Press Releases

‍“Heroes of Innovation” is a nationwide competition organized by the Eurocash Group, aimed at owners of local retail stores cooperating with the Eurocash Group. From May 15, they can submit ideas to innovate in their points of sale or their surroundings. From the submitted entries, Internet users and an independent jury will select the most interesting initiatives that will be financed by Eurocash. The winners will receive prizes worth a total of PLN 1 million.

The innovations that are at the heart of the competition are not only the latest technologies, but also solutions for the development of the store and the facilitation and improvement of everyday shopping for customers.

- Entrepreneurs running local stores have a great insight into the needs of their customers. Both those related directly to the shopping point and its immediate surroundings. We want to harness this potential of knowledge and help local entrepreneurs turn it into business success — says Jacek Owczarek, Member of the Management Board of Eurocash — This knowledge is a huge advantage for local, neighborhood retail store owners over centrally managed retail chains. Independent store owners are part of the local community and can improve their points of sale with the specific needs of their customers and local specificities in mind. We want to appreciate and support those who are willing to make such an effort. This is how we look for true Innovation Heroes — adds Jacek Owczarek.

Three categories and well-known ambassadors

Entrepreneurs running stores in franchise chains in cooperation with Eurocash will be able to participate in the competition: abc, Delikatesy Centrum, EuroSklep, Gama, Groszek, Lewiatan, Koliber and entities running abc on wheels, as well as retailers running independent small-format stores who have made at least once between March 1, 2018 and July 14, 2019 purchases in the amount of PLN 1,000 net in one of the business units of Eurocash S.A.

Innovative ideas can be submitted through the website www.herosiprzedsiebiorci.pl from 15 May to 14 July in 3 categories, and their evaluation will be supervised by three ambassadors of the competition, who will also sit on the jury of the competition. In addition to the ambassadors, the board will consist of 6 experts, two dedicated to each category.

• In category “Changing the World Locally” ideas for change in the store or its surroundings will be rewarded, with an emphasis on innovation aimed at the local community. The Ambassador of the category will be Catherine Dowbor, journalist and TV presenter, who has been hosting a television program for 6 years in which she helps Polish families change their homes for the better.
• In category “I invest in technology.” proposals related to the use of technological solutions will be selected, and its ambassador will be Zbigniew Urbanski, a technology journalist and television presenter. Urbański has been testing the latest gadgets and technological solutions that improve the quality of life of Poles for more than 10 years.
• In the category”I am looking for practical solutions.”whose ambassador will be Przemysław Talkowski, a business and social journalist known for, among others, the “State in the State” program, will be highlighted practical ideas, facilitating the running of the store and shopping in it.

Participants of the action have a chance to obtain financing for innovative solutions that increase the attractiveness and accessibility of their store for consumers.

- In this way Eurocash wants to directly support its most innovative entrepreneurs who, thanks to the implemented solutions, can improve their business and respond even better to the real needs of customers — says Marta Gampf, Marketing Director at Eurocash Group - We encourage owners to consider what is missing in their store or its surroundings and what change can help them grow their business and respond to customer needs.

Participants, completing the competition application, will estimate the cost of their innovative project, which should fall within one of three budget thresholds: up to PLN 15,000, from PLN 15,001 to PLN 50,000 and from PLN 50,001 to PLN 100,000. In addition to the evaluation of the implementation of the innovation, its justification will be very important, from which it should be clear how the customers of the store will benefit from it and how the implementation of the idea will contribute to the development of the submitting business.

Building Local Engagement

Online voting on eligible initiatives will run from 1 August to 10 September.

- Participation in the competition is also a great opportunity to strengthen the relationship of the entrepreneur with his customers. Whether a particular innovative idea receives funding will depend to a large extent on the involvement of local community representatives in online voting. As Eurocash, we will provide support to contest participants in promoting their ideas, so as to encourage as many people as possible to vote — says Marta Gampf - Anyone who takes part in the voting will also be able to participate in the competition, in which there will be attractive prizes to be won. So not only the entrepreneur can benefit, but also the customer. The vote will also be accompanied by a campaign in national media, both in the press and on the Internet, including social media. Each of the entrepreneurs whose ideas will take part in the vote will also receive promotional materials encouraging consumers to vote, as well as informing about the rules of the competition and the prizes to be won — adds.

At the end of the voting, all projects will be evaluated by a jury consisting of independent experts who will evaluate the projects taking into account the number of votes and the business potential of the idea in each of the 3 categories. The results of the Heroes of Innovation competition will be announced on September 24, during the Eurocash Academy of Skills Congress. Eurocash intends to reward one entrepreneur with a grant of up to 100,000, and three more with amounts of up to PLN 50,000. The remaining 50 winners will receive a grant of up to PLN 15,000 each. The winners will be able to implement their ideas until April 30, 2020.

Eurocash Group is the largest Polish company engaged in wholesale distribution of food products and marketing support for independent Polish entrepreneurs conducting retail activities. Franchise and partner networks supported by Eurocash bring together more than 14 thousand independent stores operating under brands such as abc, Groszek, Delikatesy Centrum, Lewiatan, Euro Sklep and Gama.

‍There is already a new logistics and distribution center Frisco.pl in Klaudyn near Warsaw. It is an area of about 11,000 sq.m. divided into several temperature and logistics zones. The facility will significantly increase work efficiency and maximize the level of control over the entire order picking process. In the future, this will translate into at least a fourfold increase in the scale of Frisco.pl's business.

Frisco.pl, as the leader of the Warsaw market, is the main driving force for the entire e-grocery sector in Poland. According to the company's estimates, the e-grocery category in Warsaw grew in value by 14% in 2018, and thus reached a share of 2.4% of all FMCG sales (the FMCG market in Warsaw is worth PLN 10.75 billion).

“The results of Frisco.pl are very satisfactory for us and we expect further stable increases. The penetration of the e-grocery market in our country is more than ten times lower than, for example, in the UK, which gives great potential for the development of this category in Poland. Currently, the active customer base of Frisco.pl already corresponds to the number of customers of 7 stationary hypermarkets. The answer to the constantly growing demand is the investment in a new warehouse, which will allow us to increase the scale of our business at least four times and simultaneously develop different business models — tells Grzegorz Bielecki, President of Frisco.pl.

The warehouse with a total area of approx. 11,000 sqm is divided into several temperature and logistics zones, including: reception, storage, buffer and picking zones, as well as a shipping zone, which is operated by a special robot. Its task is to transfer the boxes with the completed order to a transport trolley, which will eventually go to the Frisco.pl van. The robot is able to pack up to 420 such boxes in an hour. All the logistics zones in question were connected by conveyors of goods. They will handle about 80% of intra-warehouse transport, which will translate into a significant increase in efficiency.

Special zones for fresh products have also been created in the warehouse. They will make it possible to expand the assortment of this category.

— High automation of our facility brings a number of advantages. First of all, it will allow you to quickly scale your order handling. Until now, when the number of orders increased in a short period of time, we sometimes had problems to keep up with the growing demand. Thanks to automation, we will gain greater flexibility in this field, and this in turn will allow us to obtain additional orders from customers who want the shortest possible delivery time. Thanks to automation, we will be able to significantly speed up logistics processes, efficiency will increase several times, and our order handling costs will ultimately decrease by about half — tells Bielecki.

The new centre will reduce to a minimum the number of trays in which fresh produce is delivered, and will also allow consumers to order one larger package instead of several smaller ones, among other things.

- The launch of the new Frisco.pl magazine is the best proof that the e-grocery market in Poland is growing strong. Frisco.pl sets trends in this segment, which is very important for us as Eurocash Group. On a daily basis, we support Polish independent entrepreneurs who run retail stores, and it is for them that we want to gain knowledge and experience in the field of e-grocery. Frisco.pl provides us with this opportunity — tells Pedro Martinho, Member of the Management Board of the Eurocash Group.  

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Frisco.pl is the largest online supermarket in Poland, which has been operating for 12 years, being a modern and convenient alternative to large grocery purchases in hypermarkets. It offers a wide range of products and prices at the level of hypermarkets. Thanks to this, it provides the opportunity to save time and make comprehensive purchases with delivery in one place, without leaving home. Frisco.pl has its own warehouse facilities with an advanced order handling system. Purchases are delivered to the indicated address Monday to Sunday at the time specified by the customer.

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Eurocash Group is the largest Polish company engaged in wholesale distribution of food products and marketing support for independent Polish entrepreneurs conducting retail activities. Franchise and partner networks supported by Eurocash bring together about 15 thousand independent stores operating under brands such as abc, Groszek, Delikatesy Centrum, Lewiatan, Euro Sklep, Gama, Duży Ben and Kontigo.

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MCI Capital S.A. is one of the most dynamic Private Equity groups in our region of Europe. The funds associated with MCI Capital specialize in digital transformation processes, investing in pure Internet models (so-called pure players), companies moving the business model from the traditional to the digital economy and companies operating in the market for the development of Internet infrastructure. Investments are carried out in the early stage, growth stage and expansion/buyout stage as well as private debt in Poland and the CEE region, Western Europe and Scandinavia. www.mci.pl

‍Since May 20, the Track & Trace (T&T) directive on monitoring and tracing the movement of tobacco products has been in force in all European Union countries. The Directive concerns both manufacturers, distributors and retailers, i.e. all entities involved in the sale of cigarettes. The process of implementing T&T in Eurocash Serwis, the largest distributor of tobacco products in Poland, assumed the implementation of a number of new solutions in the area of IT and logistics. However, the biggest challenge was the correct implementation of the directive in the case of independent entrepreneurs (retail store owners) who, without obtaining EOID and FID identifiers, would not be able to sell cigarettes in their stores after 20 May. Eurocash Serwis and its customers have coped with this challenge.

The Directive provides that tobacco products, and in particular cigarettes and tobacco, are to be subject to full control based on the traceability of tobacco products from the moment they leave the manufacturer's location to the first retail outlet. The aim of the directive is to reduce the grey area of cigarette sales across the EU.

The Directive concerns both manufacturers of tobacco products and wholesale distributors, as well as the retail outlets to which these products are delivered. The role of manufacturers is to appropriately code packages and report which packages they have sold to which distributor. Another entity - the distributor (in this case also Eurocash Serwis) is tasked with registering the company headquarters and all cigarette sales points in the T&T system. In addition, the distributor's obligation is to report which cigarettes have been accepted from the manufacturer, where they are currently located and which products have been sold to a given retail outlet. In addition, distributors monitor the transportation of tobacco products in detail. Any departure of a car with cigarettes must be reported. It is also necessary to indicate the registration number of the cars on which the given cigarettes are driven. At the end of this chain is a retail store, which in order to be able to sell tobacco products must have two different identifiers: 1. EOID (one identifier assigned to the TIN) and 2. FID (identifier for each outlet operated by the store owner). At the store level, there is no more reporting of cigarette sales or product scanning.

— We deliver goods to more than 30,000 customers running independent stores — says Dariusz Stolarczyk, General Director of Eurocash Service. For our entire business unit, introducing solutions enabling the implementation of the track & trace directive was a very big challenge. We knew that we had to prepare for it properly so that at the end of the process we could support our customers quickly and effectively. For small and medium-sized stores, cigarettes account for about 18 percent of their sales value, and in this case we could not afford any delays. After the first day of entry into force of the directive in Poland, I can safely say that the vast majority of Eurocash Serwis customers are ready to track & trace — adds Carpenter.

Owners of retail stores in Poland selling cigarettes had only 10 working days to obtain EOID and FID IDs. Registration took place between May 10 and 20 of this year. Entrepreneurs - customers of Eurocash Serwis - could obtain them in two ways: by submitting an appropriate application on the iIssuer portal managed by the Polish Stock Exchange, or by filling out a special statement that allowed Eurocash Serwis to obtain the required identifiers for their stores. Thanks to this solution, the vast majority of stores operated by Eurocash Serwis have managed to prepare for changes, and consumers can make purchases without any problems.

Eurocash Group is the largest Polish company engaged in wholesale distribution of food products and marketing support for independent Polish entrepreneurs conducting retail activities. Franchise and partner networks supported by Eurocash bring together more than 14 thousand independent stores operating under brands such as abc, Groszek, Delikatesy Centrum, Lewiatan, Euro Sklep and Gama.

Comment by the Eurocash Group on the judgment of the General Court of the European Union, which annulled the decision of the European Commission ordering the suspension of the introduction of the retail sales tax in Poland:

“We believe that for many of our customers, the decision of the Court of Justice of the European Union on the retail sales tax is positive news. The introduction of this tax is designed to support small businesses, which is consistent with our mission. For more than 20 years, we have been developing to support independent entrepreneurs in the fight against aggressively competing discount and hypermarket chains. These networks have always had access to the know-how, financial resources or support of many global manufacturers. We, on the other hand, together with several of our wholesale competitors, have been fighting for years for better purchasing conditions for our customers. We invest in innovation, develop, achieve the effect of scale, provide entrepreneurs with marketing support or education. The decision of the European Court of Justice means that independent traders will now receive additional support that aims to bridge the gap between them and the big retail chains.

We, as the Eurocash Group, will of course also have to pay a new tax — on our retail sales. We estimate that the amount of this tax in our case may amount to about PLN 30 million per year.”

Jacek Owczarek, Member of the Management Board and Chief Financial Officer of the Eurocash Group

Eurocash Group is the largest Polish company engaged in wholesale distribution of food products and marketing support for independent Polish entrepreneurs conducting retail activities. Franchise and partner networks supported by Eurocash bring together about 15 thousand independent stores operating under brands such as abc, Groszek, Delikatesy Centrum, Lewiatan, Euro Sklep, Gama, Duży Ben and Kontigo.

In October, the Eurocash Academy of Skills together with the Main School of Commerce will launch another, third edition of the postgraduate study “Business Management in Retail Trade”. This is the first study of this type in Poland dedicated to independent entrepreneurs running retail stores and a unique example of cooperation between a public university and a representative of the FMCG sector — the Eurocash Group. The initiative is part of the mission of the Eurocash Skills Academy, which supports independent store owners and their employees in building a competitive position in the local market by developing their competences and sharing expert knowledge.

Shops run by independent entrepreneurs account for more than 40% of the entire retail market in Poland. However, the further development of this segment requires the owners and their successors to constantly follow trends and market changes so that they are able to adapt their stores to the changing needs of customers on an ongoing basis. Consumers expect fresh, high-quality products, access to modern services and professional service. The Eurocash Group meets the expectations of entrepreneurs related to access to expert knowledge and the latest solutions in trading and gives them the opportunity to further educate and develop their skills and qualifications.

“Running a retail store is nothing more than managing a modern enterprise. In addition, in a very demanding and competitive market, which is changing rapidly under the influence of technology, as well as needs to adapt to the diverse needs of consumers. An independent entrepreneur who runs a store needs knowledge and knowledge of modern tools in order to stand out from the competition and ensure the success of his business. In response to the needs of Polish entrepreneurs and due to the consistently high level of interest in this form of further education, we decided to launch another, third edition of studies at the SGH — says Agata Wrzecionowska-Dzierba, manager of the Eurocash Academy of Skills. — The study program, in addition to management issues, includes modules on the analysis of customer shopping experiences, consumer trends and customer psychology. An important topic of the 3rd edition of the studies will also be succession — during a special block of classes, participants will be able to familiarize themselves with the most important challenges related to this process and its legal or financial aspects — adds Agata Wrzecionowska-Dzierba.

In the first two editions of the postgraduate studies “Business Management in Retail Trade” and in the courses “Academy of Business Management in Retail” (an alternative for people without higher education), more than 140 people participated — owners, future successors and employees of franchise and partner stores affiliated to the Eurocash Group. In the academic year 2019/2020, another 45 students will be admitted to study at the Warsaw School of Economics. Special patronage for postgraduate studies at the Warsaw School of Economics was given to the Polish Chamber of Commerce.

Candidates have until the end of May to register their participation. The studies will begin on October 11 and will end in June 2020 with the defense of the thesis. The thesis assumes writing a business plan, which the participant will have the opportunity to implement in his own business, taking into account the recommendations given by the promoter and the reviewer. Graduates will receive their diplomas in September 2020.

— Postgraduate studies in business management in retail trade conducted by the SGH in cooperation with the Academy of Skills are unique on a national scale for two reasons — emphasizes Dr. Marta Ziółkowska, head of postgraduate studies, specializing in the subject of franchising. — Firstly, lecturers are selected with great care — the staff of the studies are outstanding experts, specialists and market practitioners from different backgrounds. This year, this group included Prof. Anna Skowronek-Mielczarek, Deputy Director of the Institute of Management of the SGH; Dr. Wioletta Mierzejewska from the Department of Strategic Management of the SGH; Dr. Krzysztof Walczak from the Faculty of Management of the University of Warsaw; Dr. Joanna Żukowska from the SGH Enterprise Institute; Prof. Rafał Kasprzak, Ph.D., and Bogdan Mróz, PhD, from the Institute of Management of the SGH or Prof. Henryk Mruk from the University of Management and Banking in Poznań. Secondly, the course of study was launched in close cooperation between a public university and a private entity associating the largest number of franchise networks — the Eurocash Group, in response to the needs of the modern economy. Such public-private cooperation is unique for the world of Polish science — adds Dr. Ziółkowska.

Eurocash Group is the largest Polish company engaged in wholesale distribution of food products and marketing support for independent Polish entrepreneurs conducting retail activities. Franchise and partner networks supported by Eurocash bring together more than 14 thousand independent stores operating under brands such as abc, Groszek, Delikatesy Centrum, Lewiatan, Euro Sklep and Gama.

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Eurocash Skills Academy is the largest comprehensive educational and training program in Poland supporting Polish independent retail stores affiliated in the Eurocash Group's franchise and partner chains (ABC, Euro Sklep, Gama, Groszek, Lewiatan, Delikatesy Centrum). Within the 4 pillars of the Academy, entrepreneurs and their employees can benefit from a wide range of e-learning courses gathered on a modern educational platform, practical training workshops held throughout Poland, the annual Congress of Entrepreneurs of Polish Trade and postgraduate studies conducted in cooperation with the Warsaw School of Commerce (SGH). The Academy of Skills provides Polish entrepreneurs with access to up-to-date knowledge, practical tips, modern solutions in trade, which build the sales success of retail stores. The highest quality of the Academy's educational offer is confirmed by the ISO 29990:2010 certificate. More than 62,000 people have used it so far.

More information about the offer of the Eurocash Skills Academy can be obtained from the representatives of the franchise and partner networks of the Eurocash Group.

• Eurocash Group's revenues in the first quarter of 2019 amounted to PLN 5.48 billion and were nearly 10% higher than in the same period of 2018.

• Total EBITDA (i.e. operating profit plus depreciation) increased in the first quarter of 2019 to PLN 121.4 million compared to PLN 39.6 million a year ago, mainly influenced by a change in the presentation of results in accordance with IFRS 16 applicable since that year. EBITDA calculated in accordance with the previous standards amounted to PLN 33.5 million, and the year-on-year decrease was the result mainly from the postponement of this year's Easter holidays to the second quarter (while in 2018 the period of increased purchases before Easter fell in the first quarter).

• The revenues of the wholesale segment, despite the absence of Easter holidays in the first quarter of this year, increased by 3.5% y/y and amounted to PLN 4.11 billion. EBITDA in this segment reached PLN 100.7 million, and before applying IFRS 16, almost PLN 53 million, which is 14.5% more than a year ago.

• Retail segment sales grew 37% YoY, primarily due to last year's acquisitions, but was also supported by strong LFL sales dynamics (i.e. for the same number of stores). True, in the first quarter of this year. retail sales of LFL in the Delicatesy Centrum chain decreased by 1.5% y/y, which was influenced by the deflation of the shopping cart of 0.8%, as well as the mentioned calendar effect, however, in 4 months of this year (including holidays), LFL sales increased by as much as 4% y/y.

• The consolidated net result in the first quarter of 2019 was negative, which — apart from the expenditure on the development of strategic projects — is related to the seasonality of the Eurocash Group's activities. In the end, it amounted to PLN -40.2 million (or PLN -33.8 million before applying IFRS 16) against PLN -18.5 million in the first quarter of last year.

Wholesale on the path of further growth despite calendar effect

In the wholesale segment, the Eurocash Group continues to increase sales and further improve profitability.

“In wholesale sales in the first quarter of this year, we achieved sales growth of 3.5% year-on-year, recording increases in almost every format. The largest increase, as much as 9%, was recorded in the sale of tobacco products and nearly 6% in the format of active distribution to our franchisees. We also increased sales at Cash&Carry wholesalers by more than 3%. Considering that the Easter holiday this year fell in the second quarter, and not in the first, as a year ago, the decline in sales only in the distribution of spirits should be considered solid results — emphasized Jacek Owczarek, Member of the Management Board and Chief Financial Officer of the Eurocash Group.

— The optimization measures taken in previous years translate into a further increase in the efficiency of the wholesale segment and resulted in an increase in EBITDA in the first quarter of this year by nearly 15% year-on-year. This year we plan further optimization activities, including the integration of Eurocash Alcohols with Eurocash Dystrybucja and the sale of a wide range of alcohols also through eurocash.pl — an innovative e-commerce platform launched last year, which is already used by nearly 10,000 of our customers. Thanks to this, on the one hand, we are able to reduce the increase in costs despite rising wages, and on the other hand, both we and our customers benefit from the growing purchasing power of consumers. — said Member of the Management Board of the Eurocash Group.

Detail influenced by integration and holidays

In the retail segment in the first quarter of 2019, the Eurocash Group recorded a 37-percent increase in sales, to PLN 1.33 billion, mainly due to the consolidation of the Mila supermarket chain and 25 Lewiatan stores, acquired last year. These acquisitions contributed to the Eurocash Group's sales in the last quarter of approximately PLN 342 million.

“Like-for-like sales in the Delikatesy Centrum chain in the first quarter of this year were influenced by many factors, including the aforementioned postponement of the Easter holidays to the second quarter, the deflation of the shopping cart of more than 0.8%, fewer trading days, as well as the ongoing integration of our retail businesses. In these circumstances, the decline in like-for-like sales recorded in the first quarter of this year by only 1.5% year-on-year is promising. If we look at the preliminary estimates on an incremental basis in four months, so taking into account the holiday season, we saw like-for-like sales increase by as much as 4.0% year-on-year — indicated Jack the Shepherd.

“As announced, we are continuing to integrate the Mila network with Delicatesami Centrum, which will weigh on the Group's profitability this year as well. This is natural, since combining three organizations into one is a very complex and expensive process, although from the outside it is mainly associated with the rebranding of stores. What is pleasing to us is that the changes initiated by us are already bringing positive results, including solid like-for-like sales dynamics, which are even higher in EKO stores remodelled as Delikatesy Centrum. Our retail business has already reached a significant scale. Although it is currently characterized by a fairly high volatility of results, I am convinced that consumers will appreciate our offer more and more — said Chief Financial Officer of the Eurocash Group.

Projects are investments in future growth

Eurocash Group accelerates the expansion of Projects, i.e. innovative retail formats such as Big Ben, abc on wheels and Kontigo. The group is opening another Big Ben liquor stores, of which there are already 30, and is also investing in increasing brand awareness of all concepts. The impact of this segment on the consolidated EBITDA result in the first quarter of this year amounted to PLN -12 million.

“Like any start-up, at the initial stage of development, these projects involve significant investments, and profits appear only after the development of targeted solutions and the achievement of the appropriate scale. Examples of our projects, which have been successfully implemented and bring tangible benefits to both our customers and the Eurocash Group, are Faktoria Win, PayUp (sold last year with a high profit) or the so-called Fresh Project, i.e. daily deliveries of high quality fruits, vegetables, sausages and meats. We also believe in other formats that develop innovative solutions for the retail industry, but also, above all, better respond to the needs of today's consumer — said Jack the Shepherd.

Significant change in the standard of presentation of results from 2019

Since 2019, there has been a significant change in the presentation of selected financial data, which is a consequence of the application by the Eurocash Group of the new international financial reporting standard — IFRS 16. According to this standard, when calculating debt ratios, the Group is obliged to include liabilities from operating leases, the value of which at the end of the first quarter of 2019 exceeded PLN 1.8 billion. As a result, the Group's total net debt by. IFRS 16 reached PLN 2.55 billion.

According to the new standard, the way EBITDA is presented also changes — it additionally takes into account the estimated depreciation of leased assets. EBITDA presented in this way is therefore much more comparable to the performance of retail companies with their own real estate. The consolidated EBITDA calculated in this way for the first quarter of 2019 amounted to PLN 121.4 million, and the net debt-to-estimated 12-month EBITDA ratio was approximately 3.4x (compared to 1.8x before applying IFRS 16).

“It should be emphasized that the change introduced by IFRS 16 does not affect our operating activities. It also does not affect the banking covenants specified in the current agreements, as they are still calculated according to the methodology before the implementation of the new standard — marked Jacek Ovczarek, Chief Financial Officer of the Eurocash Group.

Eurocash Group is the largest Polish company engaged in wholesale distribution of food products and marketing support for independent Polish entrepreneurs conducting retail activities. Franchise and partner networks supported by Eurocash bring together about 15 thousand independent stores operating under brands such as abc, Groszek, Delikatesy Centrum, Lewiatan, Euro Sklep, Gama, Duży Ben and Kontigo.

CSR Policy Letters is an annual competition organized by Polityka's editorial office, Deloitte consulting firm and the Responsible Business Forum for companies that take into account corporate social responsibility (CSR) in their activities. Companies participating in this year's competition had to complete a survey developed in accordance with ISO2600 standards, divided into 5 areas: corporate governance, human rights, employee behavior, customer care, business integrity and social engagement.

In this year's edition of the “CSR Polityka Letters” 111 companies finally took part. Gold, silver and white slips went to 73 of them. Eurocash Group has been awarded the White List.

Eurocash Group is the largest Polish company engaged in wholesale distribution of food products and marketing support for independent Polish entrepreneurs conducting retail activities. Franchise and partner networks supported by Eurocash bring together more than 14 thousand independent stores operating under brands such as abc, Groszek, Delikatesy Centrum, Lewiatan, Euro Sklep and Gama.

‍Luis Amaral, President of the Management Board of the Eurocash Group, received the award “Commercial Personality of the 30th Anniversary”, awarded by European Conferences United, organizer of the Poland & CEE Retail Summit, and announced by Leszek Balcerowicz, Chairman of the Foundation Civic Development Forum. The award was presented during a gala on the eve of the Poland & CEE Retail Summit, which celebrated the 30th anniversary of Professor Leszek Balcerowicz's reforms in Poland.

— This award is a great honor for me — says Luis Amaral, President of the Management Board of the Eurocash Group. Although it was granted to me personally, in my opinion, it is an expression of appreciation for the entire Eurocash Group, above all our employees, partners and finally the owners of independent stores themselves. I think that together we have changed the image of Polish trade to a greater extent than any other company. Since the beginning of the 1990s, there has been a belief in Poland — shared by experts and foreign chains entering the Polish market — that domestic trade will quickly be dominated by large-scale stores, following the example of Western countries. However, I saw it quite differently. From the beginning, I saw the huge potential of Polish entrepreneurs, their self-denial and willingness to act. At that time, I set a goal for myself and my team to create a company, thanks to which the owners of independent stores in Poland will be able to effectively compete with the increasingly aggressively growing large-area chains. After 20 years of hard work, small stores are the largest segment of the Polish food market, which is an event in Europe. Moreover, especially in recent years, there are again voices that small shops will disappear in this country. And we are going against the grain again, investing even more and creating more innovative and advanced solutions for them. Today we see that independent entrepreneurs run more and more modern stores, staying close to their customers and offering them exactly what they need. Entrepreneurs and their employees get access to education, knowledge and, above all, tools and solutions much more advanced than those used by centrally managed large networks. The coming years will bring us even more work, a gradual change in consumer habits, but also a decisive increase in the importance of modern technologies. We will not stop carrying out our mission during this time. I believe that independent stores, thanks to this, are much better prepared for the future today than any other centralized network — adds Amaral.

During the gala, 3 other awards were also presented on the occasion of the 30th anniversary of economic freedom in Poland. In addition to the Luis Amaral distinction, awards were also given in the categories “30th Anniversary Trading Company”, “30th Anniversary Manufacturing Company” and “Omnichannel Innovator”.

Congratulations to Luis Amaral was given by Professor Leszek Balcerowicz himself.

Eurocash Group is the largest Polish company engaged in wholesale distribution of food products and marketing support for independent Polish entrepreneurs conducting retail activities. Franchise and partner networks supported by Eurocash bring together more than 14 thousand independent stores operating under brands such as abc, Groszek, Delikatesy Centrum, Lewiatan, Euro Sklep and Gama.

‍Yesterday, the Eurocash Group published its consolidated annual report for 2018. Part of it is a report on the non-financial activities of the Company. In the past year, the company implemented a dozen initiatives in the field of corporate social responsibility, such as: “Eurocash Academy of Skills”, the competition “Local Heroes”, or together with the Polish Chamber of Commerce, the ranking of manufacturers of fast goods “Equal in Business”. The company has reduced its negative impact on the environment by switching lighting to LED technology in distribution centers and warehouses and expanding its fleet of hybrid cars. Currently, the Group has the largest corporate hybrid fleet in Poland.

— Social responsibility is embedded in the business of Eurocash and all entrepreneurs — owners of stores with which we cooperate — says Katarzyna Kopaczewska, member of the board of the Eurocash Group. Social projects strengthen the competitiveness of small stores, have an indirect impact on the development of the local environment of our customers, and also contribute to changing the entire retail market — adds.

 Green investments of the Group

The report on non-financial activities summarises the Eurocash Group's activities in four areas, which form the basis of its CSR strategy: environmental impact, food quality and safety, a good working environment and the future of entrepreneurship and its impact on local communities.

In 2018, the Group's pro-environmental activities focused primarily on minimizing energy consumption and CO2 emissions. The Eurocash Group continued the project of replacing lighting in distribution centers and Cash & Carry wholesalers with modern lighting equipped with LED bulbs. At the end of 2018, new LED lighting was already present in 15 out of 16 distribution centers and in more than 72% of Cash & Carry wholesalers (130 out of 180 halls). In order to minimize CO2 emissions, the Group decided to expand its fleet of hybrid cars and implemented an eco-driving and safe driving program, which increased the number of kilometers traveled per liter of fuel by as much as 10%. In 2018, Eurocash owned 545 hybrid cars in a fleet of more than 2,100 cars.

“In 2019, the development of the hybrid car fleet and the optimization of transport and logistics within the Group will be as important for us as in previous years. We will buy cars powered only by gasoline and hybrid engines — says Katarzyna Kopaczewska.

Entrepreneurship above all

The Group's non-financial report includes a number of initiatives aimed at supporting and developing entrepreneurship. The Group's biggest initiatives in this category were: the “Local Heroes” grant competition, which involved more than 400 small store owners from 250 locations to submit projects to improve the lives of local communities, the Eurocash Skills Academy — in which more than 20,000 store owners and employees were educated in 2018, and the “Equal in Business” ranking, which evaluated distribution strategies. and prices of the largest producers of fast goods in Poland.

The above projects are part of the most important objective of the Eurocash Group, which is to support the owners of retail stores. One of the areas of support, which is rarely communicated by the Group, is also described in the report the so-called business agreements for customers. “Using the effect of scale, we have negotiated a number of contracts for our clients, which are an optional complement to the offer of the Group's franchise networks. As part of this activity, customers can take advantage of preferential conditions for the supply of, among others, energy, telecommunications services, cars, lighting or insurance policies. The conditions they receive are very competitive, and it would not be possible to obtain them in the case of individual entrepreneurs — adds Kopaczewska.

Eurocash remains among the largest employers in Poland. In 2018, employment in the Group was 21,404 compared to 17,479 in 2017. A significant increase in the number of employees is due to the Group's acquisition of the Mila network.

Eurocash Group is the largest Polish company engaged in wholesale distribution of food products and marketing support for independent Polish entrepreneurs conducting retail activities. Franchise and partner networks supported by Eurocash bring together more than 14 thousand independent stores operating under brands such as abc, Groszek, Delikatesy Centrum, Lewiatan, Euro Sklep and Gama.

A mobile application for store customers has been launched

The chain of liquor stores Duży Ben has launched a program for its customers “Ekipa Duży Ben”, which will cover all stores of this chain in Poland. Applications for the program are accepted, among others, through the new mobile application Duży Ben, launched on March 1 this year.

— Big Ben's team is growing stronger. I mean both the development of the concept and the growing number of new locations and customers. Our vision of how Poles want to buy alcohol implies a wide range of products at attractive prices and, what distinguishes us strongly, the advice that customers expect — says Daniel Nowaczyk, brand manager of Duży Ben. In Poland, alcohol is not usually sold as consumers would like. It seems to be available at any time of the day or night, but still much to be desired is the places and conditions of its sale. Discounters have a small selection, in addition, we will not buy well-chilled alcohol there. Some convenience stores sell alcohol over the counter, employees are untrained and prices are high. Specialty stores are usually expensive, and shopping in them can be very stressful for the customer, due to the feeling of incompetence. Our idea is to make this whole buying process easier for customers, and above all to give pleasure, because isn't that what this is about? — adds Nowaczyk.

In October 2018, the network launched the program “Ekipa Duży Ben” for its customers. The program allows you to collect points for purchases in stores, gives you the opportunity to take advantage of lower prices and special promotional offers. It was possible to use the program using a special card. From March 1, all you need is an installed mobile application.

The application allows you to both enroll in the program “Big Ben's Crew” and allows you to use it on a daily basis. In the application we can view the rewards for the points we receive for purchases, we can also see current promotions. We can also efficiently find the nearest store and navigate to it. The most interesting feature from the customer's perspective is to check product availability online. Without leaving home, we can check whether our favorite beer or wine is available in Duży Bena, check in which specific stores and in what quantity.

— New technologies are the basis for us, as a modern market. We strive to set trends in the industry. For example, each of our stores is equipped with a smart eye system to constantly scan the availability of goods on the shelves and the correctness of prices or planograms. We also introduce innovative POS screens that inform customers about promotions in an accessible way. In addition, for internal communication, we use the Facebook Workplace platform, where we have ongoing contact with stores and employees. We need to keep abreast of all market and technological news, because most of our “team”, that is, employees working in the network, are 19-30 years old — adds Nowaczyk.

Currently Duży Ben has 27 locations, mainly in Wielkopolska (Poznań, Gniezno, Leszno, Piła) and in the Lubuskie voivodship (Gorzów Wielkopolski). Since 2018, the stores of the chain are available to entrepreneurs in the franchise and agency system.

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About Big Ben

Big Ben is a format of a modern alcohol market created from scratch by the Eurocash Group, combining a wide range of products at attractive prices and professional advice. The stores are built on a one-stop-shop principle that allows you to shop in one place for different occasions — from an evening beer after work, meeting with friends, to birthdays or large family events.

In addition to well-known and popular brands of spirits, the store's offer also includes, among others, a wide selection of craft beers and wines from the most popular regions, as well as drinks, snacks and accessories. Big Ben stores are transparent, safe and open to the consumer.

This concept is a proposal for both new and existing Customers of the Eurocash Group, who are considering specializing in the sale of this category of products. Big Ben provides, among other things, store equipment, signage and other elements of internal and external visualization, as well as marketing support, including cyclical promotions, a special program for customers and modern business management and control tools.

By joining the Big Ben network, the entrepreneur gains the support and purchasing power of the Eurocash Group, which has 20 years of experience in developing franchise networks. Independent research indicates that sales in Big Ben's own stores are on average almost 50% higher than in other liquor stores, and in terms of wine or whiskey even several times higher.

The application for opening a store under the Big Ben brand and more information about the franchise offer of the chain can be found on the website www.duzyben.pl/collaboration

Eurocash Group is the largest Polish company engaged in wholesale distribution of food products and marketing support for independent Polish entrepreneurs conducting retail activities. Franchise and partner networks supported by Eurocash bring together about 15 thousand independent stores operating under brands such as abc, Groszek, Delikatesy Centrum, Lewiatan, Euro Sklep, Gama, Duży Ben and Kontigo.

‍The Eurocash Group has completed the acquisition of 100% of the shares in the Partner company, which operates 25 stores within the Lewiatan franchise network.

The seller of shares in the Partner company is Asteria Holding, one of whose shareholders is Wojciech Kruszewski, long-term president of Lewiatan Holding.

“With this transaction we show that as the Eurocash Group we are ready not only to support the competitiveness and development of small format stores run by independent entrepreneurs, but also to give our franchisees the opportunity to exit the investment in a situation where they have no successors to take over the family business, or when the natural successors have other business plans, as in the case of Mr. Wojciech Kruszewski — told Jacek Owczarek, Member of the Management Board of Eurocash

In 2018, sales of Partner's stores amounted to nearly PLN 191 million.

“Our mission is always to increase the competitiveness of retail stores run by independent entrepreneurs in Poland. After the acquisition of stores operating under the Lewiatan brand, we will be able to check how they are affected by the solutions developed in our other own establishments and, above all, how consumers accept them. Ultimately, the solutions developed in our own stores will be transferred to all our franchisees of the Lewiatan network — indicated Jack the Shepherd.

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Eurocash Group is the largest Polish company engaged in wholesale distribution of food products and marketing support for independent Polish entrepreneurs conducting retail activities. Franchise and partner networks supported by Eurocash bring together about 15 thousand independent stores operating under brands such as abc, Groszek, Delikatesy Centrum, Lewiatan, Euro Sklep, Gama, Duży Ben and Kontigo.

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• Eurocash Group revenues in 2018 reached PLN 22.8 billion, which represents an increase of nearly 10% compared to 2017.
• Last year, the Group significantly increased the efficiency of the wholesale segment: with sales growth in this segment by 6% to PLN 17.7 billion, EBITDA (operating profit plus depreciation) increased by 18% to PLN 410 million.
• Like-for-like sales at Eurocash Cash & Carry wholesalers grew by more than 4% in 2018 and by nearly 7% y/y in the fourth quarter of last year alone, which is the best result for this format in nearly six years.
• Sales of the retail segment in the past year exceeded PLN 4.3 billion and were 26% higher than the previous year. EBITDA of the retail segment amounted to PLN 107 million compared to PLN 153 million in 2017. The decrease in profitability in this segment was mainly related to the costs of the integration of the acquired supermarket chains EKO and Mila with the Delikatesy Centrum chain.
• One-off events had a significant impact on the EBITDA reported by the Eurocash Group in the last two years. In 2018, this was, on the one hand, a profitable sale of PayUp and, on the other hand, the creation of a reserve for the projected costs of reorganization, mainly in the retail segment. The balance of such events was positive last year and amounted to PLN 45 million.
• Normalized EBITDA (excluding one-off events) for the entire Eurocash Group in 2018 amounted to PLN 374 million, which represents an increase of 4% compared to 2017.
• The normalized consolidated net profit amounted to PLN 67 million last year compared to PLN 85 million a year earlier. The lower level of normalized net profit was mainly related to an increase in depreciation costs (primarily in the retail segment), as well as an increase in financial costs.
• In 2018, the Eurocash Group recorded strong positive flows from operating activities, which, combined with the proceeds from the sale of PayUp, made it possible to significantly reduce the Group's debt. The net debt-to-EBITDA ratio declined to 0.9x at the end of 2018 from close to 1.7x at the end of the third quarter of 2018.

Small format is gaining strength

“Small-format stores, which are the main customers of the Eurocash Group, performed better last year than the average of the entire FMCG industry, despite the difficult conditions in which they had to function. Total sales of the so-called small format increased in 2018 by 6.5% against the growth of the entire market by 5.4%. Also in terms of like-for-like sales, especially in the fourth quarter of last year, partner and franchise chains cooperating with us recorded higher growth dynamics than large chains of hypermarkets and discount stores. — indicated Jacek Owczarek, Member of the Management Board and Chief Financial Officer of the Eurocash Group.

Wholesale sales and efficiency on the growth path

Revenues of the wholesale segment of the Eurocash Group grew at a similar pace to small-format sales in 2018. They reached PLN 17.7 billion, which is almost 6% more than a year earlier. At the same time, the Group has significantly improved the efficiency of its wholesale business, thanks to which the EBITDA of this segment increased by more than 18% last year.

“In the wholesale segment, the growth of like-for-like sales in Eurocash Cash & Carry wholesalers deserves attention, which in the last quarter of last year amounted to almost 7%. This is the best result of this format since the first quarter of 2013, that is, for almost six years — emphasized Jacek Ovczarek. — Very good sales results of the wholesale segment in 2018 also accounted for an increase of more than 10% in the active distribution format, including sales to customers associated in franchise and partner chains, such as Lewiatan, Euro Sklep, Groszek and PSD (Gama) — he added.

An important event last year in the wholesale segment of the Eurocash Group was the launch of eurocash.pl — a unique e-commerce platform for independent trade, thanks to which independent retailers will be able to compete more effectively with discounters and other large stores. At the end of 2018, it already had 8.7 thousand users, mainly customers of Eurocash Dystrybucja, and ultimately the Eurocash Group wants up to 80 thousand entrepreneurs throughout Poland to actively use eurocash.pl.

Detail under the sign of integration

In the retail segment in 2018, the Eurocash Group recorded a 26% increase in sales, to more than PLN 4.3 billion, mainly due to the consolidation of the Mila network. This acquisition contributed to last year's sale of the Eurocash Group of PLN 835 million (counting from June, when the acquisition was finalized).

“The costs associated with the integration of the Mila network, as well as the EKO network acquired a year earlier, naturally burden the current profitability of the retail segment. However, these acquisitions allowed us to create a solid base on which we will build the largest chain of “proximity” supermarkets in Poland. Independent entrepreneurs from all over the country can join the network today, but even the Group's customers who do not decide to do so will ultimately benefit from its scale, know-how and developed solutions — indicated Jacek Ovczarek.

The project “Fresh” began to earn

The current profitability of the Eurocash Group is also negatively affected by the Projects segment, which includes investments in the development of innovative retail formats such as Big Ben, abc on wheels and Kontigo. The segment also includes the “Fresh” Project (distribution of high-quality fruits, vegetables, meat and sausages), which is already another project (previously Faktoria Win and PayUp) reaching the break-even point. The “Fresh” project last year generated PLN 606 million in sales (an increase of 24% y/y) and reached the profitability threshold already in the third quarter — much faster than the initial expectations of the Eurocash Group. As a result, the negative impact of the Projects segment on consolidated EBITDA last year was smaller than the previous year and amounted to PLN -41 million, which means an improvement of PLN 11 million compared to 2017.

“We can safely say that 2018 was a very good period for the core business of the Eurocash Group. Excluding the costs of integrating EKO and Mila and the costs associated with new projects, our financial results last year were among the highest in our history. The current consolidated results are influenced by investments that will further strengthen the competitiveness of our customers in the future. We see that our work is gradually bringing results, which is why we consistently implement the Group's plans, even if we do not notice an increase in profitability along the way — stated Jacek Ovczarek.

Big cash injection from PayUp sales

An important event in the Eurocash Group in the last quarter of 2018 was the finalization of the sale of 100% of the shares of PayUp Polska, which manages a network of payment terminals installed in retail stores throughout the country. This transaction had a significant positive impact on the reported financial results — it increased last year's reported EBITDA of the Eurocash Group by PLN 75 million. This impact was partially offset by other one-off events, such as the creation of a reserve in the amount of PLN 27 million for anticipated costs of business reorganization, mainly related to integration in the retail segment.

Proceeds from the sale of PayUp and strong positive flows from operating activities (PLN 582 million in the whole of 2018, of which PLN 281 million in the fourth quarter) significantly improved the cash position of the Eurocash Group. In the fourth quarter of 2018 alone, the Group's net debt decreased by PLN 226 million to PLN 382 million, and the net debt-to-EBITDA ratio at the end of 2018 decreased to 0.9x from nearly 1.7x at the end of the third quarter of 2018.

Significant change in the standard of presentation of results from 2019

From 2019, there will be a significant change in the presentation of selected financial data, which will be a consequence of the application by the Eurocash Group of the new financial reporting standard — IFRS16. In accordance with this standard, when calculating debt ratios, the Group will be obliged to take into account liabilities from operating leases, the total value of which at the end of 2018 amounted to PLN 1.8 billion. According to the new standard, the way EBITDA is presented will also change — it will additionally take into account the estimated depreciation of leased assets. According to the new method of calculation (based on the assumption that the number or terms of the existing contracts will not change), the estimated consolidated EBITDA for 2018 would increase to PLN 748 million, which in relation to last year's revenues gives an EBITDA margin of 3.3%.

“Under the right assumptions, the estimated EBITDA presented by us will therefore be much more comparable to the results of retail companies with their own real estate. Our business model will not change, so we will continue to maintain greater operational flexibility — indicated Jacek Ovczarek. Taking into account IFRS 16, the net debt of the Eurocash Group at the end of 2018 would increase to nearly PLN 2.2 billion. Using the same method of calculating the debt ratio as now, the net debt-to-EBITDA ratio would be 2.9x, which is considered a safe level even before the introduction of the new standard. In addition, this change will be for presentation purposes only and will not affect our operational activities. Nor will it affect the banking covenants set out in existing agreements, as they are still calculated according to the methodology prior to the implementation of IFRS16, explained Chief Financial Officer of the Eurocash Group.

Eurocash Group is the largest Polish company engaged in wholesale distribution of food products and marketing support for independent Polish entrepreneurs conducting retail activities. Franchise and partner networks supported by Eurocash bring together more than 14 thousand independent stores operating under brands such as abc, Groszek, Delikatesy Centrum, Lewiatan, Euro Sklep and Gama.