Fozzy Group has opened its first premium supermarket under a new banner. As disclosed by the Ukrainian Retail Association (RAU), retail conglomerate Fozzy has launched a new upscale supermarket concept under the hitherto unknown “Favore” logo. The high-end shopping venue is located in the luxury summer resort of Kozin, to the south of Kiev and features a superior choice of exclusive delicacies in the seafood, charcuterie, cheese and bakery ranges. Likewise, the “Lavka Tradytsii” concept so far only implemented in Silpo stores, offers regionally sourced Ukrainian organic products. Also popular in Ukraine, a café and bistro area complements the store concept.
Due to falling consumer spending, Fozzy has been converting its long-established supermarket banner Silpo into discount-oriented Thrash stores, which were introduced in the second half of 2016. At the same time, it has started to put a focus on expansion of its second mainstay, the Fora neighbourhood store brand. From March this year Fora has been opening stores with larger sales areas, adding extra services such as in-store production facilities and pizza takeaway, presumably with the aim of increasing footfall and to fight against the head-on competition from the ever-present soft-discounter ATB.
Considering Kiev-Kozin's cottage rental rates of several thousand USD per month, Favore’s target customers probably will not be too concerned about value-for-money. On the contrary, shopping at this high-end grocery venue might even be regarded as a status symbol. Seen from this angle, the store location seems well chosen and not representative of the rest of Ukraine. However, why attach it to the Fora brand and not just open a new LeSilpo, the current premium concept of Fozzy Group?
In our view, in the current economic framework, Favore will not start a new trend of premium store banners. The supermarket segment has lost favour with Ukrainian consumers, since it is perceived as too expensive in comparison to the ubiquitous ATB. Therefore, the Silpo network is gradually being converted to low-price Thrash stores and may even be phased out in the long term, which means the jury is still out on LeSilpo’s fate. Fora, so far operating in the niche of proximity stores and increasingly pressured by advancing ATB, is developing upmarket towards Silpo’s position, but – in contrast to its bigger sister banner – is surrounded by the halo of a better price image.
Although Fora management announced that the traditional neighbourhood store concept would not be abandoned, it would not be surprising to us if Fozzy were to pull its marketing efforts in such a manner, ending up with a low-price image store network consisting of evolved Fora supermarkets and converted Thrash “discounters”. We are convinced, therefore, that Favore is just a peripheral phenomenon, which would be typical for owner Vladimir Kostelman, who is known for his creativity and innovative spirit, as evidenced by his Jamaican-style and castle-like Silpo projects opened in the recent past. Likewise, it does not seem far-fetched, that Kostelman himself has his own holiday home in Kozin.