It has been a long time since a company operating in Hungary felt itself so intensely in the middle of a political battleground, as SPAR Magyarország Kft. has in the past six weeks. We can remember that the bomb exploded on March 11 with an article in the Financial Times, when the leading economic newspaper reported that the domestic The parent company of a department store chain with 641 stores in the retail market appealed to the European Union regarding the extra profit tax introduced in Hungary in 2022, accusing it of its discriminatory nature and its imposition in conflict with EU legislation.
What’s more, the burden increased from 4.1 percent to 4.5 percent this year over HUF 100 billion in sales, and this was also revealed in the Hungarian Gazette of May 31, 2023, just in time for the publication of the annual reports.
However, based on these, a significant part of the affected chains did not generate extra profit or profit in the 2022 business year, as a result of the high inflation, the sales revenue jumped everywhere, but the profitable operation turned into a loss in many places. At the same time, this confirmed the professional position that extra profit appeared in the food industry not on the merchant side, but mainly on the producer side.
The communication between the Hungarian government and SPAR has been going on since then, but it is worth emphasizing that the opposition to the Ministry of National Economy (NGM) is not the base in Bicske – the Hungarian center is the only viewer of this cinema – but the international ownership background. It is important to know that although SPAR was founded in the Netherlands in 1932 and its headquarters are still in Amsterdam, the domestic subsidiary belongs to SPAR Österriech, headquartered in Salzburg. In an interview with Die Presse, the CEO of the latter stated that the Hungarian government’s proposal was to obtain a state share in return for a reduction in the special tax. According to the NGM, the pressure is baseless, but at the same time, VSquare revealed that István Tiborcz, the owner of the BDPST Group, appeared on the buyer’s side, but Viktor Orbán’s son-in-law denied this to Világgazdaság.
Regardless, let’s not forget that the government’s declared goal is still to increase the share of domestic ownership in strategic sectors, and just as this process has taken place in the banking sector or telecommunications, it is also waiting for itself in retail trade, with the fact that the Indotek Group, which is owned by Dániel Jellinek got into Auchan.
SPAR is over HUF 1 billion
It is still too early to announce the outcome of the boxing match between the Hungarian government and the retail chain, and we do not yet know how many rounds the fight is in, but with the events that have been taking place since March 2024, it cannot go without saying that as a company writing a traditional business year, SPAR Magyarország Kft. On Wednesday, he gave an account of his January-December 2023 performance at the press conference in Pesti Vigado.
- It turned out that the company achieved a turnover of HUF 1,023.2 billion last year, which represents an increase of 15.79 percent compared to the previous year.
- The company opened five new stores and modernized four out of almost HUF 10 billion.
- In addition, the modernization of the meat plant in Perbá continued, and important initiatives were launched for the sake of sustainability.
- It was also said that since entering the market in 1991, SPAR has invested a total of HUF 539 billion in Hungary until the end of 2023.
The company has not yet announced its taxable profit, it will report it by the end of May at the latest in accordance with the regulations, but industry trends show that the recent period has been much more successful for the discount store chains than the market players interested in the hypermarket and supermarket segments.
Gabriella Heiszler to Index: Several inquiries have been received
However, the exploration of the cause-and-effect relationships of SPAR-gate, which has already been discussed in detail in the introduction, is worthless without interviewing the stakeholders, so we turned to the managing director Gabriella Heiszler. First of all, we were interested in how recent developments and the conflict with the Hungarian government affect the company’s domestic operations.
In recent weeks, my main task has been to create external and internal calm. Internally, this meant that the owner also communicated with our employees within the framework of a letter, and just like me, all my senior colleagues also spoke to our employees personally in order to be able to serve our customers in peace. The external communication was about SPAR being an extremely important and reliable business partner for its suppliers, franchise partners, and real estate and rental partners. This means that we will continue all our ongoing projects and we will also intensively deal with the opportunities that have opened up in recent weeks. Stability has been present in our lives since the beginning of our operation and it will continue to be so.
Gabriella Heiszler told Index. And to our question as to whether there was an investor offer on the table for the purchase of SPAR Magyarország Kft., he answered as follows:
At the moment, there are 9 major players in the food trade in Hungary, and consolidation has been underway in this sector for years. I have been working at SPAR for more than 18 years, since then I have received several domestic and foreign inquiries, but these are always discussed by the owner and not by the local management.
In connection with the special tax, we invited the managing director to an impromptu math class to find out how big this additional burden is in practice, which is now in the sandbox of the debate, and whether it will affect the company’s further plans if the extra profit tax remains in effect.
In 2023, SPAR paid almost HUF 30 billion in special tax, such a huge amount naturally affects our operations. It imposes strict cost control on us, and unfortunately, for the first time in the last five years, in 2023, our investment volume also decreased significantly. Of course, we will continue to renovate our stores and open new ones, but at a much slower pace than would be ideal.
Gabriella Heiszler added to our newspaper’s interest.
It is one of the largest employers in the country
At the event, it was explained that together with the stores of the franchise network, the company group provides a living for 17,000 employees, making it one of the largest employers in the country.
- Of the 641 member store network, 36 INTERSPAR hyper- and 300 SPAR supermarkets,
- the portfolio also includes 32 City SPAR, 42 SPAR partner stores, and 83 SPAR Markets,
- but the company is also active on the filling station line with 87 OMV-SPAR express and 61 Orlen-DESPAR units.
The company’s franchise network expanded by twenty-five stores in 2023. A product range of more than 16,000 products, logistics and educational services, IT and professional assistance are available to the stores belonging to the SPAR family, which undergo large-scale renovation and modernization upon joining.
The franchise network, which has been operating since 2012, has 273 stores, which achieved a total turnover of HUF 134.5 billion last year.
At the annual evaluation, it was also mentioned that the SPAR online shop, which was launched in 2019, achieves a year-on-year increase in traffic, which now delivers ordered products to homes in more than 200 settlements in the country. Last year, home delivery started in Győr, Keszthely, Pápa, Debrecen, Szolnok, Pécs and Zalaegerszeg. In addition, store pick-up and drive-in points were set up in additional settlements. The service, which offers more than 14,000 products, has also made progress in the field of environmental protection: since August of last year, customers can decide whether they want to receive their order in a paper bag or without packaging.
The production of own plants is key
They recalled that SPAR Magyarország’s Regnum meat plant in Bicske was started twenty years ago with the aim of providing the company with high-quality raw meats and meat products from reliable sources, processed with the most modern technology, for its network of stores. In 2020, the company group bought a production plant in Perbal, where it carried out comprehensive improvements.
As a continuation of the previous modernizations, during an investment of about HUF 1.1 billion in 2023, the auxiliary material warehouse was expanded with a new shelf system, part of the mechanical engineering was transformed, the lighting became more modern, and an economical and environmentally friendly carbon dioxide-based cooling system was built. In addition to the plant renovation, the Perbá site was also expanded with an expanded meeting room, renovated office washrooms, a new employee dining room and a serving kitchen. From Regnum’s two units, 1.2 million kilograms of ground beef, 25.6 million kilograms of ground pork and 37.6 million kilograms of private label products went to SPAR stores last year.
The net turnover of the Bicske plant in 2023 was HUF 65.92 billion, while that of Perbáli was HUF 11.41 billion.
In addition, the company built SPAR’s so-called enjoy.convenience plant, which produces convenience products, within the framework of a green field investment of about HUF 1.2 billion. The 1,500-square-meter plant, handed over in 2018 and meeting the highest food safety requirements, supplies the store network with more than 60 products. Every year, many new products leave the production lines, in addition to the salads that have been a great success among customers, in the years since the start, the range has been expanded with cold dishes and various ready meals. In 2023, the plant produced 977.6 tons of salad, cream and about 3 million sandwiches in SPAR units.
(Cover photo: László Róka / MTI)
