Kaufland, the leading modern retailer in Romania, makes most of the money from products prepared in its own ‘kitchens’, EUR260 million or 15.8% of its sales last year. Kaufland has both assisted service display cases and its own bakery and fish shops. Moreover, it has its own small shops that operate in front of the discount hypermarkets and sell rotisserie chicken, mici (Romanian grilled ground meat rolls) and fries.
Kaufland officials said, “The policy of the group does not allow us to provide any details about Kaufland sales,” without providing further details. Auchan, Cora and Carrefour hypermarket chains had not answered ZF’s question about how much of their revenue sales of such products generated by the time the story was ready for posting.
Hypermarket chains usually publish both the total revenue and the revenue breakdown by sales of their in-house production and of other products.
“Production revenue is the revenue store chains make from their own meat shops, bakeries, assisted service display cases and the rotisseries in front of the stores,” explains a top executive of a modern retail chain.
“Take bakery goods for instance, a hypermarket chain buys frozen products from suppliers and bakes them in its own stores. Therefore, the products received from suppliers are considered raw material, not finished goods (…) The same goes for assisted service display cases or meat shops, where a piece of meat is cut and sliced as the customer wants it and this is considered the product’s final form.”
It is only natural for hypermarkets to get a higher share of revenue from in-house production than discounter stores or supermarkets, the same source says. The latter may be as much as ten times smaller than a hypermarket so they cannot have their own bakeries or as large and as varied assisted service display cases.
In-house production share of hypermarket revenue stayed at 10% in 2008-2013. There are, however, sizeable differences between the networks on this about EUR4 billion market.
The percentage is about 16% in Kaufland’s case, and keeps rising, while dropping to less than 2% at Auchan.
The difference stems from the fact that Kaufland carries a lower number of products than its rivals. Kaufland stores take up 3,600 square meters on average (varying from 2,000 square meters in small cities to 5,500 square meters in Bucharest), so they are smaller than the stores of the hypermarket rivals, which may be as large as 10,000 square meters.
An Auchan hypermarket may therefore carry 50,000 to 60,000 products, while a Kaufland 12,000 to 15,000.
“The number of products sold in meat shops, bakeries and assisted service display cases is the same in all networks, as are sales. What is different is their share of the total sales because the total number of units in a store is different,” another market source said.
Assisted service display cases and bakeries only serve to complement the already existing supply at meat and bakery departments. The advantages of such ‘kitchen corners’ are the variety of products (some brands may only be available there and not on shelves), the fact that there are employees on hand to assist the shoppers and may even let them sample the product before buying and the product may be prepared, sliced or ground.
(English version by Loredana Fratila-Cristescu)