Dino Polska reported a 22.7% year-on-year growth in revenue to reach PLN1,560m (US$406m) in the first quarter of 2019. This comes off the back of a robust growth strategy to improve its trading position with suppliers and effective in-store initiatives to attract store footfall.
Retailer continues with dynamic growth rate…
The retailer grew faster than the market of around 5.5% in Q1 2019, as reported by the Central Statistical Office of Poland. Much of the growth was due to 33 store openings, to reach 1,009, which also benefited from higher than average sales areas. However, like-for-like sales growth of 5% is a steep slowdown from the 20.3% it achieved in Q1 2018. Profit increased to reach an EBITDA margin of 8.5%, which is healthy when compared to Biedronka’s 6.7% for the same period.
…but at a slower pace due to timing of Easter and Sunday trade ban
When compared to the period 2014 to 2018, this is a deceleration in performance. Dino Polska’s CEO, Szymon Piduch, attributed the slower performance to an unfavourable calendar effect, which shifted the timing of the Easter Holiday to Q2 2019, and due to the reduced number of Sunday trading days. In 2019 the retailer intends to open a record number of stores, which is likely to offset the impact of reduced trading days on sales growth for the year.
Rapid organic store growth is Dino Polska’s core strategy…
It invests in growing its network of stores by building them on its own owned land. This makes up most of its stores, with a small number of franchised ones. However, an organic growth strategy does place it at a disadvantage against its competitors. Multinational retailers have access to more financing and franchise businesses require low capital expenditure to open new stores or convert established ones.
…that strengthens its position with suppliers
Its dynamic store growth improves its bargaining power with suppliers, as the larger network helps it grow procurement volume and improve commercial conditions. This is especially important as it is operating in a highly competitive market where larger retailers put pressure on its prices and, in turn, profitability. It also looks to attain costs efficiencies for itself and suppliers by opening another distribution centre to shorten supply routes.
Private label growth is not a strategic priority
Its product offering consists of 5,000 SKUs in stores that averaged 385 sq. m. in 2018. Of these products private label represented less than 2% of value sales. It reaches a 17% share if the Dino-owned meat and cold cuts label Agro-Rydzyna is included. The retailer became the sole shareholder of this business in 2018, and currently promotes its range in its stores and online. In its 2018 annual report it stated it does not plan to expand its share of own brands sales.
Source: IGD Research
Ranging strategy that is boosting fresh food share
Fresh food is a growing category for the retailer, and it will continue to invest in the ranging and quality to increase its share of sales. Fresh goods make up 39% of the revenue, as it increased share by 1% each year between 2017 to 2019. More space was assigned to the category and the assortment was widened. It also raised the perception of quality by replenishing stock with daily deliveries and on-site preparation of baked goods.
Source: IGD Research
Locations with low rent and relatively high footfall
Dino Polska stores are commonly found in villages, small towns, and suburbs of cities, like the store we visited outside of Warsaw, in the village of Nadarzyn. This is because it faces less competition from major retailers, which typically place their stores in cities and towns that benefit from high shopper density. Locations are selected based on their relatively high footfall or vehicle traffic. Most stores are free-standing buildings with parking available, so it can attract shoppers from a wider catchment.
Source: Google Maps, map shows store location in Nadarzyn, just outside of Warsaw
Weekly promotions help generate traffic
Promotional activity is present throughout the store, and areas have been dedicated to bulky items such as beer and soft drinks. Product discounts are marketed throughout the store with placards near the entrance, on billboards and in-aisle with shelf-barkers. The retailer activates their marketing campaigns on a week-to-week basis to support visit frequency. This is in alignment with the local market, as shoppers in Poland shop little and often.
Source: IGD Research
Adequate staffing for stores, but it faces challenges
Stores are well staffed with a person employed to each position in the store, including the meat counter, check-outs, re-stocking, security and management. In the Dino Nadarzyn store each of these positions were covered with a staff member. However, it faces a labour shortage in the retail sector, which will make it difficult to sustain its commitment of adequate staffing and rapid store expansion strategy.
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