BUDAPEST, Hungary (FNS) -- A new era in Hungarian food marketing began here in August with the arrival of the international retailer Metro.
Metro, a German-owned, Swiss-registered company, launched its discount-store format in Hungary with the opening of two 110,000-square-foot stores here. The stores, which were developed at a cost of about $30 million (3 billion forints), stock groceries, clothing, hardware, computers and housewares.
Metro plans to build 10 additional stores in Hungary, including one more in Budapest and others in Debrecen, Szeged, Pecs and Miskolcz.
In its 30 years of operations, Metro has established a reputation for offering extremely low prices. It operates about 160 stores in eight countries.
In Hungary, Metro's arrival has not gone unnoticed by either consumers or competitors. Shoppers crowded the Aug. 11 openings. Metro said it issued 350,000 membership cards, mostly by sending solicitors door to door to Budapest businesses, even before opening its doors.
Metro uses a membership club principle similar to that of Price Co. (now Price/Costco, Kirkland, Wash.) and Sam's Club, a unit of Wal-Mart Stores, Bentonville, Ark. However, they charge for their cards; Metro's is free.
To enter the store and buy food or other products, shoppers must obtain a Metro membership card. With the card, a customer must purchase a minimum of 3,000 forints ($30) worth of food and other merchandise.
Metro officials said an additional 50,000 Hungarians held cards for Metro's store near Vienna, Austria, and drove there on shopping tours. The same cards can be used in the two new Hungarian Metro stores.
Cardholders receive advertising brochures every week through the mail.
Early sales have been strong at the two stores. Metro said each of the stores averages about 5,000 customers per day.
Meanwhile, other Hungarian retailers have complained about Metro's astonishingly low prices.
Istvan Kavas, managing director of the 31 Profi stores owned by Delhaize le Lion of Belgium, said the entry of Metro into the Hungarian food market "will restructure the whole sector. "Metro is No. 1 in Europe and has great financial potential," he said. "It can kill retailers here." Other retailers in Hungary include Plus, a 30-store division of Tengelmann Group of Germany, and Julius Meinl, an Austrian chain that owns 140 stores. Few of Meinl's stores are considered discount operations.
Kavas said he was so amazed by Metro's pricing that he asked his suppliers if they were giving Metro special deals.
"My producers contend they have not given Metro a better deal," he said. "No company in Hungary gets a better deal than we at Profi do. Maybe Metro is so strong it can finance a loss. That's dangerous and unfair." Kavas said his suppliers offered to show him copies of their invoices to Metro to demonstrate that they have not sold to Metro at lower prices than to Profi.
The concern about Metro's low prices has prompted some Hungarian retailers to take the issue to Prosperity 2000, a nonprofit group intended to promote better retailing in Hungary.
C. Jock M. MacKenzie, executive director of Prosperity 2000, said his group would respond to whatever request competing retailers make. But he cautioned that Hungarian prices have historically been high.
"Generally, prices in Hungary are too high for the spending level of the Hungarian public," he said. "We're trying to find ways of enabling the Hungarian public to buy products at prices consistent with their spendable income. "At the prices they generally pay, people are not getting value for money. We welcome anyone in the marketplace who, through their own efforts, are able to drive prices down for the benefit of the Hungarian public," MacKenzie said.
MacKenzie said a recent "cash forum" sponsored by Nielsen Research in Budapest compared market-basket prices in Lucerne, Switzerland, and Budapest. Lucerne prices were twice as high, but the population's "spendable income" was seven times as high as that of the Hungarians, the research group found.
Hungarian government officials also have yet to find problems with Metro's arrival. Janos Stadler, vice president of the government's Office of Economic Competition, said Hungary's law on competition only prohibits companies with a "dominant" share of the market from abusing that position and driving out competition as a result.