A comprehensive study conducted by experts from Mendel University Faculty of Business Economics (PEF MENDELU) in collaboration with the Office for the Protection of Economic Competition has revealed that the Czech food retail sector is heavily dominated by six major companies, collectively holding a staggering 75% of the market share. The study, spanning from 2005 to 2021, underscores the increasing market concentration and expanding profit margins within the industry.

The dominant players identified in the Czech food retail landscape are Albert, Globus, Makro, REWE Group (Billa, Penny), Schwarz-Gruppe (Kaufland, Lidl), and Tesco. According to Michal Mádr from the Institute of Economics at PEF MENDELU, one of the study’s authors, the Czech retail market exhibits characteristics of an asymmetric oligopoly, aligning with the prevalent market structure in several European Union countries such as Estonia, Germany, and Great Britain.

The research highlights a noticeable surge in market concentration in the Czech Republic from a mild to a medium level after 2013. This trend aligns with broader shifts observed across sectors in various markets, where a few key companies gradually strengthen their positions at the expense of weaker competitors.

Notably, the study points out a substantial increase in the market share of German companies Schwarz-Gruppe and REWE Group between 2005 and 2021. Schwarz-Gruppe, housing Kaufland and Lidl, witnessed its share rise from 13% to 28%, while REWE Group, owner of Billa and Penny, experienced an increase from 7% to 15%. The growth is attributed to the companies’ strategic initiatives and, in the case of REWE Group, the acquisition of PLUS-DISCOUNT in 2008.

The research also sheds light on the financial dynamics of the analyzed companies, revealing a consistent uptrend in trade margin and trade mark-up. The difference between purchase and selling prices, known as the trading margin, increased over time, accompanied by a growth in trade mark-up. The study points to a significant rise in aggregate gross profits, with sales of major companies more than doubling, gross profits nearly quintupling, and consumer price index experiencing a 36.5% increase between 2015 and 2021.

While the study provides valuable insights into the Czech food retail market’s current state, the authors express their intention to continue monitoring market concentration development, with a focus on comparing the profitability and margins of the dominant companies with foreign markets, offering ongoing insights into the evolving landscape of the sector.

Article by Prague Forum