International Retailing

Country- HUNGARY
Group no. 4
Lav Kumar 12
Sneha Suman 33
Anjani Mishra 37
Shekhar Ghosh 38
Ankita Joshi 44
Iqbal Ahmed 48
Flow of presentation
• The Republic of Hungary
▫ Geography
▫ Demographics
▫ Economy & market overview
▫ Political standings
• Understanding Hungarian Market
▫ Market challenges
▫ Market opportunities
• Hungarian Retail Market
▫ Top 10 retailers
▫ Typology
▫ Retail market share
▫ Retail grocery market
▫ Challenges in Hungarian retail sector
▫ Opportunities in Hungarian retail sector
▫ Recommendations
The Republic of Hungary
Geography
 Hungary, officially the
Republic of Hungary, is a
landlocked country in Central
Europe.

 It is situated in the Pannonian

Basin and it is bordered by
Slovakia to the north, Ukraine
and Romania to the east, Serbia
and Croatia to the south,
Slovenia to the southwest and
Austria to the west.

 The capital and largest city is

Budapest.
Demographics
Population:   2010 May estimate
10,005,000 -  2001 census 10,198,315

Density: 107.7/km2 ,279.0/sq mi.

Ethnic groups: 95% Hungarian, 2% Roma, 3%

other minority groups.

Official language: Hungarian

Economy & Market Overview
Currency: Hungarian Forint
€1 = 261 Forints (ECB, October 2008)
One of the weakest economy among the new EU countries.
GDP Growth - real growth rate 2.6% 2008(e) (IGD, 2008)
GDP(ppp): 2009 estimate
Total $185.873 billion   
Per capita $18,566 
GDP(nominal) 2009 estimate
 Total $129.407 billion   
 Per capita $12,926
Gini(2008): 24.96 
Economy & Market overview contd…
Inflation rate: 3.41% 2008 (e) (IGD, 2008)
Unemployment 7.3% 2008 (e) (IGD, 2008)
VAT on medicine: 5%
VAT on basic consumer goods, books, 15%
VAT on everything else (including food): 20%
ISO 3166 code: HU
The main cities are Budapest (1.7mn),Debrecen
(204,300), Miskolc (175,700)
Political Standings
Hungary is a member of
the European Union,
NATO,
the OECD,
the Visegrád Group,
and is a Schengen state.
Understanding Hungarian Market
Market challenges
Recent Financial Market Turmoil

High debt-to-GDP ratio and external liability position - caused Hungary to

become one of the first emerging markets to suffer from the fallout of the global
financial crisis

Investor risk aversion and global de-leveraging caused liquidity pressures which
created significant stress in the government securities market

In late October 2008, Hungary concluded a USD 25.1 billion IMF/EU/World
Bank loan package to help
reduce the government’s financing needs and improve long-term fiscal sustainability
maintain adequate capitalization of the domestic banks and liquidity in domestic
financial markets
 underpin confidence and secure adequate external financing
Market challenges contd…
Business issues
GOH introduced in 2006 a 4 percent “solidarity
tax” as part of an austerity program designed to
help Hungary attain macroeconomic conditions

Some projects, such as those funded by the EU,

require participation by a European partner

Hungary adopted a market economy only 20 years

ago, competition is fierce in virtually every sector
Market opportunities
 In spite the global economic crisis, Hungary remains an
attractive market for U.S. investment and exports

 Currently, there are 2000 partially owned, and 128 wholly

owned US companies operating in Hungary

 Cumulative FDI stock has totaled more than US $80 billion

since 1989,the highest in the region on a per capita basis

 The important sectors: automotive, IT, logistics and, more

recently, shared services (e.g., back office and/or call center
operations).
Market opportunities contd…
American companies have invested more than $9 billion in Hungary
since 1989, making the U.S. the 4th-largest foreign investor.

U.S. exports to Hungary have topped US$1 billion dollars in each of the
last five years.

Funding from the EU has also driven growth.

EU funds have been used to improve telecommunications, energy and

highway infrastructure.

As part of a second National Development Plan (2007-2013), Hungary

will allocate approximately €25 billion (US$36.8 billion) in projects
Hungarian Retail Market
Top 10 Retailers
Retailer Total Sales(€m)
Tesco 1,855
Coop Hungary 1,590
CBA 1,405
Real Hungaria RT 1,149
Cora-Louis Delhaize* 1,110
Metro 1,002
Spar International 976
Auchan 865
Rewe 443
Lidl 370
Tesco is leading retailer

Tesco opened its first store in Hungary in 1994 and its Budapest store is its
largest in the world, with a massive 150,000 square feet of retail space. Staff
once wore rollerskates to get round the store
Types of retail outlet
Department stores: Situated in town centers on
several stores with specialized departments
Skála, Luxus áruház, Fontana

Hypermarkets: Situated at the entrance of towns.

Alimentary and non alimentary
Tesco, Auchan, Cora

Supermarkets: Similar to hypermarkets but situated

more in the center of towns and smaller surface
Spar, Interspar, Kaiser, CBA, Match
Types of retail outlet contd…
Hard Discount supermarkets: Mostly own label
products at very affordable price
Aldi, Plus, Lidl

Specialized supermarkets: Specialized in one family

product
Praktiker, Baumax, Decathlon, Intersport

Drug stores: Durgs and beauty products.

DM, Rossmann, Marionnaud
Typology of retailers based on the
marketing orientation

Department
store
Retail Market Share (2007)
TESCO
15% REAL
OTHER HUNGAR
COOP 21% IA RT
HUNGAR
3%
Y
11% LIDLI
4%
METSPA
AUCHAN
10%
5%
DELHAIZ
TENGEL
E
MANN
8%
7%
CBA REWE
8% 8%
Retail grocery market
Over 48% of retail sales in Hungary are generated through
the food retail sector (IGD, 2008)

Hypermarkets (26% of the market): Tesco leading player

(€1,254mn sales) followed by Auchan (€865mn), Delhaize’s
Cora (€384mn) and SPAR Austria (total sales €976mn).

Supermarkets (15% of the market) dominated by

domestic operators: CBA (€2,044mn), Real Hungaria
(€713mn), COOP Hungary (€840mn), Delhaize’s Cora
(€626mn), and Tesco (€446mn).
Retail grocery market contd…
Small grocery stores (29% of the market) -
important channel especially in small towns and
rural areas and in Budapest: CBA Kereskedelmi.

Discounters (18% of the market) dominated by

Rewe’s Penny, Tengelmann’s Plus, Delhaize’s Profi
(€154mn) and Lidl (Schwarz Group) (€370mn).

Cash & Carry’s dominated by German Metro

Major food retailers
Challenges faced by retail sector
Reduced accessibility to basic retail services
Scarce information on retail offers beyond local
markets
Slow growth of e-commerce
Potentially abusive contractual practices
throughout the retail supply chain
Lack of transparency on quality labels
Unsatisfactory functioning of the retail service
labor markets
Opportunities in the retail sector
The Q210 BMI Hungary Retail report forecasts that the country’s total retail sales will
increase by more than 22% by 2014.

Increased economic prosperity, despite the financial crisis, easier access to credit and
the demand for premium products are principal factors behind retail market
expansion, contributing to forecast annual retail sales growth of 3.6% in local
currency terms between 2009 and 2014.

Consumer spending per capita is predicted to rise by nearly 30%, to US$11,050, by the
end of the forecast period(2014).

The demand for premium products and convenience are driving factors behind value
growth across the Hungarian retail industry

Retail sub-sectors that are likely to grow over the forecast period include furniture
and household goods, worth an estimated US$6.76bn in 2009 to US$8.28bn by 2014.
Opportunities in the retail sector
Data suggest that the consumer electronics sector will grow strongly over the forecast
period, with sales rising from an estimated US$2.33bn in 2009 to US$2.71bn by
2014, an increase of more than 16%.

Property experts forecast that about 450,000m2 of shopping centre space will be
added to the Hungarian market between 2009 and 2012.

Retail sales for the BMI universe of Central and Eastern European (CEE) countries
in 2009 amounted to an estimated US$1,067bn, based on the varying national
definitions.

Total consumer spending for the region based on BMI’s macroeconomic database
amounts to US$2,135bn.

For Hungary, the estimated 2009 market share of 3.1% is expected to fall to 2.0% by
2014.
Recommendation
Develop effective differentiation strategies delivering more value than just
favorable price

Focus on customer experience

Product quality is important

Develop strong local/regional brands

Look for a market niche and target a more focused group of consumers

Establish presence in the right distribution channels

A multichannel strategy is a must. E-commerce represents an area of great

opportunity
THANK YOU
Any questions?