Czech online stores looking for customers outside country
2023.03.01 04:22
Czech online stores looking for customers outside country
By Ray Johnson
Budrigannews.com – In an effort to meet the growing demand for home grocery delivery, two Czech online grocery stores, one backed by a billionaire businessman and the other by a start-up “unicorn,” are competing with Europe’s largest supermarkets. The market leader Rohlik Group is targeting Germany, while Kosik, a local rival, is moving east.
Tomas Cupr, the company’s founder and CEO, stated that Rohlik was focused on making money in Europe’s largest economy after delaying plans to expand into Italy, Spain, and other markets due to inflation and the conflict in Ukraine. Cupr stated to Reuters that the company has contracted sites for fulfilment centers in Cologne, Essen, Berlin, and Düsseldorf, where it plans to launch. “We will go much deeper in Germany than we wanted to in markets we wanted to a year ago,” Cupr added. The grocery sales market in Europe is worth 1 trillion euros. A blue ocean is what you are seeing.”
Rohlik was a rare “unicorn” among start-ups when it raised 220 million euros in a Series D financing round in June. The round was led by Belgian investor Sofina and valued the company at 1 billion euros ($1.06 billion).
Both Rohlik and Kosik, whose rivalry is supported by Czech billionaire Daniel Kretinsky, aim to implement domestically successful models.
Despite its small size, the Czech grocery delivery industry has grown more quickly than others in a fragmented European market that, according to Statista, is expected to grow to $121 billion in the next four years from its current $73 billion.
HUGE OPPORTUNITY FOR GROWTHRohlik, which was established in 2014, dominates the Czech market by primarily targeting customers in large cities via its network of distribution warehouses. Under the Knuspr.de brand, it operates in Munich and Frankfurt. The privately held company’s revenue increased by 33% to 574 million euros last year.
Cupr said it had made money in its home market but lost money overall as it tried to expand. He stated that the retailer would be able to raise capital for a further push if it achieved success in Germany over the next two years. The retailer is also active in Hungary and Austria and has a small pilot program in Italy. Additionally, it has laid the groundwork for opening in Spain. He stated, “We will probably get money for other markets once we prove Germany.”
“We will continue to work toward that infrastructure and profitability, after which we will accelerate. The ideal time to begin selling everywhere is three years. According to McKinsey’s data, less than 10 percent of consumers in most of Europe use online grocery stores, and only 4 percent do so in Germany. In a market where there aren’t many major players, analysts say, this indicates that there is a lot of room for expansion.
By 2030, according to McKinsey, online grocery sales could account for 18-30% of grocery sales in Europe. This represents a significant reward for businesses that are able to overcome the costs and logistical difficulties associated with providing prompt service at prices that are comparable to those of traditional supermarkets.
According to Ingmar Wegel, a director at the investment bank Clipperton in Germany, “The online grocery market opportunity is a clear no-brainer, but the key question is whether companies should focus on being a clear leader in one market or focus on more.”
“While a small number of online grocery players are preparing to become leading e-grocery platforms in each market, competition is still primarily driven by stationary retail.”
Kosik is expanding in Bulgaria and entering the Slovak market, while Rohlik is betting on Germany. According to CEO Ivan Utesil, the company would also try to reduce its share of the Czech market by taking advantage of its partnership with German wholesaler Metro in some regional areas.
Kretinsky also holds a significant stake in Metro, which announced in January that it had acquired a 25% stake in Kosik with the intention of strengthening its partnership with the online grocery store and expanding its sourcing capabilities.
Utesil told Reuters, “The infrastructure is a great enabler for us to expand.” The regional use of Metro stores in this model enables rapid rollout. It does not use a lot of capital. He added, “While Germany is not yet on Kosik’s radar, it will eventually turn its attention to other countries in central and eastern Europe.” Utesil stated, “Our focus for the end of this year and the beginning of the next is Bulgaria and Slovakia.” We are confident that we will be able to grow by at least 30-40% annually with our strategy, some of it organic and some from expansion.
According to analysts, the absence of distribution centers by many large supermarket chains gives companies like Rohlik and Kosik an advantage over them when it comes to expanding delivery networks. Marks & Spencer has already signed a distribution agreement with Rohlik (OTC:). Cupr also stated that the business might form partnerships with additional retailers.
According to Tomas Karakolev, a senior expert at McKinsey, businesses in the nascent market are most likely to succeed if they can quickly build scale to cut costs and cover more delivery territory.
According to Karakolev’s statement, “Leading e-grocers in Central Europe are attempting to win with a sequence of local city-level games, with each one starting with the largest cities and growing until a country is covered.”
