hungary group 4

8/8/2019 Hungary Group 4

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International Retailing

Country- HUNGARY

Group no. 4Lav Kumar 12Sneha Suman 33Anjani Mishra 37Shekhar Ghosh 38Ankita Joshi 44Iqbal Ahmed 48


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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


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The Republic of Hungary


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Geography

Hungary, officially theRepublic ofHungary, is alandlocked country in CentralEurope.

It is situated in the PannonianBasin and it is bordered bySlovakia to the north, Ukraineand Romania to the east, Serbia

and Croatia to the south,Slovenia to the southwest andAustria to the west.

The capital and largest city isBudapest.


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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


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Economy & Market Overview

Currency: Hungarian Forint1 = 261 Forints (ECB, October 2008)

One of the weakest economy among the new EUcountries.GDP Growth - real growth rate 2.6% 2008(e) (IGD,2008)GDP(ppp): 2009 estimate

Total $185.873 billionPer capita $18,566GDP(nominal) 2009 estimate Total $129.407 billion Per capita $12,926

Gini(2008): 24.96


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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: HUThe main cities are Budapest (1.7mn),Debrecen

(204,300), Miskolc (175,700)


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Political Standings

Hungary is a member of

the European Union,NATO,

the OECD,

the Visegrd Group,

and is a Schengen state.


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Understanding Hungarian Market


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Market challengesRecent 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 theglobal financial crisis

Investor risk aversion and global de-leveraging caused liquidity pressureswhich 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 governments 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


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Market challenges contd

Business issues

GOH introduced in 2006 a 4 percent solidarity taxas part of an austerity program designed to helpHungary attain macroeconomic conditions

Some projects, such as those funded by the EU,require participation by a European partner

Hungary adopted a market economy only20 yearsago, competition is fierce in virtually every sector


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Market opportunities

In spite the global economic crisis, Hungary remains anattractive market for U.S. investment and exports

Currently, there are 2000 partially owned, and 128wholly owned US companies operating in Hungary

Cumulative FDI stock has totaled more than US $80billion since 1989,the highest in the region on a percapita basis

The important sectors: automotive,IT, logistics and,more recently, shared services (e.g., back office and/orcall center operations).


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Market opportunities contd

American companies have invested more than $9 billion in Hungarysince 1989, making the U.S. the 4th-largest foreign investor.

U.S. exports to Hungary have topped US$1 billion dollars in each ofthe 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


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Hungarian Retail Market


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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 1,002Spar International 976

Auchan 865

Rewe 443

Lidl3

70


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Tesco is leading retailer

Tesco opened its first store in Hungary in 1994 and its Budapest store is itslargest in the world, with a massive 150,000 square feet of retail space. Staff

once wore rollerskates to get round the store


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Types of retail outlet

Department stores: Situated in town centers onseveral stores with specialized departments

Skla, Luxus ruhz, Fontana

Hypermarkets: Situated at the entrance of towns.Alimentary and non alimentary

Tesco, Auchan, Cora

Supermarkets: Similar to hypermarkets but situatedmore in the center of towns and smaller surfaceSpar, Interspar, Kaiser, CBA, Match


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Types of retail outlet contd

HardDiscount supermarkets: Mostly own labelproducts at very affordable price

Aldi, Plus, Lidl

Specialized supermarkets: Specialized in one familyproduct

Praktiker, Baumax,Decathlon, Intersport

Drug stores: Durgs and beauty products.DM, Rossmann, Marionnaud


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Typology of retailers based on themarketing orientation

Departmentstore


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Retail Market Share (2007)

OTHER21% REAL

HUNGARIART3%

LIDLI4%

AUCHAN5%

TENGELMANN7%REWE

8%

CBA8%DELHAIZE

8%

MET

SPA10%

COOPHUNGARY

11%

TESCO15%


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Retail grocery market

Over 48% of retail sales in Hungary are generatedthrough the food retail sector (IGD,2008)

Hypermarkets (26% of the market): Tesco leadingplayer (1,254mn sales) followed by Auchan(865mn), Delhaizes Cora (384mn) and SPAR

Austria (total sales 976mn).

Supermarkets (15% of the market) dominated bydomestic operators: CBA (2,044mn), RealHungaria (713mn), COOP Hungary(840mn), Delhaizes Cora (626mn), and Tesco

(446mn).


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Major food retailers


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Challenges faced by retail sector

Reduced accessibility to basic retail services

Scarce information on retail offers beyond localmarkets

Slow growth of e-commerce

Potentially abusive contractual practices

throughout the retail supply chainLack of transparency on quality labels

Unsatisfactory functioning of the retail servicelabor markets


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Opportunities in the retail sector The Q210 BMI Hungary Retail report forecasts that the countrys total retail

sales will increase by more than 22% by2014.

Increased economic prosperity, despite the financial crisis, easier access tocredit and the demand for premium products are principal factors behindretail market expansion, contributing to forecast annual retail sales growthof3.6% in local currency terms between 2009 and 2014.

Consumer spending per capita is predicted to rise by nearly30%, toUS$11,050, by the end of the forecast period(2014).

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

Retail sub-sectors that are likely to grow over the forecast period includefurniture and household goods, worth an estimated US$6.76bn in 2009 toUS$8.28bn by2014.


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Opportunities in the retail sectorData suggest that the consumer electronics sector will grow strongly over

the forecast period, with sales rising from an estimated US$2.33bn in 2009to US$2.71bn by2014, an increase of more than 16%.

Property experts forecast that about 450,000m2 of shopping centre spacewill 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 thevarying national definitions.

Total consumer spending for the region based on BMIs macroeconomicdatabase amounts to US$2,135bn.

For Hungary, the estimated 2009 market share of3.1% is expected to fall to2.0% by2014.


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RecommendationDevelop 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 greatopportunity


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THANK YOUAny questions?

hungary group 4

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