Delhaizes Alfa Beta chain said to have increased its share in 2010, through affordable prices and local products

Delhaize's Alfa Beta chain said to have increased its share in 2010, through affordable prices and local products

The economic crisis in Greece has hit consumer spending, which in turn has had a profound impact on the country's food industry. Consumers are buying less and, when they do open their wallets, are looking for value and for domestic products. Michael Kosmides reports from Athens.

Rocky times lie ahead for the food retail sector in Greece, as consumers are under increasing pressure in the debt-ridden country. With rising unemployment rates -which currently stand at about 16% - a 4.8% drop in the GDP for the first three months of 2011 alone and price rises after two VAT increases last year, the spending power of Greek consumers has been reduced significantly. And the food industry is suffering because of it.

Through its Carrefour Marinopoulos arm, French retailer Carrefour leads the country's retail sector. However, it is number one in a declining market.

"The retail market [for all consumer goods in Greece] has dropped in sales volume by 17.7% since 2010," a spokesperson for the retailer tells just-food. "Consumers' income has been reduced and as a result they are much more careful and thrifty in their shopping."

According to a report by market research firm SymphonyIRI Hellas, retail food stores have seen a total drop in sales of up to 3.5% by value in the first four months of 2011, on top of the 1.6% fall registered in 2010. At the same time, Greek consumers are avoiding impulse purchases, with nine out of 10 shoppers using a grocery list, and three out of 10 not buying anything that is not on that list.

"[Consumers] buy the absolutely essential items while taking care to take advantage of any promotional offerings," the Carrefour Marinopoulos spokesperson says, noting that there has been an increase in online shopping and a big turn towards private-label goods. To respond to this changing business demand, the chain has been developing private-label products, "currently offering more than 2,000 products of all kinds that combine the Carrefour quality with the lowest prices".

This trend was confirmed by leading Greek supermarket chain AB Vassilopoulos: "In the past year we have seen an important increase up to 20% in our private label sales", John Kyritsis, chief operating officer at the company, says. "This is not only due to the economic crisis, but also to a campaign we launched in 2010 in order to increase awareness and inform our customers about the values of our brands. Private labels are not only economical brands but they can also be of equivalent or higher quality than national brands."

The market pressure affects suppliers, too, who have to stave off competition from private labels. "Private label might be a new trend on the Greek market the past five years, but it is something very common abroad," Kyritsis says. "There will always be a market for both private label and national brands."

With this in mind, innovation helps. Konstantinos Domazakis, vice chairman of Creta Farms, considered to be the largest Greek company manufacturing meat and cold cuts, believes that companies with a "clear and well-planned strategy can be further developed even during a crisis". Creta Farms, which is famous for its patent that replaces the animal fat in meat products with extra virgin olive oil - resulting in healthier deli cuts - is currently adapting the concept for the cheese market, too.

"This idea is adjusted to each country's food culture and nutritional habits by localising and optimising brand, packaging, assortment, taste," said Domazakis. "Globalisation of innovation, along with the geographical expansion model of Creta Farms through joint ventures with local leaders secures future success and continuous growth even within the crisis."

The crisis has also seen Greek consumers turn towards products they know are made in Greece, according to analyst Leonidas Koumakis of K&B Analysis. "The success story of 2010 is AB Vassilopoulos, who managed to hold and increase their share by combining a very strong brand name with affordable prices and an introduction of good quality local food lines."

As well as how consumers spend their money, Greece's economic turmoil has also had an impact on the landscape of the food retail landscape. "In the current crisis, the top retailers in Greece gain market share at the expense of smaller chains," Koumakis said. Last year, Aldi closed its Greek operations in 2010, and more closures or acquisitions of smaller market players are expected.

At AB, Kyritsis believes that there is room for expansion despite the crisis. "As there are still more opportunities in the Greek market for our brand, AB, and what it has to offer, we will continue our expansion policy like we have done in the past and bring in new concepts that will answer to our customers' needs," he said.

It is no without a doubt that the challenges ahead for the food retail sector in Greece are huge, and that when - in some point in the future - the crisis is over, the market landscape is bound to look considerably different from how it looks now. But executives and analysts all seem to be able to agree on one thing: that the survivors will be those companies that take proper note of Greek consumers' demands, their behaviour and the realities of their diminishing spending power.