Russia: Russian Aldi owners build a new discount retail network in Europe

Brothers Sergey and Andrei Schneider, owners of the Svetofor, opened more than 50 discounter MERE branded stores outside Russia during four years.


How does Siberian entrepreneurs build a discounter empire abroad and on which buyer is counting?

In the penultimate day of January 2019, hunters for large discounts came to the outskirts of German Leipzig. The Germans attracted the news about the opening of the new MERE store the Russian clone Aldi and Lidl (popular network of hard discounters in Germany). No one expected such success on the first day: in front of the cash desks, in the aisles between the pallets and the boxes lined up huge queues. Macaroni, canned, soap, wine and household goods Mere offered at prices by 20% less than that of competitors. Two days later, the store in Leipzig had to close, as all products were in out of stock.


At that time, Torgservis managed in Russia and the near abroad more than 900 stores of his flagship brand "Svetofor" and dozens of hypermarkets "Mayak". But the owners of the family business, Sergey and Andrei Schneider, captured a new idea expansion to Europe. The pandemic slowed down, but did not stop the process: today there are already more than 50 low-price stores Mere working in Germany, Poland, Spain, Great Britain, Romania, Ukraine, the Baltic countries, etc.


"Yacht and the villas have never had"

In 2021, Valentine Schneider and family #182 were first included in the rating of 200 richest Russians according to Forbes, taking in it the 182nd line with a state estimate of US$ 650 million. From communication with Forbes, entrepreneurs always refuse. Refused this time. How did the German edition of Handelsblatt notice, with its non-public Schneider's look like the founders of the German network Aldi, the brothers Karl and Theodore Albrecht.


Schneiders come from Krasnoyarsk, where they started their first business. "Despite the fact that by the origin, they are the Germans living in Russia," tells a familiar businessman from Krasnoyarsk. The modest, yachts and the villas have never had. "In 1994, they created the company "Lenk", which was engaged in distribution of beer and low alcohol drinks (worked with "Baltic", "Ochakovo", "Heineken" and grew up in large regional wholesaler), and a chain of alcohol stores, tobacco and snacks "FIRST". However, the real success of the Schneider brothers brought another project, shops of cheap goods of the daily demand "Svetefor".


"They have a businessman's business," says Forbes interlocutor. The modern structure of ownership of assets is very similar to the one that was in the "Lenkom": the older, Sergey, the share of more, the younger, Andrei less (according to Spark Interfax, Sergey: 61.3%, from Andrei: 3.2%. Forbes). Their mother is a pensioner. Connections do yourself. " Valentina Schneider officially owns a controlling stake in the Torgservis Group and has long been retired, like its 82-year-old husband Ivan, who is also registered as a shareholder of many more than 100 family trading companies.


In 2009, when Krasnoyarsk businessmen decided to build a discounter network Svetofor, it was an absolutely new concept. The Svetofor business model excluded all the extra charges of logistics, storage of goods, shop lighting, advertising, chat with the press. There are no shelves in the stores, no counters the goods are sold straight out of the boxes and with wooden pallet. The minimum charge allows you to keep prices in the Svetofor 20-30% lower than the average.


Each year reducing incomes of the population made hard discounters with very popular shops first in native for Siberia Schneiders, and then beyond. Today, retail business unites the Torgservis Group of Companies. It manages the discount retail networks Svetofor with more than 3,000 stores. The Group's revenue of 2020 amounted to 189 billion rubles (US$2.6 billion according to Infoline's assessment). Over the past year, the figure grew by 39%, thus, the company became the fastest growing in the FMCG segment in Russia in 2020. At the end of 2020, according to Infoline, the volume of trading areas of the Torgservis Group of Companies amounted to 1.25 million square meters. M, the company entered the four largest retailers in terms of areas after the Magnit, X5 Retail Group. In terms of sales, the company is included in the top 7 Russian food retailers.


Since 2017, entrepreneurs have decided to enter the international level and entered with the discounters in Kazakhstan and Belarus. On one of the Retailer sites it is indicated that from the same moment preparations began to open stores under the new laconic sign MERE (translated from the English. "Simple, clean, ordinary." - Forbes).


Surimi and Sea Cabbage

The conquest of Romania, the first country with which Schneiders began expansion to Europe, was not easy. In October 2018, Mere opened its doors to residents of Snag Commune, located 40 km from Bucharest. Schneiders needed almost a year to do this, although it was planned to open 15 discounters in 2018. "Everything went very hard: there were problems with coordination, equipment," frankly complained during the opening of the manager of the Romanian Mere Daniel Vasile.


Going to the new market, Mere announced that it would become the cheapest rigid discounter in the country (at the local level the main competitors are market leading German Lidl and Penny Market). "Our progenitor is Svetofor from Russia, and we are almost a clone of their stores," said Vasile. Our main advantage is the price of 20% below the market. It is difficult, but if we don't succeed, the goods simply will not expire on our account."


The concept of MERE largely repeats the already rolled model of the Russian "Svetefor".

Shop area from 800 to 1,200 square meters. Mere should be located on the first floor of a non-residential building on the outskirts of a middle or small town, where people live "with low financial potential." Be sure to parking for 30-40 cars. The room, which is rented, should have a convenient entrance for cars, the central entrance for buyers and cargo gates with the possibility of accessing and unloading vehicles with a trailer 20 tons. The remoteness from educational institutions and churches is important to meet the requirement of a license to trade alcohol. In addition, a separate item indicates the presence of at least a five-year warranty on the floor, which must withstand goods on the pallets and in boxes weighing up to 3 tons per square. m. The average number of store personnel is about 11 people, and investments make up less than a € 0.1 million (US$ 0.12 million). According to the manager in Romania, the store receives the first profit after launch.


The range averages from 800 to 2,000 brands (one third of them is non-food) little-known brands for Europeans or Surbs of large manufacturers from Ukraine, Belarus, Moldova, Hungary, Germany, Turkey. Most of the goods in the store are long-term storage, nothing of the category "Oltrosvene" is not for sale (fruits and vegetables, fresh fish, semi-finished products), and the most perishable products are sausages.


Conditions for working with MERE are even more rigid than with the Svetofor: the price of goods, taking into account the delivery to the store, should be 20-30% lower than in competitors stores. This can be achieved, for example, by reducing the cost of packaging. "We do not need a bright, attracting the packaging. Compared with the known brands with a reputation, the difference must be 50%, "is indicated on the Polish site MERE. The supplier must deliver the goods to each store on its own and at its own expense and provide the ability to return 100% of non-sold goods (consigment stock). MERE is calculated with suppliers weekly depending on the amount of quantity. Responsibility for issuing a transport of imported products through customs also carries the supplier.


The Belarusian company "Santa Bremor", one of the largest manufacturers of fish products (herring, caviar, canned food) in Europe, cooperates with the Light Phone Network for more than five years. A broad geography was published in 2020 (discounters in Siberia, Volga region, TsFE, SFO, in the North Caucasus). In the 2021th, the company began to cooperate with the MERE network in Germany. "We have developed a range and packaging solutions for a specific network request," says Yaroslav Bondarchuk, Deputy Director for Santa Bremor. From the product categories of our portfolio, the most sought-after MERE Surimi, sea cabbage, herring, caviar cavity in sauce. "


A large Belarusian manufacturer of Belprodukt chips has concluded a contract with MERE recently, since May 2021. "Today, deliveries to the network at the initial level are the volumes of 10 pallet. The delivery was at the Moscow Warehouse, which countries left the products - no information, "comments Belprodukt Marketing Specialist Leonid Milto. Another counterparty MERE is the largest, according to Nielsen, the Russian manufacturer of cotton products and wet wipes Cotton Club (Aura brands, "I am the most" and other). It supplies products to the Svetofor network, and from recently and to German stores Mere. Officially, representatives of the Company refused to comment on cooperation due to the "lack of results", which will appear only by the middle of the autumn.


Aldi from the 60s

The second European country, where the MERE network came, was Germany. German newspapers Natrey headlines on the threat of Lidl and Aldi empires (12,000 and 10,000 stores, respectively) by the "brothers from Siberia who want to attack German discounters." Buyers called Mere "Aldi from the 1960s" when sales went straight from the pallet and boxes.


In the fall of 2017, TS Markt GmbH was registered in Berlin with an authorized capital € 25,000. "GmbH is a property form for ownership in Germany, analogue of Russian Limited Liability Company (LLC). The minimum capital for the opening of such a company is € 25,000, "commented by an entrepreneur from Germany Victoria Quint (engaged in real estate management, as well as food production). According to the register of companies in Germany Unternehmensregister, TS Markt GmbH registered areas of activities such as import and export, wholesale and retail sale of various goods (in particular, home products, consumer goods and food products), as well as logistics and forwarding services, management own assets, purchase, sale, lease, management of own real estate.


For two years, TS Markt has opened six stores in various German cities located mainly in the eastern part of the country. Such a choice is economically beneficial for "Torgservis", which works with suppliers from Eastern Europe: if goods are currently purchased from these countries, Mere can do without an expensive central warehouse, spoke of the LEBENSMITTEL Zeitung publication in February 2019 Thomas Rob, Professor of the University of Applied Sciences Bonn- Rhine Zig and retailers consultant.


Another reason for choosing Eastern Europe is the population. "Preferably, these are people who have moved to a permanent residence in Germany from the former Union," said Forbes a resident of the western part of Germany, who was interviewed by the Mere Development Manager. According to him, the vacancy was not very interesting: "The company is interested in local Germans who know Russian and German, but it offers incommensurately low taxes in Germany wages only € 3,000 per month (depending on the tax status worker loses up to 30 % from the sum). In addition, the employer refused to reimburse the cost of mobile communications and transport, although the work implies many calls and travel to suppliers and landlords, and does not provide a computer." The interview was conducted by a Russian employee who was in Russia and complained about the problems with the design of a visa for relocation to Germany.


Shop management Schneiders are trusted mainly "their own." Viktor Gorodetsky, appointed by the Managing Director of TS Markt GmbH at the end of 2020, was previously a regional manager of almost 70 discount stores Svetofor in the Sverdlovsk region (according to Spark Interfax, the region is considered the second to revenue in Russia). Managing Director of the company in Zwikau Vadim Popov previously worked as a shop manager in Tatarstan.


In Germany, Mere continues expansion along the Russian model: the business in each new region is highlighted as an independent legal entity, these legal signs are consistently numbered. For example, the first branch in Leipzig is registered in the retail register as TS-Markt 101 GmbH, it works in Zvikau called TS-Markt 102 GmbH, and so on.


The authorized capital of each German Jurlitz (now four of them, according to the UNTERNEHMENSRegister register) is minimal € 25,000 (US$ 30,000). With the Berlin Head Office TS Markt GmbH, he expanded to € 725,000 (US$850,000), according to the results of 2019, on the company's balance sheet € 925,556 - US$1.2Mn (the indicator includes the amount of authorized capital and revenue), the amount of obligations € 10,458 (US$12,500). "According to the standards of German business, this is a fairly large company. Counterparties often pay attention to the amount of capital, and the more larger, the more confidence in the company and the more willing the suppliers and other counterparties are working with you. The volume of liabilities is 10% of the balance insignificant, "confirms Victoria Quint. Compared with the turnover of Svetofor (189 billion rubles, or about € 2.3 billion, US$2.8 Bn), the numbers are small, but Schneiders continue to expansion to Europe.


Post-shaped perfect store

One of the most long-awaited was the discovery of the MERE store in the southern town of Czestochowa in Poland in July 2020. "Torgservis" was going to open eight stores MERE in 2018 and develop a network of more than 100 stores in the country, but in the end I had to wait for more than two years. Nevertheless, the local press called the late debut Mere gift of fate, because during the coronavirus clients try to minimize spending on food. For such people, a hard discounter is the perfect store.


Today in Poland four MERE stores running under the name TorgServis PL. The report on the results of 2019 states that the company's balance sheet contains 886,840,80 zł (about € 200,000, US$240,000), a loss amounted to 592,616,56 zł (about € 130,000, US$155,000). At the end of 2020, the TorgServis PL balance grown fourly to 3.33 million zł (about € 726,000, US$880,000), a loss 1.3 million zlotys (about € 287,000, US$330,000).


The pandemic slowed down, but did not cancel the plans of the Schneider brothers to fill in Europe with cheap stores. Over the past year and a half, the MERE brand expanded geography by opening discounters not only in Romania, Germany and Poland, but also in Baltic States, Ukraine, Bulgaria, Spain, Great Britain, Greece. Plans: Italy, Serbia, Austria and France.


In August, it became known that the Svetofor group wants to open MERE stores in the United States. This confirms the information posted on the Greek Network Portal: Svetofor confidently develops in Greece, Portugal, France, USA, Great Britain and other countries. " Mere has published a vacancy of a commercial real estate specialist, preferably with the knowledge of the Russian language, on Linkedin, the retailer is considering premises in the states of Alabama and Georgia. American analysts have already called Mere "a soulless ultradiscount" with big discounts on food. In their opinion, the progenitors of format, Aldi (2,000 stores) and American Save A Lot (1,300 stores) have long refused this approach.


According to Forbes estimates, about 50 MERE stores are now opened outside of Russia (according to Google Maps cards, as well as Numerous Torgservis Sites: Mere-Store.com, Mereletail.com, Mere-Discounter.com and Sites in those domain zones, Where the retailer works). Thus, Schneiders have already spent on expansion outside of Russia at least € 50 million (or 4.3 billion rubles, US$60Mn).


In Spain, Torgservice launched a large office in Barcelona, ​​with development departments, procurement and IT, which employs 40 employees. Regional teams consist mainly from Russian employees. "While the staff is fully staffed, but next year it is planned to develop on the full program and open shops in all major cities of Spain. Then, a set of employees will be announced in the central office in Barcelona with the knowledge of Spanish and Russian, "said the development manager in Valencia, Dmitry Lyapin, explained the Forbes correspondent.


Professor Thomas Rob from the University of Bonn-Rhine Zig believes that even if Mere will open hundreds of stores in East Germany, as planning his share will not be 10% of the share of existing discounters in this region. "In the short term, the concept can work, but it does not threaten large German discounters," said Thomas Toyuba from Accenture Germany. Target group of people who depend on cheap goods at all costs, too small. One of the most difficult tasks for MERE will be the creation of large and reliable connections with suppliers. " The leaders of the Russian retail market X5 and "Magnit" once also were full of skepticism with respect to Svetofor, but in the 2020th began to develop the formats of their own hard discounters.


See here for more: https://www.forbes.ru/biznes/437333-russkiy-aldi-kak-vladelcy-magazinov-svetofor-stroyat-roznichnuyu-set-v-evrope





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