Prisma looking to Estonia to survive

If lately Prisma Peremarket has been having trouble in Estonia – from dissatisfied former employees to weeks of empty stalls – the Finnish retail chain has now joined the battle for its place on the Estonian market.

“We are a small player on the European market,” said Jorma Vehviläinen, executive manager of Prisma’s owner SOK at a press conference in Tallinn yesterday. Prisma’s retail turnover of €7.76 billion falls far behind European giants Lidl, Carrefour, and Tesco the annual turnovers of which come to €62.6 billion, €64.26 billion, and €52.27 billion respectively - writes postimees.ee.

“Competing with these major chains, we have set new goals for our activities,” Vehviläinen said, pointing to the fact major European chains are gradually moving closer to the region. If Tesco has reached Poland, Lidl is present in Lithuania, Sweden, and Finland and is on its way to Estonia and Latvia. “From the east, we have strong pressure from Russian chains some of which are listed on the London exchange,” he said.

Prisma’s situation in the region has been made difficult by falling turnover – that dropped from €207.6 million in 2014 to €190.4 million in 2016 – as well as the fact the company decided to close its shops in Latvia and Lithuania this year. Nevertheless, Prisma Peremarket’s ambition is to become the regional price leader and the market leader in Estonia.

To achieve that goal, the company is looking to expand its network of shops from the current eight to 20 inside the next five years, boost turnover from around €200 million today to €300 million, and hire 400 additional people to complement existing staff of 800.

“Work to achieve those targets began two days ago,” said CEO of Prisma Peremarket Jussi Nummelin yesterday.

While locations for the new shops have not been decided yet, a large part of them will be opened in Tallinn, including the port area. If today Prisma runs hypermarkets in Estonia, new shops will mainly be smaller supermarkets, with emphasis placed on food and staple goods.

“Tallinn is quite covered with hypermarkets; we want to open smaller shops that are closer to where people live,” Vehviläinen said.

Smaller shops are the reason why the company’s turnover forecast is initially rather modest. The executive manager of SOK did not specify when Prisma could become the market leader in Estonia.

The company will have to overtake Coop, Maxima, Selver, and Rimi to achieve its goal. The turnover of all four is near €300-400 million.

Vehviläinen does not doubt Prisma will be successful in realizing its ambitious growth plan. He sees Estonia as the company’s virtual home market as Prisma has been active here for more than 20 years. “Consumer habits are quite similar in Tallinn and Southern Finland,” he said.

The head of SOK also believes the company can invest more in Estonia and Russia, the relative importance of which in the company’s portfolio is already much greater than that of Estonia, as a result of pulling out of the Latvian market.

Vehviläinen is convinced the Northern European retail market will see great change in the coming years. Near history of Finland, Estonia, and Lithuania speaks of consolidation of retail chains, and Vehviläinen believes this trend will only pick up momentum.

“The big will become even bigger. We want to remain active on the market. We want to be among the survivors,” he emphasized.

Prisma has been very successful in withstanding pressure from Lidl in Finland. The latter holds 9-10 percent of the retail market in a situation where Prisma has 47 percent. Lidl’s market entry has, however, forced Prisma to drop its prices to match those of its German competitor.

“However, we carried out a number of changes prior to that: we altered our marketing strategy, shops and support activity, and started saving electricity in our stores,” Vehviläinen said.

He is convinced that in addition to major regional changes, pivotal change will also hit Estonia in the near future. “We want to be a part of it.”

Asked whether the company has already launched merger talks with retail chains active in Estonia, Vehviläinen replied with a laconic “no”.

The head of SOK also emphasized that the fact Prisma started selling Tesco products in Estonia and Finland from the second half of the year does not mean the British giant plans to acquire Prisma. “We have had cooperation with Tesco since the 1990s,” he said.

Prisma is also testing its e-shop solution in its Mustamäe and Sikupilli hypermarkets and will decide whether to bring the system to the rest of Estonia by the end of the year.

Read also more Estonian news here.

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