Novus to boost penetration in Kiev with Billa acquisition

Date : 21 September 2020

Amin Alkhatib

Senior Retail Analyst

Novus has announced plans to acquire Billa’s store network in Ukraine (in September 2020). Rewe’s decision to exit the Ukraine does not come as a surprise, with Billa reporting below market growth between 2016 and 2019, at less than 4% annually. In the past, Rewe has withdrawn its Billa brand from markets where it underperformed, such as Croatia and Italy, to improve its profitability and to focus on countries or banners it believes it can win with.

Novus can potentially leapfrog Varus into fourth place…

On approval by the Anti-Monopoly Committee of Ukraine, the local competition authority, Novus will increase its store base by over 40%. The Ukrainian-Lithuanian retailer will potentially overtake Varus to become the fourth largest grocery retailer in the market. This is on the assumption the former maintains its recent rate of store growth.

…and will increase its market penetration in Kiev

Most of Novus’s stores are in Kiev and surrounding area, with some in the west and south of the country. Billa has the majority of its 35 stores in the same region, which will boost Novus’s market penetration in the country’s capital city.

Source: Billa Ukraine

Novus plans to attract more shoppers by covering more channels

Novus is planning to grow its shopper base by diversifying its format portfolio. Even before the acquisition of Billa it was doing so by entering the hypermarket channel and expanding its network of convenience stores. The retailer launched its first hypermarket in early 2020, and a new convenience banner, Mi Market, in August of the same year.

These steps have supported the launch of Novus online, while a partnership with Spanish food delivery company, Glovo, will help to expand its coverage area. As of September 2020, Novus provides deliveries in a 2km radius of Kiev and the surrounding area. There are plans to expand the service to further cities in the future.

Source: IGD Research

Auchan and Varus will be under pressure from the acquisition

Ukraine’s leading two grocery retailers, ATB and Fozzy, are too far ahead in market share terms to feel significant pressure from the acquisition. However, Novus’s expansion will put pressure on Auchan and Varus, the next two ranking retailers. Varus will likely feel the increased competitive pressure from Novus’s boosted penetration in Kiev. However, as Novus expands its presence in the hypermarket channel, it will put pressure on Auchan, which currently faces very few large store competitors. The French retailer will have to adapt its strategy in the country to help it win with shoppers.

Source: IGD Research

For more information on Ukraine’s grocery market please click here.