Spar: International and Independent
Elsevier Food International Vol.7, No.4, November 2004 Pascal Kuipers
“Don’t we exist?”, says Gordon Campbell, managing director of Spar International, while browsing through the Top 100 retailers in Elsevier Food International’s September edition. ”In store numbers, Spar is worldwide the largest retailer with over 15,000 stores that clearly communicate the Spar brand in four different Spar formats. We belong in these rankings.”
“I really don’t understand why we are not on this list,” says Campbell. “Here, look at the list. There are other retailers on it that are similar to Spar. They don’t operate own stores but mostly cater to independent retailers.”
Only Spar Austria made it to the Top 100 ranking that was researched by M+M PlanetRetail. “At least three more of the Spar country operations should be included. Spar Italy, Spar UK, or Spar South Africa for instance,” Campbell complains. “However, I would prefer Spar to be listed as one worldwide retail company.”
M+M PlanetRetail looks at ownership when designing the ranking and for this reason Spar UK, whose €3 billion sales is a total figure of six individual Spar licensees in the UK, and Spar Italy, whose €3 billion sales is realised by 12 different regional Spar companies, are not included. Spar Germany, the largest Spar operation with sales of some €4.2 billion in 2003, is consolidated in French retailer ITM’s financials. Since 1997, ITM (Intermarché) owns a majority share in Spar Germany.
Retail development by sharing best practices internationally is among the core tasks of Spar International. Can you give examples of best practices that were shared among Spar operations worldwide?
“Our work essentially focuses on retailing. The key role of International Spar is developing and implementing the retail strategy of the four store formats, each of which is targetted at specific customer needs. We study, train and develop together to create the best retail experience in Spar stores throughout the world. At Spar we call this ‘Passion for Food’ which comprises travelling retail seminars, in which we visit and study best practices in international retailing, and so called ‘Merchandising Masterclasses’, where senior executives from various Spar countries discuss and implement best practices of retail merchandising. Knowledge from the seminars and the techniques from the Masterclasses are applied in our flagship stores, which are jointly developed by Spar International and Spar members. Flagship stores act as a benchmark for Spar member countries to adopt and roll out. A good example is the flagship store opened in 2002 by Spar Middle Volga in Nishny Novgorod, Russia. It’s a state-of-the-art store with, for example, a takeaway counter that sells prepared foods for some US$1000 every day. Bear in mind that five years ago there was no such thing as a supermarket in Nishny Novgorod, Russia's fourth largest city. In Hamburg, Spar Germany recently opened a 2,200 m² Eurospar flagship store as a counterweight to the discounters and multiples that dominate the German retail.”
Spar operates in 34 countries worldwide. What lessons can be learned with regard to cross-cultural management from the Spar International experience?
“We are a global organisation, but all retail is executed locally. Most of the training Spar facilitates happens locally but we share international experience. A good example is an international Human Resources Management conference that we organise. This is all about sharing experiences. Spar Austria set up an academy to train apprentices. This inspired Spar South Africa and Spar Switzerland to do the same. In the UK, Spar has a virtual academy over the Internet. We always have people moving between countries, especially when new countries are added. In November 2004, the first Spar store will be opened in India and this project is managed by someone from Spar South Africa. We have an international television ad-campaign, broadcast in 13 countries, which stresses Spar’s multicultural idea.”
As a global organisation for independent retailers, how does Spar International manage to keep retailers disciplined when it comes to using the Spar franchise locally?
“We work with national Spar organisations in the 34 countries where we are represented. Mostly it’s with one organisation, but in countries like the UK, Spain, Italy and Japan where there are more regional Spar organisations we work with all of them. In total, we are involved with 74 regional Spar companies. Spar International tries to give leadership on what the standards should be when using the Spar brand. We constantly try to raise the bar by pointing at best practices. We recently brought the Spar Retail and Wholesale Board to see the 167 store operation on the Canary Islands managed by one of the regional Spanish Spar franchisers. We have excellent relations with all Spar companies and there are no strains, like a different view on the use of colours or whatever.”
What role does Spar International play when it comes to procurement of non-resellables or private labels?
“We pioneered in centrally purchasing non-resellables. Before I arrived here in 1994, Spar International already had a comprehensive list of international suppliers. We regularly organise an international suppliers’ ‘Roundtable’ to discuss business opportunities. In 2000, we started with StoreIT, a programme to centrally purchase hard- and software and next year we are going to remodel this via StoreIT 2005. All flagship stores have state-of-the-art retail equipment from leading preferred suppliers. Regarding our international private label, we have now completed the development of comprehensive ranges of private label products. In total, there are currently 350 items that are described in detail in a product dictionary. This is largely the work of BIGS, our international, European, buying group. BIGS is also working on the development of a value private label range, as a response to the threat posed by the growth of discount chain stores in Europe.”
How is BIGS developing?
“Members from 15 European countries are working in BIGS. Spar organisations outside Europe don’t participate due to the costs of logistics and tariffs. BIGS has to deal with logistic costs. The lower the cost per unit volume, the more expensive it is to ship products throughout Europe. High-value products can be supplied by one supplier but low-value products need to be sourced from two strategically located suppliers to reduce cost. Furthermore, 80 per cent of products sold in supermarkets is sourced from national or regional suppliers. On a country level, national market share determines purchasing prices. In the UK for instance, Tesco is therefore in a better position than Asda. International Spar looks at the 20 per cent that is sourced from multinational branded goods suppliers. Its involvement in dealing with multinational suppliers is growing, but you need to give value in return when you increase the level of central purchasing. The main value we can offer multinational suppliers is improving their market penetration in countries where they are relatively weak. We can also add value in supply chain management and in cross border promotions. Compared to the more uniform US market, Europe is still a heterogeneous market with all kinds of differences in product specifications, delivery terms, conditions, and so on. This will change with the expansion of major chains.”
Is Spar International also involved in e-procurement via exchanges like WWRE or GNX?
“E-procurement is only a very small business for us. We participated in several reversed auctions via Spar Austria, which is a member of WWRE. Spar International is not a member. That’s something local Spar organisations do. Still, we look at the options for e-procurement but apart from trying to get the best purchasing price, it is critical to be able to check product quality. Good quality also depends on building relationships with suppliers. In my view, e-exchanges can best be used for buying non-perishable commodities.”
Is Spar International not involved locally when the Spar franchiser is in trouble? A notorious example is Spar AG in Germany. Also in the Netherlands – the cradle of Spar – Spar has not developed all too well over the years.
“All Spar members are individual companies. Spar International can’t do anything when a company buys a Spar organisation in a given market. Unfortunately, after acquiring Spar Germany back in 1997, ITM decided to introduce its own Intermarché private label and turn Eurospar stores into Intermarché stores. We regretted this, of course, but we have always stayed close to the people of the Spar organisation in Germany. Independent retailers form the core of Spar and in Germany there are over 2000 independent Spar retailers. We also discussed things with ITM and it is good to see that these Intermarché stores have been reconverted to Eurospar. The realities of the German retail market finally reasserted themselves. In the Netherlands, problems with Spar date back to the early 1980s. At last, things are improving again and with Spar being part of the Sperwer organisation, which is a member of buying alliance Superunie, Spar had one of its best years in 2003 with increasing sales and store numbers.”
Given the consolidation in the retail markets in different regions worldwide, how important is it for Spar to join forces with other independent retailers?
"That is not an issue for us. Our brand is our strongest asset. Based on our multi-format strategy we look at establishing a strong Spar operation in any country where Spar is represented. We don't intend to play a role in the process of mergers and acquisitions. However, we are influenced by the large chains. In the UK for instance, Spar had its best year ever as small groups of independent retailers realised that they needed a strong brand to fight Tesco. A strong brand with a strong private label and merchandising excellence in fresh foods and all kinds of support. Spar offered all that to them and in 2003, Spar UK added some 200 stores to its store base and increased sales by almost ten per cent. In Italy, two wholesalers joined Spar, which increased its sales by 11 per cent. There, the Interspar and Eurospar banners are developing particularly well."
How does Spar compare to IGA? Is IGA not a perfect fit for Spar to jointly create a global stronghold for independent retailers?
"Spar and IGA are the only worldwide organisations for independent retailers. IGA is primarily focused on the US while Spar is more a Europe-focused organisation. IGA is an association, a looser confederation of wholesalers and different retailers who all use the IGA logo in their local markets. IGA is strong in central buying in the US, which is a more uniform market, allowing IGA to combine purchasing volumes of its members. In Europe this is different. Apart from non-resellables, private labels and commodities, central buying is largely impossible. Spar focuses more on the retailing experience with its brand and its four formats. Besides Europe, Spar is also represented in Asia and Africa whereas IGA is also represented in Australia and the Pacific Rim. Only in Australia and South Africa is Spar in direct competition with IGA, so indeed globally there is a geographical fit. But we are very different organisations and there have been no discussions between Spar and IGA.”
In Russia, Spar competes with companies such as German retailer Rewe, which this year acquired Marta, the largest franchise partner of Spar Moscow. Was this a blow to Spar in the promising Russian retail market?
"I can't deny that it was a setback as Spar now has 14 fewer stores in Moscow. But it is also a compliment that Rewe has paid a lot of money for stores we developed with Spar retail expertise. Marta says it's a joint venture with Rewe, but I believe Marta sold its business to Rewe, which is bringing in management and converting the stores to its Billa brand. In the press it was portrayed as if Spar was leaving Russia but that's far from true. Spar Retail Moscow still operates two company-owned supermarkets in Moscow and aims to open two more by the end of the year. Moreover, a Spar franchiser operates two Spar stores in Moscow and plans to open more stores by the end of 2004. We also have a second regional Spar operation in Nishny Novgorod. Spar Middle Volga is ambitious and growing, so in total we will have five Eurospars and 14 Spar supermarkets in Russia."
When it comes to expansion, Spar International focuses on developing markets in eastern Europe, Asia and Africa. Why? Does Spar have a better perspective in emerging markets?
"That's a strange question. We are already represented all over Europe, with the exception of Portugal and Luxembourg. That's why new member countries are mostly developing markets, such as Russia, the Ukraine and Poland. Spar Austria expanded cross border to Croatia, Slovenia and the Czech Republic. In Africa it's mostly Spar South Africa and Spar Zimbabwe that expand cross border. We are looking at South America, especially in Chile and Brazil where we hope to establish a Spar organisation. We used to be in Mexico but left many years ago. Spar was there too early. The US and Canada may also offer opportunities, but not nationwide. Maybe regional companies find it of interest to start a Spar operation in some of the states. Currently the focus is on Asia, India in particular, a huge country of one billion people with hardly any modern distribution facilities and fewer than 100 supermarkets. Developments are slow and it took us 12 months to set up a distribution centre for fresh foods. But it will happen. We will help bring modern retail infrastructure to emerging markets."
Spar International has four main formats:
•Spar: local supermarket/neighbourhood store 200-1,000m2
•Eurospar: large supermarket 1,000-3,000m2
•Interspar: hypermarket >3,000m2
•Spar Express: convenience store 100-200 m2
Profile
As managing director of Spar International, Gordon Campbell is responsible for the worldwide development and co-ordination of the SPAR organisation, the world's largest chain of retail food stores. He was previously executive director of SPAR Ireland, responsible for the re-positioning of SPAR as an upmarket convenience chain, and sales and marketing director of B.W.G. Foods, a leading Irish food wholesaler who operates the Spar franchise.
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