The Hungarian COOP chain of grocery stores is facing stiff competition from multinational firms. Now COOP has chosen DNV to monitor the quality of its private labels.
Food safety is becoming increasingly important. Particularly now, when Hungary is setting its sights on EU membership, states Laszlo Muranyi, Deputy Chief Executive Officer of COOP in Hungary. With its 220 regions and 3,600 retail shops throughout Hungary, the COOP chain has been completely restructured over the past 10 years. Changes to the Hungarian economy and stiff competition from multinational giants meant that COOP chose to change its strategy it developed a wholesale system and a retail chain. The wholesale system consists of five regional warehouses that supply the entire country. Over the past five years, the 3,600 large and small shops have been divided into three chains: The small shops are now called COOP Mini, with 800 different products for sale, the medium-sized shops are simply called COOP, and sell 1,500 different products, while the big shops are now called COOP Maxi and sell 3,500 different products. Over the past 56 years, strong competitors have entered the field. The largest of these is Swiss Metro; other chains include Spar, Cora, Auchan, Penny-Market and Biller.
High inflation lower consumption
The Hungarian economy has been struggling, and Laszlo Muranyi admits that developing the chain has not been easy during this period. Consumption has been falling at the same time as the inflation rate has been high annual rates of 3235% over the past 10 years. Inflation did not fall to 10% until 2000. But COOP has accepted the challenge and responded to it with fresh initiatives. It now has an 11.8% share of the market a share that it aims to keep through fresh efforts in marketing and sponsoring, and the development of new concepts for the chains and products. For example, sponsoring the Hungarian handball womens team, which won a gold medal in the European Championships and a silver medal in the Olympic Games in Sydney, was an extremely successful move. COOPs monthly price and product information, which is sent by the Post Office to two million households, also receives reader attention. High quality at a good price is the main message here.
Private labels a success
Growing competition meant that new measures had to be introduced constantly by COOP and its competitors. The group started selling its private labels, or own brands, two years ago. In that time, their number has risen dramatically. After the first year, we felt we had to concentrate more on the quality of these products, since quality is important to the customer, says Laszlo Muranyi. DNV was contracted to manage our quality-control system in this area, and has become an important part of our private-label programme. DNVs main task is to monitor subcontractors and examine the quality of the companies management systems and volume products. This work started with milk, toilet paper and paper towels. The number of products has since increased to 150. Customers also agree why they want private labels. With a fresh AC Nielsen report in his hand, Laszlo Muranyi states that 79% of the customers say that price rather than quality is the most important reason for choosing COOPs own brands. We have seen products be very successful for the first three or four months, and then sales have dropped off. When we then examine these products, we find defects in their quality, says Muranyi.
Higher price and better quality
This summer, COOP is to launch a new category: Premium Products. These will be of top quality and will cost more, but their prices will still be lower than those of other brands. In 2000, it proved to be more important (again according to AC Nielsen) that shops had a wide range than that they had low-priced products. COOP is therefore introducing new measures to meet competition that will probably grow even stiffer once Hungary becomes a member of the EU. Another piece of news from AC Nielsen: customers are very satisfied with the quality of COOPs private labels. COOP is well profiled and has friendly shops and shop assistants. With DNVs involvement in quality control, the groups own-brand goods provide an important competitive advantage.