EastFruit audits of produce departments at supermarket chains have predicted the fate of the entire retail business of a company many times.

A recent announcement that the Furshet supermarket chain is closing a significant part of its stores is yet another confirmation that the produce department is key for the supermarket chain regardless of format. The fact is that Furshet has been an enviable outsider in the ratings of supermarkets in Kyiv for several years in a row according to results from our comprehensive assessment of the assortment, product quality, quality of the department and services, and the price level of the fruit and vegetable departments.

About a year ago, the Billa supermarket chain fell into the same low category in Kyiv and was bought out by the more successful Novus supermarket chain. In 2019, EastFruit’s last-place rating of produce departments in Chisinau was given to the IMC supermarket chain and was soon bought out by the Linella chain, which is also more successful, according to our ratings.

Recently, our auditors are concerned about the negative dynamics in almost all indicators of the Silpo supermarket chain in Ukraine, which, together with the Furshet, Fora, and Ecomarket chains, is at the very end of the Kyiv rating according to the complex assessment of the fruit and vegetable department. By the way, both Silpo and Fora belong to the same company Fozzy Group.

“The idea of ​​creating a retail audit system for produce departments appeared in the 2000s against the backdrop of a sharp increase in the influence of supermarkets on the entire sales chain of vegetables and fruits in Ukraine. After all, it was the produce department then and now, probably, as the most difficult link in the retail trade with a very limited implementation period; high dependence of quality on many unpredictable factors; non-standard form, size, colour, taste, packaging; and many other problems always accompanied the work of managers for fruit and vegetable purchases from a supermarket chain. At the same time, the most coveted high-income customers increasingly ignored shops with a narrow assortment and low-quality products,” explains Andriy Yarmak, the author of the audit methodology and an economist at the Investment Centre of the Food and Agriculture Organization of the United Nations (FAO).

Read also: Auchan & Metro – produce retail trade leaders of the EastFruit region – Carrefour is coming

“At the initial stage of the formation of food retail in Ukraine and other countries of the region, the importance of the produce department was not so high. However, as the market developed, the influence of networks and consumer incomes grew, the significance of the department became more and more important. According to the study “Surprises in Store: Fruit Logistica Trend Report 2019” by Oliver Wyman, more than half of consumers choose a store for shopping specifically for the produce department. Therefore, if the produce department is weak, then it will not be possible to sell anything in the departments of alcohol, household chemicals, dairy, meat, fish, etc., because customers simply will not come to the store. That is why we are constantly deepening the methodology of our research. In practice, we see that it allows us to very accurately assess the overall state of the retail business of the chain, of course, only in those countries where the level of competition between the chains is quite high,” explains Andriy Yarmak.

We also note that audits of supermarket produce departments are the most important indicator for the safety of suppliers. If the chain is not doing very well with the produce department, then there is a greater risk in the worsening of its financial situation, which means that there may be delays in payments or even no payment for the products supplied to the chain. Therefore, EastFruit recommends that all farmers and wholesalers closely monitor the rating dynamics for individual supermarket chains and to remember it will be the most informative in those countries where the competition between supermarket chains is very high.

Сообщение Produce department audits enough to determine overall state of business for supermarket chains появились сначала на EastFruit.

Uzbekistan is the hotspot for supermarkets. With a large population of 33 million, very good demographics, and GDP growth rates above 5% annually, this country represents an attractive market opportunity for international supermarket chains. Uzbekistan is also among the global leaders in exports of certain fruits and vegetables and it could become an interesting source of produce for international market participants. Thus, EastFruit pays very close attention to retail trade developments in Uzbekistan.

The EastFruit team conducted one of their regular quarterly audits of the fruit and vegetable departments of supermarket chains in eight cities of five countries: Kyiv, Odesa, and Dnipro (Ukraine); Chisinau (Moldova); Tbilisi (Georgia); Tashkent (Uzbekistan); and Dushanbe and Khujand (Tajikistan) on November 24-25, 2020.

Our audit methodology and history can be found at the end of this article. Produce departments are of critical importance to the whole retail business of supermarket chains of any format. Thus, EastFruit audit results very often suggest if the chain is doing well or losing to competitors.

In Tashkent, representatives of the team visited 19 stores of 6 supermarket chains – Makro and the new format Makro Express 24/7, Korzinka.uz, Havas, Green Apple, and Andalus chains.

All chains were judged by four sets of criteria: assortment (only fresh produce items without dried, canned, and frozen fruits, nuts, and vegetables), price levels for key products, quality of the produce, and quality of the department. Quality of the department criteria included: merchandising, quality of services and the level of convenience, and completeness of the information provided to consumers at the price tags.

For the first time, the EastFruit retail audit included the Makro Express 24/7, Green Apple, and Andalus supermarket chains.

Makro Express 24/7 is a new format from the Makro chain, which is the largest in the country by the number of stores. The Makro Express format is represented by small shops with a retail area of 70-500 m² within walking distance from residential areas. At the end of November, Makro opened its 18th Makro Express 24/7 store in the express format with the round-the-clock operation. In general, Makro was opening stores very aggressively expecting many new competitors coming to the market.

The Green Apple and Andalus supermarkets are very few in numbers. The Green Apple chain currently has 3 stores and Andalus has only 2 stores. Also, due to their opening delays, we could not include the Carrefour chain as it had not opened by the time of our audit. However, it did open at the end of 2020 and we will cover it in the upcoming spring audit.

In the overall rating by the four criteria, the small Green Apple chain surprised everyone and unexpectedly took the lead. Green Apple stood out in terms of produce quality as well as quality of the produce department. It was also very competitive in price yielding only to the hard discounter Havas. Green Apple’s weakest point was in the relatively poor assortment of produce with 87 positions on average vs Makro, who was the leader in assortments, with 130.

With three out of four criteria being very competitive, Green Apple, despite being a small chain, has already gained its popularity among consumers in Tashkent. We noticed that it was very busy compared to others and clearly has good development perspectives.

The leaders of the previous ratings Korzinka and Makro supermarket chains took the second and third positions respectively. Makro Express 24/7 chain was among the outsiders with the highest prices, small assortment, and relatively low quality of products.

Korzinka was ahead of Makro in price as well as produce and department quality but had a 14% smaller assortment of fruits and vegetables.

Makro’s main problem was in poor price competitiveness, which was not justified by the quality of fruits and vegetables nor quality of departments. We suppose management’s main focus was on securing the greatest number of stores before it became more expensive to enter the market and competition moves in. In one of the interviews, Makro’s CEO said that their main competitors are bazaars. Thus, having many stores, including convenience stores in Makro Express 24/7 format, helps them gain market share from the traditional bazaars.

In the future, we expect that competition in the fruit and vegetable trade market in retail chains in Uzbekistan will only intensify, which will have a positive impact on the quality and efficiency of production, storage, and trade for the whole country. This will be facilitated by the possible appearance on the market of new international supermarket chains Carrefour and Magnum Cash & Carry.

History and methodology of the EastFruit retail audits.

The methodology and concept for retail audits were designed by Mr Andriy Yarmak back in 2009 and widely used initially in Ukraine by Fruit-Inform.com, a leading analytical fresh produce market company in the country. Audits were conducted one or two times per year. In 2018, under the leadership of Mr Yarmak, who joined FAO in 2011, and in cooperation with Fruit-Inform and the Ukrainian Horticultural Association (UHA), EastFruit adopted this methodology to be used internationally and conducts audits 3-4 times per year in Moldova, Georgia, Russia, Tajikistan, Uzbekistan, and Ukraine.

Auditors make sure to cover all key supermarket chains and visit at least two stores of each format if the chain works in different formats. For the leading chains, the number of stores to visit are determined based on their market presence and could be up to seven stores of each format in each city.

Audits are always conducted on the same day or during two days in all cities.

Auditors are trained before each audit to make sure key elements of methodologies are understood uniformly in all cities of the EastFruit retail audits.

Cross-checks of the audit results are regularly and randomly conducted.

There are four sets of criteria EastFruit uses in the produce department audits:

1. Assortment – number of SKUs present in the produce department (only fresh produce items without dried, canned and frozen fruits, nuts and vegetables),
2. Quality of the produce – compliance of fresh fruits and vegetables with quality standards for the consumer;
3. Quality of the department – how informative and convenient the produce department is for consumers and how polite and knowledgeable the staff is;
4. Price – how competitive are the prices for key and most traded fresh fruits and vegetables.

Information collected is always analyzed by experienced specialists, verified for possible mistakes and then processed using the same standard methodology.

Сообщение Supermarket chains of Uzbekistan – produce department ranking as of November 2020 появились сначала на EastFruit.

The EastFruit team conducts independent audits 3-4 times a year of fresh produce departments in supermarkets of Ukraine, Moldova, Georgia, Uzbekistan, and Tajikistan (countries of the EastFruit project). Retail chains and investors closely watch the results of these audits. They are also a very important tool for farmers and wholesalers in helping them to understand which supermarket chains are at risk and which chains, on the contrary, are actively developing.

Also, thanks to the EastFruit retail audit, fruit and vegetable suppliers can determine a more suitable chain to work with based on it’s positioning. Some chains are looking for the cheapest product on the market, while others search for the best quality premium products and the EastFruit team determines it.

On November 24-25, 2020, the EastFruit auditors visited 151 stores, which represented 46 supermarket chains in 8 cities of 5 countries: Ukraine, Moldova, Georgia, Uzbekistan, and Tajikistan. The cities where the audits were carried out: Kyiv, Odesa, Dnipro, Chisinau, Tbilisi, Tashkent, Dushanbe, and Khujand. The same methodology was applied on every visit, which helps for very accurate benchmarking of the results.

The most developed and competitive food retail market was in Ukraine where many international, foreign, and local chains operated. Many of them had national coverage, including small towns with a population of 10,000 or more. Retail trade was also actively developing in Moldova, where many local, two international, and several foreign chains competed. Georgia is still in third place, but it may be overtaken by Uzbekistan where foreign investors are now actively planning to enter. The least developed was the retail food business in Tajikistan where only a few chains operated, including one international. However, the retail business in Tajikistan struggled with produce departments. One of the chains in 2020 had to close this department altogether as bazaars were simply much more competitive and appealing to consumers.

The most represented supermarket chains in the cities of our audit were Auchan and Metro Cash & Carry, whose stores operated in four out of eight cities. Moreover, in three of them, these networks competed directly – all of them in Ukraine. Both networks were represented in two of the five EastFruit countries.

Carrefour at the time of the audit had only one store in Tbilisi but opened one a few weeks later in Tashkent. Thus, in our next audit, Carrefour will be represented in two countries just like Auchan and Metro, but it will be less represented in terms of cities.

Two Ukrainian chains were operating in all three cities of the audit – Silpo and ATB. However, these are not international chains. Two more Ukrainian supermarket chains that operated in neighbouring Moldova were Furshet and Velmart.

Most of the other supermarket chains operated either only in one of the audit cities or were also represented in one of the cities of the same country, which indicates a low penetration rate of supermarket chains.

Also, two more international supermarket chains operated in the region, which was present only in one of the EastFruit countries: Kaufland (Moldova) and Billa (Ukraine). However, the entire business of the Billa chain was bought out by a relatively young Ukrainian supermarket chain with foreign investments operating under the Novus brand, which means that the Billa brand will cease to exist in our region in the near future.

Now let’s see how successful these supermarket chains were in the region’s produce trade in November 2020.

Only one network Auchan became a leader in two audit cities: Kyiv and Dushanbe. It is hard to count it as a success in Dushanbe, however, as there were only three supermarket chains in the capital of Tajikistan. Also, while Auchan performed better than others, its produce department in Dushanbe was not one to be proud of. In addition, Auchan’s performance in Odesa was also very poor compared to its competitors. It has also not performed well in Kyiv in the past and it’s lead in November 2020 came as a surprise to many. These unstable results suggest that Auchan lacks consistency and continuity in managing produce departments even within one country.

Metro Cash & Carry is indeed a regional leader in terms of performance. Despite the fact that it positions itself as a wholesale chain of supermarkets, it looks very good in competition with retail competitors. Although Metro did not win in any of the cities in November 2020, it also never fell below third place in the most competitive cities, scoring two seconds and two third places. Kyiv, Dnipro, Odesa, and Chisinau were indeed the most competitive cities of the region in produce retail and Metro worked exactly in these cities maintaining very high standards of the produce departments.

Kaufland is another international network that recently entered the retail market of the region and immediately took the lead in the capital of Moldova confirming its leadership status with each of our audits. Moreover, in November 2020, Kaufland sharply strengthened its position in terms of prices – the only indicator where it was not competitive during the previous audits.

Carrefour at the time of this audit was present only in Georgia, where, as a rule, it was the leader of our produce department rankings or, at least, one of the leaders. However, in November 2020, Carrefour sharply surrendered positions becoming third-worst supermarket chain in Tbilisi.

Fozzy Group, one of the two largest players in the food retail sector of Ukraine, does not operate in other countries. However, Ukraine owns five retail chains: Fozzy (hypermarkets), Silpo (supermarkets), Fora (convenience stores), Le Silpo (premium supermarkets), and Trash (hard discounters). At the same time, Silpo, the largest chain of the Fozzy Group, operates in several different formats from store size and assortment to pricing.

The largest chain of the Fozzy Group seems to also be the weakest as its positions in produce department rankings keep going down in recent years. According to the results of the November 2020 audit, Silpo was among the outsiders in Kyiv and Dnipro and took a place below average in Odesa. Only the Le Silpo chain of the Fozzy Group shows good results in both Kyiv and Dnipro; it was in leadership positions and even showed a certain improvement over the recent year.

We will also name the leaders in the comprehensive assessment of fruit and vegetable departments in other countries that do not belong to large international companies: Fresco supermarket chain in Georgia, Green Apple in Uzbekistan, and Oasis in Tajikistan (Khujand).

Сообщение Auchan & Metro – produce retail trade leaders of the EastFruit region – Carrefour is coming появились сначала на EastFruit.