Pedro Pereira da Silva had a reason to smile. On 28 July it was announced that he would be awarded the Knight’s Cross of the Order of Merit, Poland’s third-highest order of honour. The Polish Home Office wrote in a statement it acknowledged Pereira da Silva’s “contribution to Polish economic growth and employment, the company’s engagement in charity and social work, and its outstanding contribution to the development of trade between Poland and Portugal.”
Pereira da Silva is the CEO of Jeronimo Martins Group which operates Biedronka, Poland’s leading retail chain with over 2,650 shops. One of the largest companies in the country, Biedronka (meaning “ladybird”) employs over 58,000 people and has invested in excess of $2.8bn over 20 years. An estimated 4m people shop at Biedronka every day. From a turnover of $8bn in 2013, the company was also Poland’s fourth-largest corporate income tax payer at $138m.
The outrage that followed the award announcement was emblematic of Poland’s love–hate relationship with Biedronka. Right-wing media were eager to quote the Stop Abuse association of former employees that sued Biedronka for $82m in allegedly unpaid wages (the case continues; it follows a series of labour rights lawsuits in 2007-9 that Biedronka lost). The discount chain has also grown at the expense of small independent grocery shops, it was argued. Eventually, the Polish Home Office gave in to the pressure and Pereira da Silva’s order was postponed and handed over with no official ceremony.
Twenty years of success
Biedronka was founded in 1995 by entrepreneur Mariusz Świtalski. In 1998, the chain of 240 shops was sold to Jerónimo Martins, who earlier bought Eurocash, a grocery wholesale, also from Świtalski. The chain’s major growth came after 2005 thanks to a clever strategy of expanding to Poland’s smaller provincial towns, and a steady growth in the country’s purchasing power.
Biedronka started a low-key importation of wine in the early 2000s. Initially, it also sourced a large part of its portfolio from Polish distributors specialising in low-end wines, such as Bartex and TiM, as was then customary for all supermarket chains. It was when it gradually moved towards own imports and introduced monthly “wine festivals” that the category really took off. Three-time Polish sommelier champion Tomasz Kolecki-Majewicz was hired to firm Biedronka’s illustrated wine catalogue, which introduced educational features and food pairing suggestions, a novelty at that time in Poland. The wine range, which had mostly explored the sub-15 PLN ($3.75) category, was extended upwards, and capitalising on its privileged access to Portuguese producers – Biedronka’s sister chain, Pingo Doce, is one of the major players on that market – Biedronka put renowned brands on its shelves, including João Portugal Ramos, Lavradores de Feitoria, or Bacalhôa.
The investment paid off: by 2010, hard discounters were estimated to control 20% of the Polish wine market. Given that Biedronka had by then (and continues to have) three times as many shops as its nearest competitor, Lidl, its wine market share grew from zero to 15% in a decade. But this was merely the beginning. In the last five years, discounters were the fastest-growing sales channel in Poland, with year-to-year growth reaching 40%. The market’s global compound annual growth rate of 4% to 6% was almost exclusively achieved by discounters, whose market share in 2013 exceeded 46% (KPMG data). Biedronka never discloses figures about their wine sales in Poland but these can be estimated at 650m PLN ($163m), or 35% of the still wine market.
This success was also made possible by Biedronka’s proactive approach to marketing. Glossy catalogues were only one aspect, and a restricted, easily navigable wine offer was another. The media also played a part. Biedronka was the very first supermarket to actively engage journalists and bloggers, sending samples and organising press tastings, at a time when Tesco or Auchan couldn’t even care to return emails. More controversially, it appointed Tomasz Prange-Barczyński, editor-in-chief of Poland’s only independent wine magazine, Wino, to write editorials in the company catalogue (in 2015, Wino has also edited and published the catalogue itself), and has been sending bloggers on vineyard tours to suppliers in France and Portugal. By giving amateur and professional wine writers easy access to its wines, Biedronka has warranted continuous coverage of its monthly “wine festivals” and gained yet another competitive advantage; a similar strategy was later adopted by Lidl.
The range
So what can be typically found on a Biedronka wine shelf? The retailer has a small core of references it stocks throughout the year, predominantly very inexpensive wines including semi-dry and semi-sweet, which still account for over half of Poland’s global consumption. But the interest is with the fast-moving “wine festivals”, themed offers of 20 to 30 wines from a single country or, occasionally, linked by the same theme (such as dessert, New World, or Eastern European wines). Depending on the season there might be a majority of whites or reds, with four to five wines at the bottom end of the price spectrum of 9.99 to 12.99 PLN ($2.57–3.35) and most oscillating between 14.99 and 19.99 PLN. Occasionally two to three more expensive wines will also appear: Chablis, Barbaresco, a mid-range Douro or Ribera del Duero, costing up to 29.99 PLN, although these are slower movers and are often discounted by 30% to 40% after the “festival” ends; there are bin-end crates in every Biedronka shop where bottles are discounted when the new offer enters the shelves.
Biedronka does not sell wine under an “own label” although many producers create special brands for the retailer: Portugal’s Vallado did so with Quadrifolia and Paço do Monsul, for example, positioned below their flagship Vallado Tinto. For many years Biedronka has only sourced wine from Portugal, Spain, Italy, and France, giving those countries a major boost in the overall market. Recently it has experimented with single “festivals” of Central European and New World wines, but the core has remained stable. Another activity is a biweekly “Sommelier’s Choice” wine that often tests a new supplier or label; if successful, the wine can later reappear within a “festival” or even stay on the shelf for longer.
Biedronka’s success has been based on three key elements: simplification of the wine range, targeting the consumer sweet spot of 14.99 PLN ($3.72); and marketing. Abandoning the obsolete “wine wall” system of hyper- and supermarkets in favour of a narrow range of themed wines has resulted in less confusion and more curiosity from consumers. Lower price points have been fundamental not only in driving sales but also attracting new consumers, a crucial aspect in a country where cheap beer and spirits are still the drinks of choice. Advertising of alcohol is illegal in Poland but Biedronka has cleverly exploited the legal grey area with its trendsetting magazine, shelf talkers, posters, and email newsletter. This approach has been copied by Lidl, who entered the market later and has a smaller market share, but which has upped the game considerably with a multi-million promotional campaign centred on food, and later by convenience shop chain Żabka (who hired sommelier champion Andrzej Strzelczyk) and franchise network Eurocash (glossy magazine).
During its golden years of wine retail, Biedronka has made a lot of money. The company refuses to disclose any figures, but the markups may exceed 50%. A wine retailing at 14.99 PLN ($3.72, of which $1.04 is tax) is usually purchased for €1.50 to €1.65; for 19.99 PLN retail ($5.20), some brands were sold by wineries as low as €2.25. Biedronka’s buying department is a notoriously tough negotiator and a supplier’s initial price might be pressured to go down 15%. But prices might move even after they contracted. Several wineries (who prefer not to be named) said they were asked by Biedronka to further discount wines that for some reason failed to sell within the one- or two-month “festival” window; the Biedronka explanation of why the latter happened could even include the wine being in a Burgundy rather than Bordeaux bottle.
Those who win this tender of sorts can expect to move considerable amounts of wines (by Polish standards). The minimum order for a “festival” is 30,000 bottles, and one 19.99 PLN brand that was retained for Biedronka’s permanent catalogue sold over 100,000 bottles in a year. A very inexpensive Eastern European semi-sweet wine is said to sell over 1m bottles per year.
After years of buoyancy, 2014 saw a slight stagnation of Biedronka’s wine offering. This mirrored the company’s slowdown in the overall market, where its like-to-like sales fell by 0.8% (global sales rising 9.1% thanks to new openings). Analysts argued Biedronka’s growth model expired as smaller towns became saturated and the company had no strategy to attract metropolitan shoppers. Suppliers have also voiced discontent. “In 2011, contact with Biedronka’s buying department was excellent; now employees keep rotating, and negotiations have become a nightmare,” said a French winery. On the back of underwhelming results, part of the managing board was replaced in July 2014 and Pedro Pereira da Silva, who had been CEO until 2010, was reappointed. He notably revised plans to open 100 instead of 300 new shops per year, and introduced new formats. Figures for the first half of 2015 are optimistic at +2.6% like-for-like.
The critics
As the novelty effect wore off, some critics have also grown disillusioned with Biedronka’s wine offer: it “is limited to industrial wines that all taste the same”, wrote one blogger, and “Biedronka is killing normal wine retail by listing the same wines as independents at half the price”. Poland’s leading wine website Winicjatywa (of which I am the editor) has consistently criticised Biedronka’s higher-priced brands and argued that only a few hand-picked items were qualitatively competitive; in contrast, Lidl was held to have “better buying”. In 2013, following reports of above-average bottle variation across the Biedronka range, Winicjatywa disclosed that a red wine from northern Italy included vastly different batches under the same label and lot number. The story was widely quoted in the general press, again reflecting the public’s love–hate relationship with Biedronka. Another reflection is a supermarket tax planned by the newly elected Law and Justice right-wing government that could severely affect the company’s finances as early as 2016.
Biedronka has reacted to criticism and slowing growth by consolidating its wine range around the pivotal price points of 14.99 and 19.99 PLN. It has also consistently reworked its image from hard discounter to deli chain, and is now communicating wine jointly with food, including ethnic-themed “festivals” and a glossy magazine full of recipes. With its sheer number of shops, Biedronka will remain Poland’s leading wine retailer in the short- and medium-term, but its future growth will depend on a number of factors: the overall condition of the retail environment; more consistent quality wine buying; and foreseeing consumer trends rather than merely interpreting them.
