Eastern Europe prioritised by Nestlé, Tesco

22 September 2010

LONDON: UK retailer Tesco and Swiss food group Nestlé both plan to expand their operations in central and eastern Europe, as the region's economic prospects brighten.

Philip Clarke, who is to become Tesco's next ceo in 2011, said the firm will launch online shopping services in the Czech Republic and Poland, as well as China.

And Laurent Freixe, head of Nestlé Europe, said that the he plans to use a combination of "organic extension and potential acquisitions" in Eastern Europe.

Data from the IMF suggest that central and eastern European GDP shrank by 3.6% last year and will grow by 3.2% in 2010.

But the richer eurozone economies shrank by 4.1% in 2009 and are forecast to grow by an average of just 1% in 2010.

Tesco's "retailing services" division - which incorporates the firm's online shopping and financial services businesses - has grown significantly over recent years, reflecting increased ecommerce activity among consumers.

It now has an operating profit target of £1bn ($1.55bn; €1.19bn).

Explaining why online would form a crucial part of the firm's eastern European expansion, Clarke said: "I don't think you can afford to say it's all sequential, build out a store network and then do the internet.

"I think what you've got to say is, 'We've got a good store network, we've got to do grocery home shopping, what about non-food? What next?'"

Meanwhile, priority markets for Nestlé include Russia, Poland and Ukraine.

"There are three conditions to grow: a relentless focus on consumers, the closest co-operation with our customers in retailing; and a determination to boost efficiencies across operations and reinvest savings in marketing and innovation to grow share," Mr Freixe added.

Nestlé Europe currently accounts for SFr22.5bn ($22.4bn; €17.1bn) of the firm's annual sales revenues of SFr108bn.

Data sourced from Financial Times; additional content by Warc staff