Retailing in the Week Ahead, Week 16

Lutenica is a daily spread, often served on fresh bread, and typically prepared by women in villages throughout the central and southeastern Balkan region (primarily Bulgaria, Northern Macedonia and Serbia). It also goes well with meat.

The first part of the word means ‘spicy’ in local dialects and this gives the spread’s ingredients away – slow roasted red peppers form the base of the dish, with different recipes calling for variations on how much and which types of oils, salts, and other flavours to add. Most lutenicas also feature both carrots and tomatoes. Nutritionists claim that lutenica is one of the original heart-healthy superfoods and many will prescribe it as a butter alternative for middle-aged modern dieters looking to reduce cholesterol and lose weight.

A foodservice offer adjacent to a Lidl (left), while in-store the discounter's regional offer features an abundance of Lutenica (right).

Lutenica is also a symbol of the ‘slow cooking’ movement – harking back to the days when grandmothers would spend two weeks every autumn gathering the red peppers then charring pepper after pepper to grind into a jar and preserve for winter. The entire house, village and surrounding countryside would be pervaded by the clinging fragrance of wood smoke and grilled peppers, reminding everyone of the love and care going into every jar of preserve to get families through the winter.

Lutenica is also a symbol of a battle taking place in retail – particularly in Bulgaria – where consumers are trying to distance themselves from unhealthy, heavy-in-preservatives, packaged foods in favour of products labelled fresh, prepared in-store, bio, eco, vegan and more.

The result is that three things are happening to modern trade retailers in Bulgaria – and beyond. It is worth a review to see just how far along the journey we there are today and how much further we have to go.

1.  Retailers are giving up space to other retailers to create solutions that satisfy consumers requiring the conveniences of modern grocery shopping, but not wanting to buy mass-produced products.

The best example of this phenomenon is supermarket chain Billa Bulgaria, a subsidiary of Germany’s Rewe Group. Billa has 126 stores across 38 cities in Bulgaria. It is also present in Austria (the headquarter market), Czech Republic, Slovakia, Hungary, Ukraine and Russia.

Billa has launched a new concept in Bulgaria called “Billa Park”. The new store features space to allow local partners to trade in what resembles a traditional market. The goal, of course, is to provide the long tail of assortment and food discovery that can only be found by having multiple small producers participate. Just as Alibaba is trying to help small producers gain access to national and international markets, Billa is working to bring regional producers access to urban and more national audiences.

The result, of course, is rather than having two types of lutenica for sale – the A-Brand and the private label. Consumers may have hundreds of recipes to choose from when they arrive and the unexpected should be expected.

2.  Retailers are reinventing mass production.

The best example of this phenomenon is the discounter Lidl Bulgaria, a subsidiary of German Schwarz Group. Lidl has invested in a new meat processing technique where there is no ‘mechanical separation’ of meat from bone. The result is that Lidl has an advantage over smaller production meat processing plants that have all upgraded in recent years to having mechanical separation techniques. The challenge with mechanical separation is that it damages the meat and then requires preservatives, colorants, and other additives to make it look attractive and stay in the right condition for resale.

Lidl is betting big on a new label, called ‘Pikok Pure’, which will be the first mass-produced lunchmeat product offered in Bulgaria that is preservative-free and, while mass-produced, does not use mechanical separation to accomplish speed.

3.  Retailers are abandoning central planning and fixed rotational calendars.

The best example of this phenomenon is T-Market Bulgaria, a subsidiary of Lithuanian Maxima Group. T-Market is investing in flexible retail planning. The company plans different assortments for rural consumers, and is investing in having a wide variety of formats to choose from to match different shopping needs based on town size and consumer profiles. It is now launching flexible store design formats where rotational and local products can be featured at different levels during different times of the year.

For readers that read this column frequently, you may remember our discussion on Surge Assortments. T-Market is doing surge assortments well – the difference being that they are doing it in markets where modern trade is still winning from traditional trade, leapfrogging the competition who would not move to a surge assortment strategy until like-for-likes (comp sales) plateau.

T-Market’s latest investment in Bulgaria is a hybrid grocery and convenience store. If you want to see surge assortment and flexible merchandising at its best, it may be worth spending some time in either the Baltics or Balkans to see what T-Market has been doing to abandon rigid and time-consuming planning around a fixed international calendar. The result, of course, is local flexibility, which requires a higher dose of trust in local staff and management as well as suppliers that can work with more agility.

The Three Lessons of Lutenica in Bulgaria

In summary, consumers want the best of both worlds. They want to go back to the old days of grandmother’s slow cooking. They also want the convenience and speed of modern grocery production. A visit to the modern trade in Bulgaria will show you that many retailers are abandoning the old rules of grocery retailing to try and give consumers something from the old days. This means reallocation of space, new techniques in food production and sourcing, as well as abandoning a one-size-fits-all sourcing and promotional calendar.

Fast-rising chain Fantastiko (left), and the steadily-growing and innovative T-Market (right). 

So, who is doing it best? Well it’s true that Billa, Lidl and T-Market are all performing strongly in Bulgaria. Kaufland, not mentioned until now, is also doing very well and has begun to break an entirely new set of rules with the launch of its consumer-centric store in Veliko Tarnovo. 

However, we should never overlook the locals. Bulgarian-based chain Fantastiko has been performing very strongly in recent years and, according to some reports, has recently taken the number one retailer title for Sofia, Bulgaria’s capital-region. What are they doing so well? In a word: Lutenica. A trip to a Fantastiko will show you how a retailer can capture the essence of a Balkan open-air market in the small space of a supermarket. The big chains have taken notice and the battle for Lutenica has just begun.

We at Kantar can’t wait to revisit Bulgaria to see the changes that arrive as five very good retailers compete to deliver Lutenica to Bulgarian consumers in ways that capture the imagination of the past – slow-cooking, healthy and sourced from small producers that put love in every jar.

If you did not have a chance yet, please also have a look at some of our big featured items from Week 15:

Good luck in the week ahead. 

Regards,

Ray Gaul – Ray.Gaul@KantarConsulting.com and @KantarConsulting or @RayGaul on Twitter plus LinkedIn.

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