outlets.

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Retail Consumer Spend Per Capita in Slovenia

• Slovenia is a high-income economy which enjoys
  the highest GDP per capita of the newly joined EU
  countries.

Source IGD Datacentre
www.igd.com/analysis/datacentre
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Retail Legislation

• In Slovenia, stores are generally open from
  Monday-Friday 0800-1800 and Saturday 0900-1300.
• The rules on Sunday opening differ for three
  types of shops
• Stores selling essential goods may open from
  Monday to Saturday and on a maximum of 10 Sundays
  a year.
• Small stores which sell essential goods located
  at petrol stations, hospitals, hotels, airports,
  border crossings, railway and bus stations may
  open without restrictions on Sundays.
• All other shops are closed on Sundays.
• In March 2006, the act on Double Pricing was
  adopted, rendering it compulsory to display
  prices in both Slovenian Tolars and Euros.

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The Grocery Retail Market Structure By Format

• Slovenia is a small market of 2 million
  inhabitants. IGD estimates the value of the
  Slovenian grocery market to be 4.08 billion in
  2007.
• Slovenian retailers dominate the market, although
  Spar International, E. Leclerc, Aldi and Lidl
  have entered the country.
• Slovenian retailers are focusing upon strategic
  acquisitions to consolidate their market
  position. Domestic retailer Mercator has pursued
  a highly acquisitive strategy to date.
• The hypermarket format was first introduced into
  the country in 2000 and dominates larger cities,
  whilst the supermarket format still flourishes in
  smaller towns and villages.
• The retail sector has undergone rapid
  transformation in recent years, with a shift in
  power away from manufacturers and focus being
  placed on larger retail formats and consumer
  satisfaction.

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Top 5 Retailers 2006

• Grocery Retail Market Shares exclude cash carry
  operations.
• Data is for grocery formats only except Total
  Sales which includes non-grocery if applicable.
  Total Sales Grocery Sales are Net.
• Data includes franchised operations where
  appropriate.

Source IGD Research, Mercator, Spar, Engrotus,
Aldi, Leclerc
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Key H Hypermarket, S Supermarket, C
Convenience, SS Self Service, CC Cash
Carry, D Discount

• In 2006, 78.4 of Mercator's turnover came from
  the Slovenian market.
• Mercators market share increased in 2006 due to
  its acquisition of Era.
• In addition to the above, Mercator has 165
  franchised units covering 21,426 sqm.

www.igd.com/analysis/datacentre
Source IGD, Mercator. Data is for grocery
formats only. Total sales are Net.
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• Mercators strategy is to
• Retain its market leadership position and achieve
  group net sales of 2.3 billion and group net
  profit of 30.4 million in 2007.
• Expand its store portfolio in Slovenia through
  investments in new facilities and modernising
  existing ones. The development of its clothing
  and technical product chains, either as
  independent ventures or in connection with
  strategic partners, is also important.
• Focus on the construction of 'store concept'
  hypermarkets, with a clear layout and emphasis on
  non-food items.
• Expand its online store delivery area.
• Develop a CRM system and use analysis from
  loyalty card holder purchases.
• Become a leading retailer in the neighbouring
  markets of SE Europe. Mercator is aiming to
  remain the first or second largest retailer in
  Croatia, Serbia and Bosnia. It also plans to
  expand further east, for example to Macedonia and
  Bulgaria.

Source Retail Analysis photo gallery
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Key H Hypermarket, S Supermarket, C
Convenience

• In 1991, Dutch retailer Spar International became
  the first non-domestic retailer in the Slovenian
  market.

www.igd.com/analysis/datacentre
Source IGD, Spar International. Data is for
grocery formats only. Total sales are Net.
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• Spars strategy is to
• Target a 25 market share over the next few
  years.
• Invest 100 million in 2007. Spar intends to open
  2 Megamarkets, in Nova Gorica and Kranj and it
  also plans to expand existing shopping centres in
  Ljubljana, Maribor and Celje.
• Open a new bakery at the end of 2007 which will
  produce 7,000 tonnes of bread per year. Spar will
  thus meet 85 of the demand for bread and will
  only purchase the remaining 15 from suppliers.
• Focus on differentiation, especially from
  discount operators. Building customer loyalty is
  important and Spar currently has a programme of
  loyalty promotions in place.
• Plan further expansion into the emerging markets
  in Europe and Asia.

Source Retail Analysis photo gallery
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Key S Supermarket, C Convenience, CC Cash
Carry, O Other

• In 2006, Engrotus achieved the best ranking
  (30th) by a Slovenian company on Europes 500
  list, which measures European companies in terms
  on job creation.
• Engrotus received the Golden Gazelle award in
  2005 for being the fastest growing company in
  Slovenia. Between 2002-2005 the retailers
  revenue grew by 105.

www.igd.com/analysis/datacentre
Source IGD, Engrotus. Data is for grocery
formats only. Total sales are Net.
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• Engrotus strategy is to
• Achieve an 18 rise in revenues in 2007 to 621
  million, as the network of stores and petrol
  stations is expanded.
• Invest a total of 120 million in 2007, 40 more
  than in 2006.
• Increase its market share in Southeastern Europe.
  The retailer plans to build 6 shopping centres in
  Bosnia and Herzegovina, Serbia and FYR Macedonia.

Source Retail Analysis photo gallery, Engrotus
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Key D Discount

• Aldi entered the Slovenian market in December
  2005, opening stores under the Hofer banner.
  This fascia is almost identical to the standard
  Aldi format.
• The stores carry around 700 food lines, including
  typical Slovenian products, as well as non-food
  categories such as textiles, sporting goods,
  household goods and home electronics.  
• The stores are operated by Aldi Sud.

www.igd.com/analysis/datacentre
Source IGD, Aldi. Data is for grocery formats
only. Total sales are Net.
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• Aldis strategy is to
• Operate 80 stores and employ 2,350 people in
  Slovenia by the end of 2009.
• Invest 19 million in new stores planned for
  2007, with an additional 50 million investment
  being allocated to a logistical and distribution
  centre in Prevoje.
• Aldi plans to spend 300m to expand its network
  nationwide in the next few years.

Source Retail Analysis photo gallery
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Key H Hypermarket

• French retailer Leclerc entered the Slovenian
  market in June 2000.
• It operates 1 hypermarket in Ljubljana and the
  store stocks 80,000 SKUs.

www.igd.com/analysis/datacentre
Source IGD, Leclerc. Data is for grocery
formats only. Total sales are Net.
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• E. Leclercs strategy is to
• Open a second store in 2007 in Slovenias second
  largest city, Maribor, according to unconfirmed
  press reports.
• Focus its attention on expansion in Poland, Italy
  and Portugal, where it has a stronger presence.
  In the short-term Leclerc is not expected to be
  planning any further stores in Slovenia.

Source Leclerc
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New Entrant -

• At the end of March 2007 Lidl opened 15 stores,
  making it the 6th discount chain on the
  Slovenian market.
• 10 additional stores are expected to follow
  shortly.
• Lidl will use a hard discount format with a
  limited product range of mostly private- labelled
  products.
• The retailer believes that its biggest
  competitive advantage is fresh fruit and
  vegetables.
• Lidl is aware of the scale of the challenge it
  faces in Slovenia and has not indicated the
  market share it expects to achieve. However, some
  reports suggest that a 10 market share is
  possible within 3 years.

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Challenges and Opportunities

• Slovenias accession into the EU has led to an
  increase in foreign investment, which is set to
  continue following the countrys adoption of the
  euro.
• It remains to be seen whether the euro can be
  adequate for a small, open, growing CEE economy.
• The dominance of Mercator, along with the
  country's small population and the limited number
  of large cities will hamper the development of
  hypermarkets and supermarkets.
• Slovenia remains a price-sensitive market and
  foreign discounters, such as Aldi and Lidl, are
  starting to invest in the country.
• Slovenia is facing the issue of an increasingly
  ageing population. It has the lowest fertility
  rate amongst the EU countries with women on
  average mothering 1.25 children in a lifetime. In
  2006, the rate of natural increase in Slovenia is
  estimated to be negative at -0.5 per 1,000
  inhabitants, a dramatic drop from 5.8 per 1,000
  inhabitants in 1980.
• In 2006, the average age was estimated at 40.6
  years. 15.7 of the population is aged 65 and
  this figure is set to increase to 31.3 by 2050.
  

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Market Share Definitions

• IGD Market Shares
• IGD defines the grocery retail market as all
  food, drink and non-food products (i.e. health
  beauty, pet care, clothing, DIY, tobacco etc)
  sold through all retail outlets selling
  predominantly food in a given country. This
  definition includes modern retail formats such
  supermarkets and hypermarkets as well as
  traditional retail formats such as open air
  markets and traditional food stores such as
  bakers. However, it excludes cash carry and
  drugstores.
• IGD Market sizes are derived from national
  statistical sites wherever possible. In all other
  cases, the figures published in this report
  represent IGD estimates and are based on a
  consistent methodology and knowledge of local
  markets.
• For each retailer, the turnover used is total
  grocery (rather than total company), and
  therefore excludes non-food formats (such as DIY,
  electrical stores, department stores etc). IGD
  also excludes cash carry formats and retailers
  and drugstores / chemists from this measure to
  ensure a consistent market share figure.
  Therefore these shares are based on IGD Grocery
  Retail Market Sizes.
• 1.Retail turnover is excluding VAT
• 2.Retail turnover is excluding non-food formats
  (e.g. furniture, electrical stores etc)
• 3.Metro cash carry operations are excluded
• 4.Where known, we have subtracted the cash
  carry operations of players such as Carrefour and
  Rewe to use a pure grocery retail estimate of
  turnover.
• IGDs market shares differ from ACNielsen or TNS
  data due to the different methodologies applied
  to calculate the market shares (till roll data
  and customer panel information respectively
  from limited categories).
• Europanel Data
• Europanel market shares are based on purchases
  made by private households, and cover the
  purchasing of fmcg products bought in all outlets
  even if they do not sell primarily food
  (e.g. pharmacies).
• In many countries, the definition excludes large
  items bought in hypermarkets (e.g. television,
  washing machine).
• It does not cover Cash Carry (except where
  private households buy directly from them),
  institutions who may buy some of their products
  from retail outlets (e.g. hospitals, schools etc)
  and purchases made for out of home consumption
  (e.g. caterers, offices etc).

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For More Information

• Visit the Slovenia hubpage on Retail Analysis.
• Use the IGD Datacentre for key macroeconomic data
  on Slovenia, plus statistics on retailers
  operations by banner and format.
• Visit the photo archive for images of retailers
  operating in Slovenia.
• Got an iReports subscription? Try checking our
  International Research reports.
• To find out how an IGD Customised Briefing can
  bring you up to speed on the market and the key
  players, email nick.everitt_at_igd.com
• Still cant find what youre looking for?
  Contact us igd_at_igd.com or 01923 857141.