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Brutus maximus

  • 2002-05-29
  • Matt Kovalick
In only 10 years, the founders of the Lithuanian company Vilniaus Prekyba have transformed investments in state vouchers and a single food shop into a retail empire. Matt Kovalick talked to the company's CEO Ignas Staskevicius about the secrets of success.

The retail empire already dominates Lithuania, and there are now plans to conquer other countries in the region. While the Maxima chain of hypermarkets does not yet stretch from the Baltic to Black seas, it has its sights set on developing shopping malls and hypermarkets in Latvia very soon.

Ignas Staskevicius' crowning achievement is the Akropolis in Vilnius, the biggest "super-mall" in the Baltics, which opened last month. But Vilniaus Prekyba has cornered almost every part of the retail market, from the small, cornershop-style Minima brand to the monstrous HyperMaxima.

In 1992, how did Vilniaus Prekyba start out?

Business in retail and consumer goods started in 1992 as a shop, which was purchased as an acquisition of state property by public tender. That shop was located on Savanoriu Street in Vilnius. It was quite a small store, with about 150 square meters of sales area.

The store was purchased with the purpose of selling it as real estate property. Basically, this was our core activity at that time: speculation in privatization vouchers and mediation in transactions between people who got vouchers free from the government and those people who, at that time, had significant amounts of cash but didn't have any chance to invest that cash directly without having vouchers.

But for some reason it took longer than expected, and we operated the store for a couple of weeks, then a month, then for two months, and we saw it was a reasonable business. So, we decided to keep it and continue. After that location we bought another store. We noticed two stores were better than one. It went on from there.

The Prekyba group includes more than just retail stores. It has entertainment outlets and a development company. What other businesses do you have?

It's constantly changing. We were quite diversified at the end of the decade, but today we are concentrating on the core activity. Looking at our group from today's perspective, we see that retail again is the core business, without a doubt, and very few activities within the group's operations are something other than retail.

Other holdings include a real estate development firm, which is very close to retail because our retail operator uses a lot of the properties. Also, a pharmacy chain consisting of 47 outlets is growing quite fast. And other activities, like a movie theater, a chain of pizza restaurants, the Lido restaurant in the Akropolis hypermarket, a children's entertainment center, even smaller companies like a financial brokerage, insurance brokerage and things like that.

Despite the diversity is there a way to keep a certain personality or core values across those diverse operations?

It changes with the times. At the beginning of our group's history, we considered that business was the priority, and that every good deal we had to have. Today, we think more strategically and see that the consistent development of a retail chain and the improvement of the organization is our strength. Everything is concentrated around retail.

So, the movie theater and children's playground are ways to draw more people to the Akropolis shopping center?

If we take Akropolis as an example, then of course we can say that we thought of erecting it only because we thought it would be a better place for a HyperMaxima than to only have a standalone HyperMaxima. We started thinking of what we needed to have inside the Akropolis. We decided on a multiplex cinema, but we didn't have a chance to attract a local operator to the site. So, we decided to make a cinema center ourselves. I think it was a good idea.

Are you pleased with how the Akropolis turned out?

It's not completely finished yet, but so far it works well. It started with the HyperMaxima opening last December. Our expectations were to have the best, the largest, and most beautiful shopping center in Vilnius, which makes it a big attraction.

Do you feel you can take the same concept to the Riga market and beyond?

It's conditional thinking of course, but yes, we're thinking of having one good hypermarket in Riga, and to do that we need a complex to put a hypermarket into. But it will not necessarily be called the Akropolis, nor will it look exactly like the one in Vilnius. It will be a shopping center with a hypermarket inside.

Are hypermarkets how the future of retailing will look?

There is probably no need to have another shopping center like the Akropolis in Vilnius. We have a HyperMaxima in Klaipeda, which is a smaller version adapted for the city. In Kaunas, we are missing something similar so we have certain plans there. Otherwise we have a number of standalone stores that operate very well.

There are competitors old and new. How are you able to compete with Rimi and Iki?

First of all, we have a good retail organization. We think our real strength is in using retail technology in our stores. It's not our idea just to build a good shopping center and therefore the hypermarket or supermarket inside is attractive for our customers. No. First of all it is the quality of the supermarket itself - a brand that is attractive for our buyers. That let us compete successfully with other chains. But competition is fierce.

Have you seen a change in the Lithuanian consumer market from when you started out? How has the market evolved?

I think the changes began long ago, the same trend. Five or seven years ago, when we had foreign visitors, they were always surprised at the assortment of products, the store layout, and the quality of the stores - not only our stores, but our competitors too. They asked questions like, "Why do you need 200 brands of ketchup? Or 20 different versions of still water?"

It's a very demanding market. If you manage to work in it, then it is easier to go into other markets. So, we are confident in going to Latvia.

In Latvia, there are already plenty of T-Markets and Maximas. Do you plan to head further north to Estonia? And Poland, Russia?

So far we have only elaborated a plan for Latvia. It includes a number of T-market stores across the country and four or five Maxima stores. That's for the near future, which we have planned specifically, budgeted for and foreseen. Talking about Estonia or other markets would be more difficult, and we haven't made specific plans so far. But, yes, the natural development would be to expand further.

I've heard there are also plans for stores in places like Kazakhstan, Kiev and Moscow.

Well, last year I traveled to Kazakhstan, and also to Croatia and Bosnia. It's interesting, to look around and keep an eye on markets like Belarus, Russia, Ukraine. We have ideas, but first you need to go and see, analyze taxation systems, the market, and so on.

Can you imagine Vilniaus Prekyba and Maxima growing into a regional power - another Carrefour or Walmart?

It's hard to foresee such things, but we are working in different formats, and that's our similarity with those "superchains." We have discount stores, mini-markets, supermarkets, hypermarkets, and cash and carries. Of course, to grow so successfully we need financial strength and the expertise of being a multinational chain. I can only see that if we made a joint venture with some Western, strategic partner, then it could happen.

Are you looking for one?

It's impossible to look around for such a thing. It just needs to come. We had offers from different companies about various forms of cooperation - full-exit, joint venture, or participation from financial institutions. Different models. We didn't get the right one, so we continue as-is, and we still have potential. I can only be specific about the nearest future.

Part of the process of moving into new areas is working with local producers and farmers. Is that a goal when establishing stores in Latvia or working better in Lithuania?

Roughly, 80 percent of our sales are local products. Only that can guarantee freshness and variety. Customers are loyal to certain products, even in smaller regions in Lithuania and Latvia. For example, when opening a store in the Lithuanian town of Alytus, we present local bread and local sausages produced by local companies. That's a natural feature of our business.

But I need to stress that our priority is to be profitable - every day, every month, every quarter. This is the basis of how we choose suppliers and products.

What are the challenges of doing business in the Baltic states?

We don't have a strategic priority to become a Pan-Baltic chain, as others do. Our goal is to be profitable, to work efficiently, and if we see today that Estonia is a more complicated market to enter, we can hesitate a while until there's a good opportunity to be there. On the contrary, when we see in Latvia that the potential is okay, and there is a good basis for implementing a specific plan, then we go ahead.

In general, I think a strong advantage is that Vilniaus Prekyba is essentially a family business. The owners are very close to every store. It's true when we say there are nine owners and it's true that each of them can visit the stores during the day. This is an advantage compared with a multinational chain where the owners are far away and uncertain of what is going on. It gives flexibility, control, and the potential for new ideas and solutions. We are local, we grew up here.