Salling Group’s discount banner Netto has completed its acquisition of Tesco Poland, following approval from local competition authorities. The move will see Salling Group acquire 300 stores and two distribution centres. For Tesco, the exit from Poland reduces its central European business to the three much smaller markets of Hungary, Czech Republic and Slovakia.
Netto’s biggest investment to date, international business now bigger than domestic market
The deal, which is worth PLN 800m (€181m), is both Salling Group and Netto’s biggest investment to date and will mark the first time that Netto operates more stores internationally than in its domestic market of Denmark.
The acquisition will see Netto operate over 700 stores in Poland, more than doubling its store numbers in the country. Netto’s presence in southern Poland will be particularly boosted as a result.
Watch this video from Netto Group CEO Michael Løve, as Netto celebrates the acquisition:
Stores will be converted to the new Netto 3.0 concept
Salling Group will begin converting Tesco stores to the Netto 3.0 concept will begin at a rate of six per week. DKK 1.5bn (€201.7m) as part of the process, with an aim of completing conversions in the next 18 months.
IGD Retail Analysis subscribers can download this exclusive Netto 3.0 store visit report to learn more about what to expect from the concept:
Source: IGD Research
Will stores be adapted to suit the local market and how will hypermarkets evolve?
Key considerations include if and how Netto will be adapting its 3.0 concept to the Polish market.
Meanwhile, Tesco hypermarkets, which make up around a third of the newly acquired stores, are significantly larger than Netto’s stores on average. Will stores be right sized to suit Netto, will the Netto 3.0 concept be flexed to suit these larger locations or will it be a blend of the two?
Netto could also explore selling some stores to Kaufland, Auchan or Carrefour, leasing locations to third parties, sub-letting space in-store, using stores for online fulfilment or introducing ranges seen in Salling Group’s Bilka hypermarkets, for instance.
Poland is central to Salling Group’s strategy
A press release from Salling Group cited that ‘Poland already constitutes Salling Group’s largest growth market, and with the acquisition the Group fulfils a strategically important ambition for expansion in Poland, which is a cornerstone of Salling Group’s overall strategy'.
Tesco to focus on remaining markets
Despite the exit from Poland, Tesco appears committed to its retained markets of Czech Republic, Hungary and Slovakia where it has a leading or number two position. Going forward its priority will be to boost profitability of the resized business and improve its relevance to local shoppers. There are no indications that Tesco will grow its network in Central Europe, but it is likely to grow its omnichannel offer now that the business is on a more stable footing.
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