Spar International’s headquarters are in the Netherlands, the country where it all started back in 1932. In the course of its 75-year history, Spar retail formats are franchised in 33 countries worldwide. In this special version of Elsevier Food International’s interview section ‘Market Vision’, three Spar executives from different regions will comment on Spar globally and speak about their challenges with Spar locally.

Dmitry Maslov is a Russian entrepreneur who in 2000 was the first to obtain the Spar license for the Moscow metropolitan area. Holder of the master franchise, he built Spar in Russia together with partner companies. He owns Spar Retail which consists of four operational companies in the greater Moscow area. Together with seven Spar partners in cities south and east of Moscow, Spar retail cooperates under the umbrella of Spar Central Russia.

Profile Dmitry Maslov (1968) graduated in 1991 from the Moscow State Technical University as an Engineer. After working as a sales representative of an American company in Moscow dealing in feminine hygiene products, he established in 1994 his own distribution company supplying FMCG’s to retail outlets. In 2000 he got the SPAR licence for Moscow. Since 2000, he has been General Manager of SPAR Moscow and since 2004 of SPAR Central Russia.  From 2002-2004, studied in Stockholm School of Economics with the Executive MBA programme from which he graduated in 2004.

According to Maslov, knowledge exchange and a right balance between global and local are key success factors for Spar. “Local chains are the result of local entrepreneurship, supported by Spar International’s experience,” he says. “We benefit from this experience, as Spar international actively promotes knowledge exchange across Spar countries. For instance via retail seminars we meet Spar colleagues from all over the world. The retail industry is changing very fast so we need a window to the world. What’s happening where, and where are the best practices in marketing communications, store design, or other topics. Our stores in Moscow and Tula have similar features to Spar stores in Ireland, South Africa and Austria. We use the same manuals and exchange knowledge. Not only on store design, but also on human resource management, training of staff, best practice operations, logistics, and IT solutions. There are many examples.”

What attracts the Russian consumer to Spar?

“We are a privately owned company, so we can develop close to our customers. We aren’t forced to open at least 100 stores a month. We develop our business at a pace that we can afford. Nice store design with proper lighting, convenience stores, different colours for different store departments, wide aisles that are easy to shop with a trolley, these are all things that please the customer. We pay a lot of attention to the service departments for fresh foods. Fresh, chilled products require a lot of attention. We want to have enough cashiers at the tills. We also want the outside of our stores to look attractive. Better looking stores than those of our competitors, which often don’t look that appealing.”

 You are the founder of Spar in Russia. How is Spar developing in central Russia?

 “Since 2000 my company Spar Retail has had the Spar license for the Moscow metropolitan area. For growth, partners are needed and coverage of a wider area. We added four regions to our operations: Vladimir, Kostroma, Yaroslavl, and Ivanovo. These are all regional centres north and northeast of Moscow. Spar Retail also has partners in Tula (200 km south of Moscow), Penza (600 km south of Moscow) and Nizhny Novgorod (400 km east of Moscow). We all cooperate under Spar Central Russia.”

The development of Spar in Russia has been hampered by partners that left Spar. Was it not frustrating that your Moscow-based partner Marta in 2004 ended its affiliation with Spar and joined Rewe in the supermarket joint venture Billa Russia?

 “I had the master license and by 2003 I had two stores. Marta was sub-licenced for twelve stores and tried to change the standards which were set for SPAR. I didn’t agree and therefore cancelled the license granted to Marta. It was frustrating and painful, yes. We had plans to jointly develop Spar further. But Marta didn’t want to follow the Spar principles. If you want to build something big and strong, you need to stick to your principles all the way. But we responded in the best possible way: by further developing ourselves and opening good stores. It’s up to the customers to vote by shopping either with us or with the competition. In 2004, when we stopped with Marta as a Spar sublicense company, we lost twelve stores. But that year we opened nine new stores and managed to retain our total sales level for the full year! That was an important sign for our suppliers as well.”

You say that in your local organisation principles should be lived up to all the way… How does this relate to the freedom Spar International grants its license holders worldwide to manage Spar locally as they see fit? Does this mean the more local, the more discipline? Even within Spar?

 “All Spar license holders share the same values and are open to collaboration. That’s a key word, collaboration. So that everyone can benefit.  But this doesn’t mean that Spar International has no principles at all! Before selecting a new license holder, the candidate is screened to make sure the retailer is good enough to be a Spar retailer. A company that doesn’t share the Spar values will never be able to benefit from cooperation. That’s the essence of Spar.”

Russia is a booming, young market. A key problem is recruiting and retaining skilled managers. How does Spar Central Russia deal with this?

 “Shortage of good managers is a problem for all companies in Russia. It’s less than 15 years ago since Russia became an open market. Because Russia is a young market, there is no generation of experienced managers to pass on relevant management experience to new generations of managers. People are a key factor for success, so loyalty or incentive systems to retain management are very important. We organise human resource seminars to deal with this topic. Also we have begun working on a Retail Academy for Spar Central Russia to train our management. This is based on a shared experience within Spar International. Spar South Africa and Spar Austria already developed a similar initiative and together with other Spar countries we are learning how to do this.”

Doesn’t the educational system in Russia produce the rightly trained and skilled managers? Can this be a joint effort of the business and the educational system?

“There are no proper management schools in Russia. Yes, a lot of them call themselves School of Management, but they don’t deliver good managers... The teachers’ experience is based on the past and they have no experience with an open market. As said, that’s the problem of a young market: no experience to share. When I studied in Sweden at the Stockholm School of Economics, some of our trainers and teachers were former senior managers of world famous companies. Yes, it is a challenge for both the business and the Russian educational system to create the right schools. Things are moving in the right direction, as some Russian schools are backed by western schools of management.”

Despite a 23 year long career with Spar South Africa, Wayne Hook faced a tough task as the successor of the iconic Peter Hughes as chief executive. Hughes retired after being at the helm of Spar South Africa for 16 years (from 1990 to 2006). Since 2004, Spar South Africa has been a listed company, which also added novelty to the chief executive’s position. Nevertheless Hook sits comfortably in the driver’s seat of South Africa’s listed wholesale company.

When asked how it can be explained that Spar can be successful in one market, but playing a much more modest role in another, Hook explains that it all has to do with commitment. “We focus on one brand only and that’s Spar,” he says. “Other organisations that operate in markets where Spar plays marginal roles often have more than one brand to care for. Other banners than Spar that also require attention. That is not good. We are committed to Spar. If Spar fails, we fail. Examples can be seen in markets where Spar is less dominant resulting from a situation where the Spar licensee had to care for more brands than Spar only. In South Africa we have Super Spar superstores, Spar supermarkets and Quick Spar convenience stores.  This single brand strategy works for us. A complete commitment to voluntary trading.

We very much believe in the original concept of Spar which is all about independent retailing. We don’t own stores ourselves. Only if a retailer is in trouble or an independent retailer wants to sell his business. Then we might – temporarily – own a store. But we are wholesalers and we are not like the chains. It’s our job to manage the support systems for independent entrepreneurs. We also do this via our Spar license in other, neighbouring countries. Most of our members are retailers with one store, but there are also successful entrepreneurs who own more than one store. But in general these multiple store owners are an exception.”

 South Africa is Africa’s only affluent retail market. But it has to deal with large differences in wealth and spending power as well as social and cultural diversities. In this respect, how important is Corporate Social Responsibility to Spar South Africa?

“We are committed to CSR. Any store must be involved in its local community. As Spar we support local schools and churches. Our retailers are setting up important growth programmes for new stores not only in communities with an emerging middle class, but also in rural communities and townships. In general we aim to empower the previously disadvantaged.  Some projects are on a social basis focused at topics like fighting crime and HIV and AIDS prevention and support. Other projects are business related. In rural areas we help starting farmers with financial support. We also aim to attract more black people to run Spar stores. We actively try to get more black people on board. Currently there are 115 black retail entrepreneurs. The fact that a store needs to be part of the local community holds even truer for a township store. People appreciate local involvement, especially in low income areas. If you support them, they will support you. Townships are a priority area for store development and the newly opened stores are doing well. South Africa has vast differences in income spread and we market our offer accordingly. In all areas the stores are built and designed in the same quality, but the assortments differ. In low income areas the assortment consists much more of staple foods. This social stretch shows that Spar is an adaptable brand. That’s why we beat the chains. We successfully do micromarketing whereas the chains simply roll out one standard recipe.”

The 115 black Spar retail entrepreneurs, what percentage do they represent of Spar South Africa’s total membership?

 “Out of some 1200 stores we service, black entrepreneurs account for 10 per cent. We want to grow that percentage. Our existing retailers get in touch with black retailers (or black people that have the potential to become a Spar retail entrepreneur). We have put training programmes in place to train and develop their skills. We also lend them money to start up their business. In general we have a budget to support any new entrepreneur.”

Dr Gerhard Drexel belongs to one of the founding families of Spar Austria. The Drexel family is one of the three main shareholders and has members on key positions at Spar Austria. In 2001, when Gerhard Drexel became Spar Austria’s chief executive, the Austrian financial paper Wirtschaftsblatt characterised him as “a man with a boys’ smile and the politeness of an English court servant.” But looks can be deceptive, as in the same article a supplier to Spar Austria said, “Doktor Drexel is a tough negotiator and strategist. No doubt the best choice for the position at the helm.”

Drexel is focused on the competition with the hard discounters Hofer (as ALDI is named in Austria) and Lidl. But he is especially keen on German retailer Rewe who’s Austrian operation Billa leads the market, just a few percentage points before Spar Austria. In 1998, Billa acquired the Austrian retailer Julius Meinl and therewith snatched away this interesting prey. Gerhard Drexel – at the time a board member of Spar Austria – took legal proceedings up to EU levels and succeeded in forcing Billa to sell off the majority (60 per cent) of the acquired Meinl business – stores that were eagerly acquired by Spar Austria. “We turned a 100:0 defeat into a 40:60 victory,” Drexel was then quoted as saying.

With operations in Austria and five neighbouring countries, the Spar Austria Group is the largest member of Spar International by turnover. In 2006, it reached a sales level of €8.9 billion, of which Spar Austria accounts for 52 per cent. The international business accounts for 37 per cent, but has a much stronger growth pace. In order to meet further future growth, Spar Austria added a shopping centre and real estate branch to its operations.

 “The shopping centre and real estate business is our third business pillar which will further stimulate our growth. We already operate 18 shopping centres, eight of which are abroad. Most of them are freehold so much capital is fixed, but it is a very good business. We get revenues from tenants – we select only the best tenants for these locations – and our hypermarkets that anchor these shopping centres are most successful. This is a new line of business and a big strategic opportunity for us because our traditional competitors – like Rewe, Hofer or Lidl – are not in this business.”

And competitors are not allowed as tenants? In that case you can protect your own market.

[Laughing:] “No, no… as I said, only the best concepts can be tenants in our centres. So we chose our own best concepts. In April this year we won the prestigious ISCS European Shopping Centre Award for our flagship shopping centre Europark in Salzburg. This is like the Oscar of the shopping centre industry, awarded by the International Council of Shopping Centres ICSC. Our main competitors are companies like Rodamco, Redevco, ECE and Sonae Sierra. New competitors for our new real estate business.”

In 2000, the ‘Wirtschaftsblatt’ quoted you as saying: “We want to become Austria’s leader in growth, innovation, quality and price.” Seven years later, have Spar’s ambitions come true?

 “Figures from ACNielsen prove that in Austria between 1999 and 2006 we grew stronger than our largest competitor Rewe. Our market share – without Hofer and Lidl – grew in the last seven years by +7.2 percentage points to a share of 35.5 per cent, whilst Rewe’s market share grew by +3.7 percentage points to a share of 38.3 per cent. With regard to innovation, we use state-of-the-art architecture for our stores. Transparent stores with a lot of glass in storefronts, accessible parking places and basement garages. In-store, we have modern layouts with fresh foods departments in the heart of the stores. We added fresh seafood departments to all our 53 Interspar hypermarkets. That was a sensation in our country, as Austria has no coastline.

We want to have the right assortment of both branded and private label products. The Spar brand has appetite appeal and for bio/organic assortments we developed the label ‘Spar Natur Pur’. For convenience we developed ‘Spar Feine Küche’. All added value private labels we developed ourselves. Via Spar International we get commodity items under private label and we also have non-food own labels for which we don’t use the Spar brand. Five years ago private label accounted for 20 per cent of sales and currently it’s 25 per cent. It will increase further to a maximum share of 30 per cent. If you consider the current health and wellness issue, we were the first in Austria and central Europe to cover this theme. Some three years ago we created an advisory scientific board comprising nutritionists, doctors and scientific researchers to advise us on how we can create more, healthy Spar products. In May 2005, we were the first in Austria to introduce a system for nutritional information. We named it ‘Big 8’. We also started a magazine Gesund Leben [healthy living] with information on healthy food. Another key factor is price aggressiveness. The assortments of hard discounters Hofer and Lidl are also available in our shops at the same price levels. Beyond that, we have a broader choice which is not available via the discounters. Also there we are keen on our pricing.”

How does Spar Austria keep its cost levels low?

 “We constantly review and rethink our operations. Where possible we reduce cost, especially in the supply chain. We also do ECR projects. I believe there are much more costs to be taken out of the supply chain.”