NICOSIA - Some 3,000 outlets – from supermarkets to bakeries – are competing for business in the island’s food retail sector, with the post-bailout economic crisis making the struggle for survival even more difficult.
This works out into an average of 100 households for each supermarket, grocery, bakery and kiosk, with studies anticipating a 10-15% drop in turnover in the next two years, forcing an anticipated 20% of the outlets to go out of business.
The sector has already taken a blow from the steady deterioration of the economic climate since 2011, the bankruptcy of Orphanides Supermarkets – which held 20% of the market – and the haircut of bank deposits. The arrival of low cost supermarket chain LIDL has also brought changes to the sector.
An all-island survey carried out by RAI Consultants in July 2013 with the participation of 2,300 households points to the upsets in the market and the new spending habits, post bailout.
Of significant importance is the large concentration in the market, since after the closure of Orphanides Supermarkets, the largest three supermarkets represent 40% of sales and the first five more than 50%. The five big players are Carrefour, ΆlfaMega, LIDL, Athienitis and Papantoniou.
Market share varies per district, with Athienitis top of the list in Nicosia, followed by AlfaMega and Carrefour. The latter is top in Limassol, where E and S takes second place and Papantoniou third. In Paphos, Papantoniou is first, followed by AlfaMega and Carrefour.
The study shows that Orphanides clients were absorbed by Carrefour, AlfaMega, LIDL, Athienitis and Papantoniou in that order.
Smaller groceries that were located close to Orphanides also benefited.
The RAI survey also shows that LIDL and Athienitis cut across social classes, attracting clients of all incomes.
The economic crisis has affected consumer behaviour, with Cypriots increasingly on the hunt for good deals and prepared to go from one shop to the other in order to get the best offer. The survey shows a significant decline in loyalty to one outlet only, with many consumers prepared to visit two or three.
The survey also shows that consumers are now far more likely to prepare a shopping list in order to avoid buying unnecessary items.
RAI chairman Olympios Toumazos said changed behaviour is likely to lead to keener competition and a greater concentration in the market which will force a number of companies to close.
The survey also shows that consumers may go to shop more often, but buy half the stuff they used to buy.
The study points to distortions in the market, with too many outlets for the size of the population and high operating costs including electricity which represents 4% to 20% of turnover.
“The companies are struggling with lack of liquidity and need capital to operate,” said Tomazou.
“Prospects for the retail food market over the next two years are not favourable, and this will lead to greater concentration in the retail trade, more acquisitions and cooperation between businesses, even competitors,” he added.