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Russia: Russian Aldi: How Svetofor Store Owners Build a Retail Network in Europe

Brothers Sergey and Andrey Schneider, owners of the Svetofor chain, have opened more than 50 stores outside of Russia in four years. How are Siberian entrepreneurs building an empire of discounters abroad and what kind of customer are they counting on?

On the penultimate day of January 2019, hunters for big discounts gathered on the outskirts of Leipzig, Germany. The zealous Germans were attracted by the news of the opening of a new Mere store "the Russian clone of Aldi and Lidl" (popular chains of hard discounters in Germany). No one expected such a success on the very first day: huge queues lined up in front of the cash register, in the aisles between pallets and boxes. Mere offered pasta, canned food, soap, wine and household goods at prices 20% less than competitors. Two days later, the store in Leipzig had to be closed, as all the products were sold out there. At that time, the Torgservice company operated in Russia and neighboring countries more than 900 stores of its flagship Svetofor brand and dozens of Mayak hypermarkets. But the owners of the family business, Sergey and Andrey Schneider, were seized by a new idea - expansion into Europe. The pandemic slowed down, but did not stop the process: to date, more than 50 low-price Mere stores are operating in Germany, Poland, Spain, Great Britain, Romania, Ukraine, the Baltic countries, etc. "They never had yachts and villas" In 2021, Valentina Schneider and the family entered the Forbes 200 richest Russians list for the first time, taking 182nd place with an estimated fortune of US$ 650 million. Entrepreneurs always refuse to communicate with Forbes. They refused this time too. As noted by the German edition Handelsblatt, in their non-publicity, the Schneiders are similar to the founders of the German network Aldi, the brothers Karl and Theodor Albrechts. The Schneiders are from Krasnoyarsk, where they started their first business. “Despite the fact that they are Germans by origin, they live in Russia,” says a familiar businessman from Krasnoyarsk. "Modest, they never had yachts or villas." In 1994, they created the Lenkom company, which was engaged in the distribution of beer and low-alcohol drinks (worked with Baltika, Ochakovo, Heineken and grew into a large regional wholesaler), and the Napilnik chain of alcohol, tobacco and snacks stores... However, the real success of the Schneider brothers was brought by another project stores of cheap everyday goods "Svetofor". “They have a family business,” says a Forbes source. The modern structure of asset ownership is very similar to that of Lenkom: the elder, Sergey, has a larger share, the younger, Andrey has less (according to SPARK-Interfax, Sergey has 61.3%, Andrey 3.2% - Forbes). Their mother is a pensioner. Draw your own conclusions. " Valentina Schneider officially owns a controlling stake in the Torgservice group and retired long ago, like her 82-year-old husband Ivan, who is also registered as a shareholder in many of the family's more than 100 trading companies. In 2009, when Krasnoyarsk businessmen decided to build a network of hard discounters "Svetofor", it was a completely new concept. The business model of "Svetofor" eliminated all unnecessary expenses for logistics, storage of goods, store lighting, advertising, and communication with the press. There are no shelves or counters in stores, they sell goods directly from boxes and from wooden pallets. The minimum mark-up allows you to keep prices in the "traffic light" by 20-30% below the market average. The annually shrinking incomes of the population made hard discounters very popular stores, first in the Schneider's native Siberia, and then outside it. Today the retail business is united by the Torgservice group of companies. It operates the Svetofor and Mayak retail chains with over 3,000 stores. The group's revenue at the end of 2020 amounted to 189 billion rubles (according to the Infoline agency). Over the past year, the indicator grew by 39%, making the company the fastest growing in the FMCG segment in Russia in 2020. At the end of 2020, according to Infoline, the volume of retail space of the Torgservice group of companies amounted to 1.25 million square meters. m, the company entered the four largest retailers in terms of floor space after Magnit, X5 Retail Group and Lenta. In terms of sales, the company is among the top 7 Russian food retailers. Four years ago, the Schneider brothers felt cramped in Russia. Since 2017, entrepreneurs have decided to go international and have opened Svetofor discounters in Kazakhstan and Belarus. On one of the retailer's sites it is indicated that from the same moment preparations began for the opening of stores under the new laconic Mere label (translated from English “simple, clean, ordinary” - Forbes). Surimi and seaweed The conquest of Romania, the first country from which the Schneiders began their expansion into Europe, was not easy. In October 2018, Mere opened its doors to residents of the Snagov commune, located 40 km from Bucharest. It took the Schneiders almost a year to do this, although it was planned to open 15 discounters in 2018. “Everything was going very hard: there were problems with coordination and equipment,” Daniel Vasile, manager of the Romanian Mere , frankly complained during the opening. Entering the new market, Mere announced that it would be the cheapest hard disk discounter in the country (locally, the main competitors are Germany's Lidl and Penny Market). “Our progenitor is Svetofor from Russia, and we are practically a clone of their stores,” Vasile said. Our main advantage is the price 20% lower than the market price. It is difficult, but if we do not achieve this, the goods simply will not end up on our shelf." The Mere concept in many respects repeats the already tried-and-tested model of the Russian "Traffic Light". Shop ranging from 800 to 1200 sq. m should be located on the first floor of a non-residential building on the outskirts of a medium or small town where people "with low financial potential" live. Parking for 30-40 cars is mandatory. The premises that are rented must have a convenient driveway for cars, a central entrance for buyers and a cargo gate with the ability to access and unload vehicles with a 20-ton trailer. Distance from educational institutions and churches is important to meet the requirement for a license to trade in alcohol. In addition, a separate clause specifies the presence of at least a five-year warranty on the floor, which must withstand goods on pallets and in boxes weighing up to 3 tons per sqm. The average number of store personnel is about 11 people, and investments are about € 1million (US$ 1.2million). According to the manager in Romania, the store receives its first profit a year after its launch.


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