A Czech business paper has reported on how the British-owned supermarket chain Tesco may pull out of Hungary, with its Hungarian interests potentially being sold soon by well-known financial services firms.
Tesco to leave Hungary — and not just us
Another concrete step may have been taken towards the possible sale of Tesco’s Central European interests. According to reports, the British supermarket chain has hired two major American investment banks, Citigroup and Goldman Sachs, to prepare the sale, the Czech business daily e15 reports.
A particularly important detail from the Hungarian Tesco perspective is that, under the current plans, the Hungarian network would not be sold together with the Czech and Slovak stores. The interests in the three countries could instead be offered in two separate packages.
According to the report, which was also summarised by Portfolio, the two investment banks have already sent documentation to potential buyers. This suggests the matter may have moved beyond the stage of merely weighing up a possible sale: the materials sent out also set out the companies’ financial position, prospects and the planned structure of the disposal.
According to Tesco’s data published in June, showing the position at the end of February, it operated 200 stores in Hungary, 184 in the Czech Republic and 182 in Slovakia. The British chain has been present on the Hungarian market since 1995 and employs more than 8,000 people in the country.
Who could the buyers be?
The Czech and Slovak store networks are reportedly to be sold together. Potential buyers are said to include the Schwarz Group, owner of Lidl and Kaufland, as well as Poland’s Biedronka. There is as yet no information on which companies might be interested in the Hungarian business. Tesco, Citigroup and Goldman Sachs have neither confirmed nor commented on the reports. They have not denied them either.
Retail giants such as Spar, Aldi and Tesco may quit Hungary this year
If the sale of the Central European interests does in fact go ahead, it would mark a significant shift in Tesco’s strategy. Chief executive Ken Murphy was still describing the regional business as an integral and successful part of the group in 2023. Behind the scenes, the company may be increasingly focused on the British market. In the ferocious competition there, against Asda and Morrisons, it could gain an advantage if it were able to use money from the Central European sale to cut prices.
For the British company, dismantling overseas interests would not be unprecedented. In recent years it has withdrawn from several markets, including Poland, one of the region’s major economies. A sale of further Central European interests and a retreat from the region would therefore fit the direction Tesco has taken in recent times.
The first reports of the possibility of a regional withdrawal surfaced at the beginning of July. At the time, the Financial Times reported that the company was examining the sale of its Central European interests. On the basis of the latest information, it appears that what was then only being floated has since moved into the preparation stage.
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Tesco in the UK has been suffering from the Aldi and Lidl onslaught, like all the incumbent grocers. The difference is that unlike in Hungary the German discounters struggle to find vacant plots of land to open new stores in the UK. Far more people in the UK continue to have a Tesco as their nearest supermarket compared to any other competitor.
Hungary is a particularly price sensitive market where physical expansion has been easy for Aldi and Lidl. I believe that Hungarian consumers also prefer its Germanic/Central European product range. Tesco just can’t compete and has many big box stores that customers are increasingly rejecting in favour of the more compact supermarkets where parking and dashing in for a quick shop can be accomplished in minutes. Visiting a large Tesco is a time consuming process.
Tesco is not as good as it used to be for a longer time. Maybe the space can be taken by Carrefour. This is a French company and a really high quality supermarketchain. Or maybe Albert Heijn. Also a high quality chain.
“the German discounters struggle to find vacant plots of land to open new stores in the UK”
That is not really true. Where I live in S.Wales there are loads of Aldis and Lidls. Even more than Tesco or Sainburys.
That’s interesting. Perhaps vacant plots and land prices are relatively low where you are? It’s murder for either of these chains to open new branches where I am in SE England. We’ve been promised a local Lidl for coming on 10 years now but they’re struggling to get planning permission to convert an old car dealer. In the meantime various businesses are squatting in the building on a short term basis, selling old bangers and second hand tyres.
Aldi will take over the world. I wish they would come to Toronto.
Surprised they’re not in Canada, Larry!