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Strengthening Brand and Team in ‘Strange Times’

Retail

Penny Market Hungary, a member of the REWE Group, now has more than 4,700 staff and 223 stores in Hungary. When Florian Naegele was appointed CEO in October 2018, he was charged with growing the brand in the country. He talks to the Budapest Business Journal about managing that amid the not insignificant challenge of COVID-19.

Florian Naegele

BBJ: What were the greatest challenges in running the stores during the state of emergency?

Florian Naegele: At the onset we had a great challenge in securing the quantities needed in a situation where there was a sudden, great increase in the demand for certain products, like non-perishable goods, and a huge decrease for others, like luxury items and fresh products. There were large peaks, some days we had a more than 70% increase in turnover.

Another great challenge was the purchase of the protective gear for our employees, and disinfecting equipment and materials, in order to have our shops fully functioning in the safest possible way.  

BBJ: How challenging was managing the logistics side?

FN: The borders were closed for many weeks and the supply chain from abroad was significantly interrupted. We had trucks from other countries waiting for clearance at the borders for days. We have never experienced such a situation.

The border closing was also problematic for purchasing protective items in order to ensure the smooth operation of the shops. Delivery times increased by several weeks, as these items were coming from abroad, and some materials and products were in short supply. The purchasing prices of some protective items, like those of safety masks or cleaning supplies, became 2-3 times higher. The price of disinfectants increased by about 50%. Normal trading practices changed and we had to pay ridiculous amounts for some items.  

However, it was needed and we wanted to offer the safest possible shopping environment for our customers and employees, so we invested huge amounts into plexiglass shields at the cashiers and also at the bakery stands and have installed hygiene stations at the entrances of all our 223 shops.

BBJ: What did you learn during the crisis that surprised you most?

FN: We realized how important it is to have a bigger quantity of our own local stocks, in case of a temporary supply chain trouble. One of the advantages of being part of an international retail group is that we can help each other. As the virus started much earlier in Italy, we could see what was happening there and could learn from their experiences.

I am very proud of our team, seeing the cohesion, the perseverance, and the mutual search for solutions within our collective. This is the biggest learning moment for me: we fought together facing such great difficulties that nobody could even imagine would happen in our life. These are very strange times, and I am very thankful to our team for working together in such an exemplary way. We are stronger now as team than we ever were before.

BBJ: Will measures such as the “sneeze shields” around tills be permanent?

FN: We think that there is a huge need for the customer to feel safe in the stores. Therefore, the protective plexiglass will remain at the cashiers, and we are implementing some new equipment for our bakery shelves in order to increase hygiene and security for customers.

BBJ: Are shopping habits changing? Are you seeing more demand for online shopping?

FN: People are more careful with their purchases and buy only when they really need something. Price sensitivity has significantly increased. Customers prefer private label products and we have noticed a shift towards packaged – thus considered safer – products. Customers now buy more products for home cooking and baking than earlier. The importance of some categories, related to spending time at home, became much more significant.

Customers consider it highly important to feel safe in the shops, so they monitor what measures each shop has taken and is taking to protect against viruses. We do everything to make sure that our stores are always clean and our staff complies with all the valid regulations.

Online shopping is becoming more significant. In Hungary, people are still a bit hesitant to shop online, especially the older generations. They prefer to come and shop in person, to choose the goods on their own. So we need to make sure that we can offer them safe shopping and an enjoyable experience, even if it is shorter now, than prior to the crisis.

It is also clear that paying by bankcard will become favored over paying with cash. It is good for us as well; closing the shopping is somewhat faster.

We suspect that the Christmas will be somewhat different this year. It will not be the case when people have plenty of money for expensive gifts and huge food shopping bills. We think that they will focus on the necessities, they will be looking for good value deals and not luxury items.

BBJ: What plans are you making for a second wave?

FN: Unfortunately, we are already in the second wave. The infection numbers are rising every day and we see from our experience as well, that customers are behaving differently than a few weeks ago. Luckily, we have created sufficient stocks of the protective equipment and disinfectants, so we are well prepared.

We have added some new elements to our business continuity plan. The protective items that were used in the first wave have all remained in the stores. On top of what we did earlier, we have prepared a list of employees who can be mobile and so work anywhere in the country. They will be the employees who will help to operate in different locations and serve our customers in a troubled store in case of any infection.

Based on the experience of the first wave, we assemble pallets of the most needed “crisis” products, those that were most purchased during the first wave, which we will be able to deliver quickly to stores in the event of a panic buying outbreak.

BBJ: When you were appointed, one of the targets was growing the brand in Hungary. How has that been affected by the pandemic, and how long do you think it will take to get back on track?

FN: I would say, even with the pandemic, we are on track. In March and April, we had to focus more on ensuring the proper functioning of the supply chain. However, after that we could luckily return more or less to a normal way of operation and continue with our planned customer activities and promotions.

The summer was almost normal. We launched a new Hungarian products campaign, where we communicate the fact that Penny has a very good partner base and we support the Hungarian economy.

I can say that Penny  has been a well established brand. We are working on further strengthening it. Our customer base has grown; we managed to attract new target groups to the brand. We have grown the younger customer base as well, and we have a high share of very loyal consumers.

We also have a larger team; we have more than 4,700 employees. We have improved the management structure and were awarded the Reliable Employer award from the German-Hungarian Chamber of Industry and Commerce. We did not have to let any of our employees go, but the opposite happened: we managed to hire some truly remarkable colleagues.

For Penny Market, Corporate Social Responsibility is a priority. We remain active in this field. Our new CSR partner is the National Emergency Services Foundation (OMSZA), whom we decided to support seeing the need of the help of such professionals in a healthcare crisis.

Another goal for me was to improve our performance from the sustainability point of view. Here I can also say that we are doing very well. Even during the crisis, we managed to continue with some investments and improvement to become an ever more sustainably conscious company.

BBJ: What are the future plans for Penny Market in Hungary?

FN: To strengthen the brand image, improve perception of the brand, make it more widely known, and gain new target groups by doing so. We plan to focus on the whole Hungarian population, offering them a pleasant and safe shopping experience with the best value for money assortment possible.

Serious efforts have been placed into maintaining our status as a reliable employer. We aim to grow our team and improve their performance through developmental programs. Our campaign will continue to further strengthen cooperation with Hungarian producers and suppliers nationwide.

In terms of SCR and sustainability, our support for the Children with Cancer Foundation, with OMSZA, and with the support of many local schools and nurseries will all continue. We also support the Hungarian Food Bank on a monthly basis, and this too will carry on.

Putting more emphasis on sustainability is another key area. We see this as an important topic that big corporations need to pay more attention to.

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