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25 Years of Serving the Market and Building Trust

Interview

Florian Naegele

Penny Hungary CEO Florian Naegele reflects on the German retail chain’s 25th anniversary in the country and its plans for the future.

BBJ: Penny is celebrating 25 years in Hungary. How has the business changed in that time?

Florian Naegele: The first Penny Market opened its doors 25 years ago in Szentes [156 km southeast of Budapest by road]. The chain has grown into one of Hungary’s leading retail companies in that quarter-century, with 226 stores nationwide and three logistics centers, employing nearly 4,700 people. Twenty-five years ago, the most important thing for our customers was price, not the assortment or ingredients. Today, consumers are more quality and health-conscious, besides expecting the best value for money. We have a great selection of high-quality products that can cater to those with food allergies or the health-conscious.

BBJ: How are you marking this silver jubilee?

FN: To mark the 25th anniversary, we asked our oldest members of the “Penny family” why they love working for the company. We received hundreds of very heart-warming comments. We produced posters with these and are placing them on our intranet and our Team Penny app. We are a committed partner to our employees, striving to know and understand their needs while offering them individual personal and professional development opportunities. It is no wonder that the company has many employees who have been with Penny for more than 20 years, and some since the beginning.

Our “25 Years Together” birthday campaign ran through September for 25 days. Every day, 25 lucky winners per store received 25% of the value of their purchase back. On top of that, 25 Penny customers who presented their digital or plastic loyalty card when paying could win a gift card worth HUF 25,000. The cherries on the cake were 25 Citroën C3 cars drawn from among all the customers who shopped during those 25 special birthday days at Penny.

For our employees, we organized an online celebration, where we spoke about the past, about our commitment to the Hungarian team, our mutual achievements, and our future goals. We had some great hosts who made the program truly enjoyable, including a performance created especially for us by the dance group Urban Verbunk. We honored employees who have been with us for 25 years with a celebration on stage. After the show, all the teams could celebrate with a slice of cake and a glass of non-alcoholic champagne. Every employee received a special birthday present as well. We also had some games for our employees before and after the celebration. We will continue working in this festive atmosphere till Christmas.

BBJ: Last year’s retail figures were boosted by how shoppers responded to the pandemic. Has that been maintained this year, or are things reverting to “normal?”

FN: Last year, the shopping habits changed, and these changes are still more or less valid. The average basket value has significantly increased, and the frequency of purchasing has declined. People are more careful and buy only when they need something; price sensitivity has increased substantially. Customers prefer private label products, and we have noticed a shift towards packaged products that are considered safer. They buy more own-brands, bulk-packaged and thus more affordable goods than before the crisis. Shoppers buy products needed for home cooking and baking more than previously. The importance of some categories related to spending time at home became much more significant.

Another change is the higher significance of the online stores. Many of those who were averse in the past tried it during the pandemic. We currently offer online shopping via Food Panda in selected locations. People are still hesitant to shop online in Hungary, especially the older generations; they prefer to come and shop in person. So, we need to make sure that we can offer them safe shopping and an enjoyable experience. Paying by bank card is favored over paying with cash.

We suspect that Christmas shopping will be somewhat different this year again. Due to the significantly higher inflation, people will not have money for expensive gifts and huge food bills. We think that they will focus on the necessities and will be looking for good value deals. Thanks to our renewed assortment, we can cater to our customers in these new, challenging circumstances as well.

BBJ: Are you using more local suppliers to shorten supply chains in the wake of the pandemic? What proportion of goods on the shelves are of Hungarian origin?

FN: We have been advocating for Hungarian producers for many years. We have very strong cooperation with Magyar Termék Kft. (Hungarian Products Ltd.) and have applied their logo on our Hungarian products for a long time. Since the beginning of last year, we have increased the number of our Hungarian suppliers in every segment, not necessarily because of the pandemic. We are keen to offer Hungarian products due to the efficiency of the supply chain and the taste preference of our customers. In some segments, like meats or spring and summers fruits and vegetables, for example, the share of Hungarian products is more than 90%. In general, approximately two-thirds of our selection comes from Hungary. We introduced an advertising and PR campaign to inform shoppers about the direction of selection development and supply management: More local products and more efficient supply management. 

BBJ: What are you doing to boost brand recognition in Hungary?

FN: We are renewing and refreshing our stores. Penny Market is becoming Penny. We have a fresher look with a new logo and color scheme. In our communications, we focus a lot on the local, high-quality products, wider assortment, and our offer for the health-conscious; a more extensive selection of products that are low in sugar and fat or that do not contain various allergens. We pay attention to the vegetarian shopper as well, offering some great non-meat options.

BBJ: What do you think will be the greatest challenge for the company in the near- to mid-term?

FN: A great challenge for all retailers, I think, will be to work based on a fluent supply chain. We can see what is happening worldwide with the supply chain slowing down and even broken at some phases. We trust we will be able to serve our customers so that they will not see too many of these issues. We are extending our logistics center in Karcag (172 km east of Budapest); it will be ready in March 2022. This development will increase the area by 30,000 sqm and employ 40 new staff. It will supply many more stores in its vicinity, shortening the transport time of our goods from warehouse to shop. We can react to any change in demand in a much shorter time.

BBJ: And what of the future?

FN: Important tasks for the coming years will include strengthening the brand image on the Hungarian market, building on the solid base that we have, making it more widely known and relevant, gaining new target groups to expand our customer base in an extended store network. And of course, we wish to improve our relationships with our suppliers and partners further.

We put serious efforts into maintaining our status as a reliable employer. We plan to grow our team and improve their performance through developmental programs, team coaching, offering higher educational programs, and graduate internship programs.

Regarding SCR, we will continue to support the Children with Cancer Foundation, the Hungarian Emergency Services Foundation OMSZA, and many local schools and nurseries. We also support the Hungarian Food Bank every month and its annual Food Convoy initiative, organized with the Food and Agriculture Organization of the United Nations. This marks World Food Day and was held for the 16th time this October. People and families in Hungary are more in need of financial or material support due to the social changes following the health crisis that is now becoming economically and socially challenging.

We want to put a greater emphasis on sustainability too. We see this as an essential topic to which large corporations need to pay more attention. We will improve our material use and systems, saving money for us and beneficial to our local environment.

This article was first published in the Budapest Business Journal print issue of November 19, 2021.

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