Change of Strategy in Slovenian Biggest Retailer

Business,  19 Aug 2012  / By STA

Toni Balažič, who has been at the helm of retailer Mercator for three months, has suggested a shift of strategy in an interview for Delo. "Mercator is not a focused and efficient company, it is a conglomerate of activities," he told Saturday's edition of the daily.

New Leadership, New Strategy
New Leadership, New Strategy

The biggest shareholders of Mercator, foremost among them big banks, plan to make a renewed push to offload a majority stake in the retailer after the previous attempt to sell failed late last year.

But Balažič cautions that the company needs to be whipped into shape first. "Mercator is simply not ready for sale, as it is grappling with problems on the market, high debt and a lack of focus. If the shareholders want to maximise their profit, the management must prepare it for sale."

The management believes that EUR 60-80m can be saved over two to three years with measures such as improving cost effectiveness, purchasing, logistics and the management of working capital.

One key measure will be monetising real estate by selling shopping centres and leasing them back. The plan, estimated at EUR 1.7bn, has been around for years but the new management has decided to break the sale up into smaller chunks in order to attract a broader circle of real estate funds.

"This year's monetisation plan involves two tranches worth EUR 250m total, which represents a quarter of Mercator's debt and over half of its current market capitalisation," Balažič noted.

Mercator is currently trading at EUR 122 on the Ljubljana Stock Exchange, but Balažič says this does not reflect its true value. "I'm convinced that the potential is much greater, which is also indicated by offered prices in the recent past," he said in reference to last year's EUR 221 per share bid by Croatian rival Agrokor.

One of the reasons that Mercator has not performed so well in the past is that the management was busy with constant procedures involving the sale of the company. "I believe that stable and long-term ownership is crucial," he says.

The company wants to become No. 1 in the Balkans, but Balažič notes the competition is fierce, with Mercator and Croatia's Agrokor pitted against Belgian Delhaize. "The competition among us will be interesting and important." he says.

Balažič was tight-lipped about Q2 results, but he said the plans drawn up by the previous management would be "difficult to achieve" considering the weakness of the economy and lower household purchasing power. "Nevertheless, we are confident the second half of the year will be better than the first."
 

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Bb, 02.10.2012 ob 20:15

In my opinion is Slovenian domestic food better than foreign. I believe in home made.

Bb, 02.10.2012 ob 20:11

I'm not a patriot of Mercator but you forgot the card discount. I know is still expensive but less.

Diogenes, 21.08.2012 ob 09:29

Interesting about Asda, didn't know. One of my ex-pat friends orders regularly from a British web site, I think more for specialties than necessities, though.

Julian, 20.08.2012 ob 22:15

The point of what follows is to compare the cheapest of Mercator, the subject here, with the cheapest of the big five, as g. Balažič is clearly only interested in shares and property portfolios and doesn't seem to understand these customer activities. I'll have to correct ya Diogenes: Hofer in the UK is Hofer. Asda, originally a workers' cooperative, is now controlled by Walmart through Corinth Services Ltd. In 2010 Asda gobbled up the untermensch-Hofer Netto, making it the UK's second biggest after Tesco. It will always be better to go some distance for something - my Lear jet full of fig rolls and doughnutus edibilis is on its way back from Leeds as we blog.

Diogenes, 20.08.2012 ob 10:54

Good work! How about comparing to Italy, Austria, and Croatia so we know whether it's worth crossing our border to shop? Asda is actually Hofer in GB, Mercator has always been expensive, so your comparison might not be as fair as it could be. Try Spar prices in Austria vs. those in Spar here.

Julian, 20.08.2012 ob 03:39

Ever wondered why Slovenians are so thin compared to the rest of the world?

Now the story can finally be told.

To find foods as equivalent as possible I have started from the current Mercator special offers book.

There turned out to be no point trying to do it the other way around, as most of the things I wanted to compare are simply not Slovenian enough to exist in supermarkets here. Although it is equally true that many of your more bizarre ripoff concoctions can't be found in Britain either. Who, after all, would pay a couple of quid for some soggy red pepper of uncertain vintage, in a jam jar?

Of course it would be very difficult to live on the things listed here, or indeed out of Mercator generally.

The UK prices come from a comparison of its top five supermarkets, which can be found everywhere in the country.

Although the descriptions are the same the Slovenian versions may contain less protein, more chemicals, improvers, sugar, salt and padding because, well, because that's not important yet.


Asda UK Smartprice Chicken Legs £1.78/kg (EUR 2,24)
Mercator Chicken Legs EUR 2,99/kg
Slovenian country-shaped food adds 33%

Philadelphia cheese spread 200g Asda UK £1.00 (EUR 1,26)
Philadelphia cheese spread 175g Mercator Slovenia: EUR 1,47 (normal price 1,84)
Slovenian logistics genius adds 33%

Hellman's Extra Light Mayonnaise 600g Asda/Tesco UK £2.00 (EUR 2,53)
Hellman's Delicatessen Mayonnaise 210g Mercator Slovenia EUR 1,44 (normal price 1,69)
Slovenian marketing expertise adds 62%

ASDA white bloomer 800g £1.20 (EUR 0,95)
Kruh Istrski white unsliced bread 600g EUR 1,69 (normal price 2,06)
Slovenian love of the earth adds 137%

Asda UK Wholefoods Cous Cous 500g £0,68 (EUR 0,86)
Mercator kus kus 250g EUR 1,19 (normal price EUR 1,43)
Slovenian xenophobia adds 232%

Asda UK Smartprice Tomato Ketchup 550g £0.20 (EUR 0,25)
Felix Tomato Ketchup 700g EUR 2,39 (normal price 3,14)
Slovenian love of children and the working man adds 838%

Minimum wage Slovenia (after tax): EUR 748,10
Minimum wage UK (which is tax free up to £675.41 / EUR 851,02): £1053.00 (EUR 1326,78)

Sources:

Mercator prices:
http://www.mercator.si/si/akcije/aktualni-katalogi/
UK prices:
http://www.mysupermarket.co.uk
Minimum wages:
http://www.hmrc.gov.uk/rates/it.htm
Currency conversion rate:
http://uk.finance.yahoo.com/q?s=EURGBP%3DX

So you can see how clever this is. You're so marvellous, just like always. What kind of wide-eyed sucker is going to buy this strategic business?

Dober tek!



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