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Baltic Inspiration – ESM Catches Up With Rimi Baltic CEO Edgar Sesemann

By Steve Wynne-Jones
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Baltic Inspiration – ESM Catches Up With Rimi Baltic CEO Edgar Sesemann

Retailer Rimi Baltic has ambitious growth plans for its Latvian, Lithuanian and Estonian operations, as chief executive Edgar Sesemann tells Stephen Wynne-Jones. This article first appeared in ESM Issue 5 2019.

Since the turn of the century, Latvia, Lithuania and Estonia have come to be known as the ‘Baltic Tigers’, boasting high levels of inward investment, a burgeoning tech sector, and low debt levels.

From a retail perspective, this has led to the rapid embrace of modern retail formats, with Rimi Baltic, marking its 15th year of operation, among the key players.

Rimi Baltic is headed up by Edgar Sesemann, who started working with Rimi Estonia in 2008, before becoming CEO of the overall Rimi Baltic operation later the same year. In the first quarter of its financial year, Rimi Baltic saw its sales increase by 1.8% – a period that Sesemann describes as “challenging”, partly due to macroeconomic circumstances, and partly due to Rimi Baltic upping its level of internal investment.

“Salary increases are 8% to 10% higher this year, food inflation is up 1% to 2%, and electricity costs are skyrocketing across the region,” he explains. “Managing these costs has been challenging, but we have been able to offset them by investing in more efficient operating systems, such as CO2 refrigeration and LED lighting.

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“Also, we have invested quite a lot in self-scanning – 30% to 35% of transactions now take place via scanning – which also has enabled us to increase efficiencies.”

Evolution

Rimi Baltic was founded in 2004, through the merger of the Baltic operations of Swedish retailer ICA Gruppen and Finland’s Kesko in a 50/50 joint venture, with ICA taking full control of the business in 2006.

Each of the three markets has its nuances – food price inflation is ‘substantially lower’ in Estonia and Lithuania than it was a year ago, and higher in Latvia – but Rimi Baltic is seeking to portray itself as a modern retail powerhouse across all territories, lessening its exposure to low-growth segments. This is evidenced by the group’s current rebranding of its Supernetto stores in Latvia to Rimi Mini, the group’s convenience concept.

“Rimi is one of the most-loved food brands in the market, so we need to take advantage of that,” says Sesemann.

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“The market has developed. If you go back 20 years, the story was about scarcity of product and very traditional retail formats. Today, shoppers – and especially the younger generation – expect a strong assortment, high quality, and good-looking stores. We are therefore focusing on one brand – Rimi – and exploring ways to make that brand even stronger.”

Such has been the rapid development of modern retail in the three Baltic markets that growth opportunities vary depending on channel, he adds.

“There’s not a lot of room left for hypermarkets,” says Sesemann, “which is why, around ten years ago, we started expanding into mini-hypermarkets, of around 2,000 square metres. This has been extremely important for our development.

“Now we’re looking at formats that fit in between the traditional supermarket and convenience or express options, where customers have the convenience of a small store, but can also get everything they need for the next week. That’s really the essence of the Rimi Mini format.”

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Private-Label Opportunity

Rimi Baltic is putting its efforts into improving its sourcing capabilities, enabling the use of more local produce in categories such as fresh, while also seeking greater coherence in product sourcing across the three markets, particularly in private label.

“We operate one buying organisation for private label across the three markets, and we also source private label through the AMS buying alliance, but it’s also important for us to acknowledge the regional preferences of categories such as dairy,” he says. “Estonian consumers want Estonian milk, Latvian consumers want Latvian milk, and so forth.”

In terms of private-label differentiation, Sesemann says that Rimi Baltic has adopted the popular I Love Eco organic range of products from ICA Sweden, its parent company, and it will explore other areas in which similar added-value ranges can be rolled out across the group.

“I was the sourcing director for ICA for nine years, so I see the potential for cooperation and collaboration in a lot of areas,” he says. “Across the group, we have developed a good spirit of collaboration, to learn from each other and help each other.”

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Making A Difference

­­­In terms of corporate social responsibility, Rimi Baltic is seeking to develop another point of difference. In March, it introduced a campaign called ‘Let’s Consume Smart’, which saw stores offer tips on environmentally conscious consumption, such as how shoppers can use their own containers for purchasing prepared foods in store.

“Food waste is perhaps less of an issue here than in traditional Western societies, as we have a tradition here that you buy for what you need for the next day, or the next couple of days, rather than stock up on products,” Sesemann says of the campaign. “Nonetheless, this is an area that we need to take seriously, particularly in terms of dealing with wastage in store, and helping us optimise our supply chain.”

A campaign to draw attention to age-based discrimination, #AgeDoesNotMatter, arguably gained the group the most plaudits, including a number of awards. The campaign was developed to tackle the prejudiced attitude to older people, particularly women, in the workplace, seeing the number of employees aged 50 or over within the group rise considerably – by as much as 62% in Lithuania, for example. The campaign also acted as a double-win for the retailer, which has had difficulties in sourcing new staff in recent years.

“We got so much recognition for that campaign,” says Sesemann. “We changed our whole recruitment process and sought to change people’s opinions. Just because an employee is older doesn’t mean that they can’t do excellent work. The oldest person we have working for us today is 81 years old, and she loves her job.”

Expansion Potential

As for future expansion, while the retailer maintains that Latvia is its strongest market – “It was the first market we entered, so we managed to secure all the good locations,” says Sesemann – it sees Lithuania as boasting the most growth potential, “since our market share is still far too low, but it takes a while to source the right plots, get approval, and so on. I’m confident you will see quite a lot more expansion coming in 2020 and the coming years.”

Rimi aims to have more than 100 stores in Lithuania by 2023, up from 58 currently, “so that’s more or less ten stores per year in the next three or four years,” he adds. “We don’t give any projections, but you will definitely see more store openings in the next three or four years.”

As to whether the group sees room for acquisitions – ICA made a bid to acquire rival Lithuanian chain IKI in 2018, which was blocked by the country’s competition authorities – Sesemann won’t be drawn on potential targets in any of its three markets.

“We will always look for opportunities if something comes on the market, but we are not actively seeking anything at the moment,” he says. “It’s a very competitive market at the moment, so it’s difficult to see what businesses, if any, would be for sale, but we won’t rule anything out.”

Watch this space, in other words.

© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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