Czech whole and natural food retailer seeks more than organic growth

The market for health foods, organic, and direct from farm produce took some time to develop in the Czech Republic and there have clearly been some growing pains. Three of the biggest players merged in 2016 to join forces under the Sklizeno brand.

My Food Corso, Prague, photo: archive of SklizenoMy Food Corso, Prague, photo: archive of Sklizeno Sklizeno’s Petr Borkovec, has been put in charge of strategy for the new combined force on the market. He explains how they are plotting their future and helping to develop the overall natural and healthy foods market overall and make it more accessible to Czech buyers.

I first asked Mr. Borkovec to outline some of Sklizeno’s history and where the original idea stemmed from:

ʺSklizeno opened its first shop in 2011 in Brno. That was the period of the big boom in farmers’ markets in the Czech Republic and the quality of food started to greatly discussed but almost impossible to buy easily at one place. You had to combine farmers’ markets and multiple small specialized stores, for example gluten free stores and so on. And usually you had to go to the supermarket anyway to buy the rest. And the gap between the supermarket offer and farmers’ market quality was huge. From the beginning at Sklizeno we wanted to simplify things and make this a service and offer quality products in one place, under one roof, and to make quality grocery shopping easy and more comfortable.ʺ

And how difficult was it at the start? You had that one store in Brno but how quickly could you develop and how was the concept welcomed?

ʺThe gap between the supermarket offer and farmers’ market quality was huge.ʺ

ʺThe second Sklizeno store was opened in Prague in 2012 and in the same period two more quality grocery stores opened. These were My Food and the concept was a combination of quality foods from the Czech farmers and abroad as well and with gastro. Kitchens produced tortillas, salads, and sandwiches and this fresh menu. And the second concept was Nas Grunt in the same year. So these three concepts spread to cities throughout the Czech Republic within four years. And, for example, in these four years Nas Grunt had 3o stores, Sklizeno had 21 stores, and My Food had six or seven stores, but bigger. My Food had their own stores and Nas Grunt and Sklizeno were franchisee stores.ʺ

And how difficult was it to get supplies locally? As you mentioned earlier, that was one of the problems for the shoppers but for you as a retailer what were the problems in sourcing local, high quality foods?

Sklizeno, Břevnov - Prague, photo: archive of SklizenoSklizeno, Břevnov - Prague, photo: archive of Sklizeno ʺOf course it is difficult but it depends on the category. In some categories it is not such a big problem but in most categories the offer is not so big and processing and professionalism is the biggest challenge. And that’s our service or the reason why we are here: to consolidate the offer of small and mid-sized farmers and to offer it in one place. That’s why, for example, we are investing a lot of money and effort in our own production in our kitchens and we are investing in interesting producers as well. We have got an investment funds and it’s not just about money but also about being able to help, to offer our energy and professionalism, better processes and cheaper purchasing. We are building a shared service centre for these small and medium sized farmers and producers.ʺ

Can you give me some examples of what kind of small producers you are helping?

ʺFor example, this project is called Sklizeno Centrum and as part of this project we have two organic farms. Another example is a company called Zdravi Stravovani which is the biggest producer of lunch and breakfast boxes. They have a big distribution in the Czech Republic and Slovakia and produce around 2,000-3,000 boxes with these five foods per day. We invested in them two yeas ago when they had big financial problems from the past. We helped them with better purchasing prices for materials and so on. Now they are twice as big and very profitable. We also have a gluten free bakery. These are a few examples.

ʺThe Czech Republic has problems with organic or bio.ʺ

ʺUsually we invest some money and take a stake of 30-40 percent in the company and we provide our shared service centre. Of course, there are some examples of companies where we did not invest money but just help them with this shared service centre and some processes and because of our cooperation with we can offer them really big help in getting [goods] on the market.ʺ

And how healthy – if I can use that term – is the overall market for high quality natural foods in the Czech Republic? You mentioned the three companies that came onto the market around the same time five or so years ago, is the market still expanding? Is it still developing and are Czechs still willing to spend the extra money on these foods and this lifestyle as it were?

ʺThere are two sides to the problem. The first is demand for quality or health foods, different diets, or lifestyle is growing. But of course, the Czech Republic has problems with organic or bio. Czech people don’t believe in it and don’t have enough information in it. But the feeling that they want better quality is growing and demand is growing. Gluten free, for example, is growing really fast. So I think this part of the market is relatively healthy.

Sklizeno, Brno, photo: archive of SklizenoSklizeno, Brno, photo: archive of Sklizeno ʺThe second part is the offer, the service, and the price. The price is still high. It’s not as high as in the past and I think the difference is getting smaller. But I think the problem is the offer and processes and professionalism. That is why the consolidation of the market is important and why it was crucial to join the three concepts together, My Food, Nas Grunt, and Sklizeno, and to choose only one brand. We chose Sklizeno because it was the biggest brand. It was not just about joining the brands but the three founders also joined forces. And we cooperate in creating organic farms and in talking with other players on the market. I think it’s very important that the market is ready for consolidation of the healthy part of the business on the part of producers, sellers, and other players, who for example, need organic vegetables for their products. We are talking with these players and looking to consolidation.ʺ

Are you looking at expansion outside the Czech Republic at all?

ʺAs I said, I think that volume is critical in this business. Volume and professional processes. We are trying to consolidate with other players and have lots of discussions. Last year we began the consolidation of our three chains and we opened some multiple big stores. Now in 2018 we ned some time to clean up and polish our services and our offer. But we still want to expand. This year we are focused on Slovakia. For me, Slovakia is not foreign expansion, they are our brothers. It is something different to go to Poland or Austria, Slovakia is not foreign expansion for me. We will open two new stores there and we are consolidating with one player in Slovakia. They have eight stores and have their own problems there so there is potential for consolidation on this market as well.

ʺI hope that all the boring things will go to online groceries.ʺ

ʺThe third thing is that we want to start a new concept for Sklizeno. I hope that we will open two new 500 square metre concept stores, we call it Sklizeno Experience. We see the future of grocery retail in some experience in that you learn something and have fun. I hope that all the boring things will go to online groceries. We open this new concept and we want to have Sklizeno in most Czech cities with more than 50,000 inhabitants.ʺ

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