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Produce department audits enough to determine overall state of business for supermarket chains

EastFruit audits of produce departments at supermarket chains have predicted the fate of the entire retail business of a company many times.

A recent announcement that the Furshet supermarket chain is closing a significant part of its stores is yet another confirmation that the produce department is key for the supermarket chain regardless of format. The fact is that Furshet has been an enviable outsider in the ratings of supermarkets in Kyiv for several years in a row according to results from our comprehensive assessment of the assortment, product quality, quality of the department and services, and the price level of the fruit and vegetable departments.

About a year ago, the Billa supermarket chain fell into the same low category in Kyiv and was bought out by the more successful Novus supermarket chain. In 2019, EastFruit’s last-place rating of produce departments in Chisinau was given to the IMC supermarket chain and was soon bought out by the Linella chain, which is also more successful, according to our ratings.

Recently, our auditors are concerned about the negative dynamics in almost all indicators of the Silpo supermarket chain in Ukraine, which, together with the Furshet, Fora, and Ecomarket chains, is at the very end of the Kyiv rating according to the complex assessment of the fruit and vegetable department. By the way, both Silpo and Fora belong to the same company Fozzy Group.

“The idea of ​​creating a retail audit system for produce departments appeared in the 2000s against the backdrop of a sharp increase in the influence of supermarkets on the entire sales chain of vegetables and fruits in Ukraine. After all, it was the produce department then and now, probably, as the most difficult link in the retail trade with a very limited implementation period; high dependence of quality on many unpredictable factors; non-standard form, size, colour, taste, packaging; and many other problems always accompanied the work of managers for fruit and vegetable purchases from a supermarket chain. At the same time, the most coveted high-income customers increasingly ignored shops with a narrow assortment and low-quality products,” explains Andriy Yarmak, the author of the audit methodology and an economist at the Investment Centre of the Food and Agriculture Organization of the United Nations (FAO).

Read also: Auchan & Metro – produce retail trade leaders of the EastFruit region – Carrefour is coming

“At the initial stage of the formation of food retail in Ukraine and other countries of the region, the importance of the produce department was not so high. However, as the market developed, the influence of networks and consumer incomes grew, the significance of the department became more and more important. According to the study “Surprises in Store: Fruit Logistica Trend Report 2019” by Oliver Wyman, more than half of consumers choose a store for shopping specifically for the produce department. Therefore, if the produce department is weak, then it will not be possible to sell anything in the departments of alcohol, household chemicals, dairy, meat, fish, etc., because customers simply will not come to the store. That is why we are constantly deepening the methodology of our research. In practice, we see that it allows us to very accurately assess the overall state of the retail business of the chain, of course, only in those countries where the level of competition between the chains is quite high,” explains Andriy Yarmak.

We also note that audits of supermarket produce departments are the most important indicator for the safety of suppliers. If the chain is not doing very well with the produce department, then there is a greater risk in the worsening of its financial situation, which means that there may be delays in payments or even no payment for the products supplied to the chain. Therefore, EastFruit recommends that all farmers and wholesalers closely monitor the rating dynamics for individual supermarket chains and to remember it will be the most informative in those countries where the competition between supermarket chains is very high.

EastFruit

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