• Discount Retail Consulting GmbH

Baltics: Russian food chain MERE threatens to bring prices down

Updated: Jul 28

Discount Retail Chain MERE (part of Svetofor and owned by Torgservis) has opened its first store in the Baltics Kaunas, the second largest city in Lithuania.


Over the remaining six months, the chain plans to open a total of 40 stores in Lithuania.


Svetofor controls over 1,500 stores in Russia, Kazakhstan, Belarus and China, opened its first discount stores in Germany and Romania in 2018 and 2019. The Svetofor chain of stores is managed by Torgservis. The owners are the Schneider family (92.5%), Valery Yakovlev (4.5%), Andrey Veykulainen (3%). Torgservis took the ninth place in the ranking of Russian FMCG retailers compiled by InfoLine at the end of 2019. Torgservis revenue in 2019 amounted to a little more than $1.4B (26% more than in 2018). In 2019, the company opened more than 500 new stores.


The MERE discount format is essentially a warehouse store totally not in line with the format of today's modern supermarket landscape. No convenient shelving, decent shopping arcades, all kinds of self-service cash desks and numerous staff. Products are in boxes on pallets, perishable products are in huge refrigerators.


And no advertising, noisy announcements in the media and fireworks during the opening. The company completely abandoned marketing expenses and any other expenses for the sole purpose of keeping prices 20% lower than those of its competitors.


Market

In Lithuania, the retail market is quite dense. The five main players are Maxima (Lithuanian chain, 248 stores), Iki (owned by the German Rewe group, 228 stores), Norfa (Lithuanian chain, 143 stores), Rimi (Norwegian chain, 60 stores), Lidl (German chain, 49 stores).


The last of the largest players entering in Lithuania was the German Lidl in 2016, before that, Maxima, Iki, Norfa and Rimi occupied 80% of the entire country's market. Lidl's arrival mixed all the cards. Due to low prices, the chain quickly lured buyers. By 2018, Lidl caught up with Rimi in terms of turnover. Judging by the first store, the Russian MERE has even lower prices than Lidl, but so far the assortment range is not rich.


According to the Lithuanian business newspaper Verslo zinios, after the Baltic states, MERE intends to enter the markets of France, Spain, Italy, Greece, the Czech Republic and other EU countries. The main strategy of MERE is to keep prices 20% lower everywhere than its closest competitors. Offering low prices because MERE works directly with manufacturers, has a strict cost policy and applies minimum margins. In its stores, the customer pays only for the goods, not for the brand and bright packaging.


Prices at MERE are indeed shockingly low for the Lithuanian market. For example, a bedding set (100% cotton) costs $15.69, a towel (0.7x1.5 m) - $2.04 euros, sparkling water (1.5 l) - $0.20 euros, pieces of mackerel fillet in oil (200 g) - $1.74 euros, herring fillet in mayonnaise (280 g) - $1.07.


All products are mainly Russian-made. In the first days after the opening of MERE, both in the premises and in the parking lot, there are big lines.


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