One of Russia’s fastest-growing supermarket chains, Svetofor, has plans to expand its discount retailer Mere in Ukraine and open 40 new stores in 2021, according to Mere’s director in Ukraine Artem Khomenko.
The company already has one store in Mykolaiv, a city of 486,000 people, nearly 478 kilometers south of Kyiv. Over the next week Mere will open stores in Bila Tserkva, Chernivtsi and Dnipro. Khomenko told the Kyiv Post that Mere plans first to enter cities with a population of over 6,000 people but eventually Kyiv as well.
In Ukraine, Mere will compete with the country’s largest discount retailer ATB that has over 1,130 local supermarkets and serves nearly 4.5 million Ukrainians every day.
Khomenko said that the company has analyzed the market and is ready to compete. Mere could even sell its goods cheaper than ATB, he said.
Apart from Ukraine, Mere plans to open stores in the U.K. and the U.S., adding to its chain of supermarkets in Germany, Romania, Poland, Serbia, Lithuania and China.
In 2020, Mere’s parent company Svetofor became Russia’s seventh-largest food retailer with 1,700 local supermarkets and an annual revenue of $2.6 billion. Although the company is often compared to the U.S. discounter Walmart or German supermarkets Lidl or Aldi, food retail experts said that Svetofor is more of a radical discounter.
The company looks for ways to save money everywhere: advertising, rent, design, equipment and salaries. Svetofor also orders goods from small or unknown brands and usually sells them wholesale, so customers can buy food at really low prices. To reduce costs even more, the company places its products on wooden pallets instead of shelves, Khomenko told the Kyiv Post.
The initial investment in one store is low as well, costing around $18,000. In contrast, the initial investment in one ATB supermarket runs one about $1.5-2 million.
For many, this business strategy appears strange, given current consumer trends. All over Europe shoppers are starting to care more about quality than prices, experts say. But in Russia and Belarus, Svetofor’s model appears to be popular.
When it was founded in 2009, Svetofor aimed to serve “the poorest 4-6% of Russians.” However, as the chain continued to grow, more middle-class consumers started shopping at their stores.
Ukrainian experts say that local customers would probably dislike the idea of a ‘hard discounter’ that offers a narrow selection of products and looks like a warehouse rather than a supermarket.
In fact, ‘food warehouses’ are becoming obsolete all over Western Europe. Ukraine’s popular discounters ATB and Thrash, for example, abandoned this model and began to grow more rapidly, according to Denys Poddubskiy, head of the development at Varus supermarket chain. The same happened with Aldi and Lidl who regained popularity once they started selling popular brands and changed the design.
Mere has ambitious plans in Europe and is expanding rapidly there. But for now, it has only opened a few stores in each country, lagging behind its promises. The company could, however, become more successful in Ukraine where the minimum wage is $220 compared $1,950 in Germany.
And to succeed in the Ukrainian market, the company has to be ready to compete with local discounters that are more familiar to Ukrainian consumers, experts say.
