According to newspaper Liga, Auchan is considering introducing minimarkets in Ukraine – as it has in other European countries. Some 10 stores would be opened in the capital city Kiev, carrying the Auchan brand. The retailer is however reportedly facing difficulties due to its contractual obligations with its local partner, Furshet. The difficulty being that Auchan is focussed on hypermarkets, whilst Furshet drives smaller formats. Auchan Ukraine’s Development Director declined to comment.
We believe Auchan's intent to develop its multiformat presence across Europe – as recently demonstrated in Portugal and Poland – is a financial opportunity for local partner Furshet, who finds itself in dire need of cash. Let's remember that Auchan teamed up with Furshet in a bid to rapidly enter the Ukrainian market. However, things quickly went awry and both partners ended their joint venture a few years later. Auchan however retains a 10% stake in the Ukrainian network to this day.
For Furshet, the economic instability of the past few years has had a serious impact on the mid-tier supermarket segment, favouring instead price-aggressive formats. In response, Furshet has reworked its assortment, reducing the amount of premium items and imports, while downsizing its supermarkets. This is likely to have seriously hit its bottom line, and LZ Retailytics anticipates a lull in store openings over the coming years. The outlook for Furshet may fall further as deep-pocketed Fozzy's convert some Silpo supermarkets to its new Thrash discount banner – and perhaps even more so if Auchan competes head-to-head with its own smaller formats.
From Auchan's perspective, expansion is taking longer than anticipated and opportunities are limited. Political instability, low consumer spending, a weak infrastructure and difficulty in finding suitable locations in top cities are all likely to prompt the retailer to deepen its footprint in the more affluent capital where it already has a strong footprint. Coincidently, it is also Furshet’s own backyard... A situation that will likely force both partners back to the negotiation table.
13/10/2017: Auchan eventually sold its stake in Furshet for an undisclosed amount in October 2017.