Russian discount chain looking to come to Hungary seeks staff with savage salaries

According to the Linkedin posts of TS Retail Ltd, a company registered to operate the domestic chain, recruitment of employees started months ago. The company's offer of a net salary of €1,300 and a commission based on sales volume makes it an attractive opportunity for Hungarian purchasing managers to work for Russian Mere.

The chain promises to increase competition in the discount store market by offering products up to 20% cheaper than competitors, according to the announcement.

The expansion of Russian Mere in Hungary is in line with the interest in the discount chain in Europe and Western Europe. The business model, with its emphasis on efficiency and cost minimisation, could be attractive to countries where customers are increasingly looking for low prices without sacrificing quality.

When Mere opened its first German store in Leipzig in 2019, there was such a queue outside the store that some people didn't even get in - in fact, the goods were snapped up so quickly that the store had to be closed for a few days, Telex recalls.

TS Retail Ltd. is owned by Hung Trade DOO Beograd, a company registered in Belgrade, Serbia, which was also founded last year. The owners of the company are the same as the owners of Mere in Russia:

• 79% owned by Sergei Schneider;
• 15% owned by Andrey Schneider;
• 6% owned by Valerii Iakovlev.

The EU sanctions against Russia do not cover the trade market, so Russians can also invest in the EU market through greenfield or acquisition deals. There are, however, two not insignificant aspects that would make it very difficult for a new player to enter the EU, according to the experts surveyed by Világgazdaság.

One is the regulatory environment and the other is the embeddedness of the actors involved. It is no secret that the domestic retail sector, especially the food retail sector, is highly regulated, which makes it difficult not only for a new player but also for incumbents to expand. This makes it very costly to launch a greenfield investment. Aldi and Lidl are the youngest players in the domestic grocery market and only now, after 15-20 years, have they managed to achieve a national coverage that can serve as a basis for so-called organic growth.

The expansionary phase of the Hungarian retail market is long over and the market is now saturated. The cities are dominated by multinationals, especially Lidl, SPAR and Aldi, while the countryside is dominated by smaller shops such as Coop. The government, for example, has spent billions on the Village Programme to upgrade and keep alive small shops in the countryside, and it is unlikely that any new entrant to the Hungarian-backed sector would be looked upon favourably by politicians, regardless of the nationality of the investor. That is why small Aldi or Lidl stores are not being built in the countryside by the dozens, according to the experts.

Buying up the market would still be a viable option for Mere, in other words, buying up a chain of shops and converting them. Recent regulations, special taxes and government communication have also significantly reduced the market value of domestic chains - see the huge loss sustained by Spar. At the same time, it is a question of which EU chain would sell its chain to a Russian company, giving up its presence in Hungary. The owners of Mere, as Russians, would have to pay a premium in any case, and the restructuring, renegotiation of store leases, conclusion of supplier contracts, training of employees, would involve additional substantial costs. Of course, this is also a question of money and investor strategy, and a question of what kind of return the investor expects, what kind of profit centre. But based on experience in other EU and neighbouring countries, the main attraction of Mere is its low prices.

Cover photo: A stocker at the Mere discount supermarket in Riga, Latvia, Friday, Dec. 2, 2022. Source: Andrey Rudakov/Bloomberg via Getty Images