IGA believes its global expansion has no limits.
Having already established the red IGA oval at 5,200 locations worldwide, including approximately 4,000 stores outside the U.S., IGA continues to pursue growth opportunities in Asia, Africa and Europe.
Global sales among IGA licensees outside the U.S. account for nearly 75% of IGA's total — $22.5 billion last year out of a total volume of $31 billion.
According to Tom Haggai, IGA chairman, the goal of IGA's global expansion “is to help independents around the world compete the way those in the U.S. are able to do.”
IGA averages four or five requests a year from wholesalers or retailers around the world who want to become IGA licensees, Mark Batenic, president and chief executive officer of IGA, told SN. The last global wholesaler IGA opted to license was Megapolis Trading Co. in Russia in 2009. It has not accepted any new international members in the last two years.
Its next market entry may be South Africa, Batenic said.
“We had a partnership in South Africa with Metcash Trading Africa for several years, but the number of stores didn't grow so we ended that relationship last year. Right now we're considering an offer from UniTrade, a wholesale company based in Johannesburg, whose executives will be visiting us in Chicago in June.”
According to Haggai, what IGA learned from its previous experience in South Africa is that the largest cities there have rings of development around them, “and the best chance for independents is to operate outside those rings, in the third tier of cities or villages where our ‘hometown proud’ approach means helping schools.”
Aside from South Africa, countries under consideration for IGA entries include Sweden, Vietnam and Pakistan, Batenic said. “We've also had a lot of inquiries from India, though we're not ready to go there yet,” he noted.
Haggai said his personal wish list would include Italy and Turkey, and he would also like to see IGA enter Cuba, “but not till things there are stabilized,” he added.
IGA also has its eye on the Czech Republic, Haggai said. “A company there made a run at us, but we didn't click with them,” he explained. “We also looked at Dubai, but we'd rather go to other countries in that part of the world.”
“The world continues to come calling on us,” Batenic said. “But we don't select which countries we enter — people from those countries come to us.
“They call us in Chicago and invite us to come and look at the retail operations in their country, and then we decide whether or not we want to go there. We sometimes consult with our Red Oval [manufacturer] partners who are already in those countries and who have knowledge about the companies and the marketplace, and then we pick and choose very carefully because we don't want to become over-extended.”
China Largest Market
IGA's largest single global market is China, where it licenses 17 distributors serving approximately 1,800 stores — slightly less than half of the 4,000 IGA stores operating outside the U.S., Batenic pointed out. “And we have the potential for 1,000 more in China,” Haggai added.
Batenic also said the opportunities in China are enormous, given its population of 1.3 billion, “including 400 million people between the ages of 25 and 40 who comprise the growing middle class.”
IGA entered China in 1995 with just 12 stores, working in conjunction with the World Trade Organization.
“The Chinese met with IGA and told us they wanted us to help them as they opened up to the world,” Haggai said. “The WTO made it easier for foreigners to enter China, and because we are a not-for-profit company, we leave a lot of money there.”
Most of China's IGA stores are 80,000-square-foot hypermarkets, though the number of smaller stores is growing, Haggai pointed out.
“As the Chinese people get wealthier, they don't like the large, impersonal stores, so our smaller stores are more in tune with what they're looking for,” he explained.
In contrast with the rest of IGA's global operations, there are no wholesale companies in China, Haggai noted. IGA works with 17 retail companies there — each with its own warehouse, with an 18th about to be added — that operate in 14 provinces and three municipalities.
“IGA won our hearts by helping member companies and their partners improve their management, better their service and strengthen their brand through an international network while allowing them to remain operationally independent,” Helen Wang, chairwoman of IGA China, told SN. “In particular, IGA's tradition of social responsibility and community service fits in so nicely with the values and development strategy of regional retailers in China. We like to say that Dr. Haggai planted a seed in China [that] has now grown into a forest.”
Xiaoguang Fang, IGA's chief representative in China, said the biggest benefit of IGA membership is its brand.
“In today's China, IGA stores are acutely aware of consumer concerns with food safety and health, and we see an opportunity for building up our brand by addressing such concerns,” he told SN. “By enforcing IGA operational standards, many of our stores enjoy a reputation among consumers for selling foodstuffs that are fresh, safe and healthy, thus winning their loyalty and competing successfully with major international players such as Wal-Mart and Carrefour.
“The ultimate goal is not just to grow the organization in size but, much more importantly, to grow it in terms of consumer satisfaction and engagement. When that is being done, sales and profit will follow automatically.”
Australia Big for IGA
Outside of China, the largest group of IGA stores is in Australia — approximately 1,400 locations operating under three banners: Supa IGA for large stores, IGA for conventional stores and IGA Express for smaller, convenience-oriented stores.
“Australia has been one of our brightest spots, with same-store sales that probably lead the world,” Haggai said.
At the time IGA entered Australia in 1985, the country was dominated by two national chains — Woolworths and Coles — which controlled 70% of the market, with most of their strength in the Sydney area, Haggai said.
“One of our early mistakes was setting IGA headquarters up in Sydney. Once we moved our base of operations to Queensland, in the state of Victoria — away from the area where the two chains dominated — we grew much faster.”
IGA's original wholesale partner in Australia was Davids Holdings, which had a 3% market share when it joined IGA — a share that has now grown to 20% under Metcash, which acquired the wholesale company in 1997.
Fred Harrison, CEO of Ritchies Stores, Victoria, told SN that IGA currently represents a market share of about 17% in Australia.
“If Metcash, our wholesaler, is successful in acquiring Franklins, it will increase IGA's market share another 1.5%, and with many greenfield sites and a number of refurbishments planned for the next couple of years, I can envisage IGA's market share in Australia increasing to the low 20s in the next three or four years,” he said. “Thank goodness for IGA, as we would have had little future competing against the chains as individuals or splintered banner groups.”
Before IGA came to Australia, he said, there were at least 27 independent banners, “with independents fighting independents rather than focusing on the main competition — the publicly traded chains,” Harrison explained. “We have come a long way since then.
“When we were 27 banners, we lacked buying power. But Metcash went to suppliers and negotiated better pricing and more aggressive case deals, and we can now compete on promotions like-for-like with the publicly listed chains.”
Currently, IGA stores represent nearly 90% of the independent market, Harrison said.
“As IGA retailers, we meet other like-minded retailers, exchange ideas and benchmark,” he said. “Benchmarking has become a key attribute in helping drive and improve sales and profitability within our stores, and these ideas are shared and interspersed into our own stores. Independents are very good at sharing knowledge with each other, and this has helped grow our business and our brand.
Revisiting Russia
IGA entered Russia eight years ago, working at that time with an entrepreneur there who said he planned to expand his two-store operation considerably over a five-year period. When he did not expand beyond the two stores, IGA pulled out of Russia, Batenic said.
It was subsequently approached by a group called the Russian Independent Union of Retailers, he noted, and in the course of looking at that group and other potential partners in Russia, IGA was approached by Sergei Katsiev, president of Moscow-based Megapolis Trading Co.
“Katsiev lived in the penthouse on top of the highest building on the Gold Coast in Queensland, Australia, and when he'd take the elevator down to the first-floor lobby, he'd pass the entrance to an IGA store,” Haggai said. “That piqued his interest, and one day he called us in Chicago.”
Megapolis, which was serving 25 stores in Moscow, became an IGA licensee in 2008, Batenic said, “and Sergei assured us he could grow that to 500 stores within five years.
“We're pretty confident he will — he just purchased Victoria Wholesale in Russia, which supplies approximately 200 independents and 150 corporate stores, and Sergei has assured us he will hit the 500-store goal over the next two years.”
IGA also sees major growth possibilities in Brazil, though its progress there has been slowed by a tough local economy. It originally partnered with seven wholesalers there who were supplying 100 IGA stores, until the economic downturn put most of the distributors out of business, leaving IGA with just 25 stores.
Earlier this month, Paulo Goelzer, president of the IGA Coca-Cola Institute, IGA's research and educational arm, was in Sao Paulo at the annual APAS show — an 8,000-member group similar to Food Marketing Institute — to let Brazilian retailers know the IGA Coca-Cola Institute's online training courses were available to all of them.
“We expect that exposure to help us grow the IGA store base there,” Batenic said.
Strong in Caribbean
Haggai noted that IGA is strong in the Caribbean region, “and our licensees operate great stores there.”
Andre Chastanet, owner of Super J IGA in Castries, Saint Lucia, said his company is “setting the trends for others to follow, and this is slowly but surely leading to changes on the part of our competitors and the overall retail landscape.
“The IGA banner provides Super J IGA stores with global recognition,” he said. “It signifies that, although we are local, we are part of a global organization offering quality products and benchmarking against international standards.”
He said he believes his stores are more competitive because IGA “presents a point of differentiation for us in this market.
“And the recognition we got from being one of IGA's three retailers of the year in 2010 is a strong selling point for us because it points to Super J IGA as a local success story achieving global standards,” Chastanet added. “As we live out the IGA promise, it has led to even more emphasis on service and value at our nine stores.
“Our support for the community has resulted in greater customer loyalty as they see our focus on developing sustainable solutions to national and community issues, and the access we have to a variety of IGA support systems and resources helps us create programs that have the potential to increase sales.”
Chastanet said being part of IGA has allowed for collaboration among IGA stores in the Caribbean, resulting in more sharing of ideas and joint marketing.
Growth in Poland
In Poland IGA operates about 100 stores, with its biggest stores in the rings around Warsaw, and others in the cores of small towns around the country.
Luis Amaral, president of Eurocash S.A. in Poznan, said he believes IGA has the potential to integrate all franchised retail brands currently served by wholesaler Eurocash to become the biggest retail force in Poland.
“We know it will be a long and arduous road, but we are aiming for No. 1 in the market,” he said.
He said he thinks IGA provides Polish retailers with several advantages:
• An interchange of international experiences that will allow independent retailers to discover new ideas for the development of their business.
• A sense of reassurance from belonging to part of a big family whose members have been successful in other parts of the world.
• A process for developing skills for management and their employers though the IGA Coca-Cola Institute.
• Improved cooperation with producers who are part of the IGA alliance.
The retail business in Poland is unique in Europe, with independent retailers accounting for 50% of the market, Amaral explained.
“There are an unusually high number of stores per 1,000 inhabitants, showing the entrepreneurial spirit of the Polish people,” he said.
However, the stores are very small, with most measuring less than 100 square meters (approximately 1,000 square feet). Many of these retail stores started to appear no more than 20 years ago, after the end of Communist rule.
“In addition, capital formation to invest in bigger and better stores is still taking place,” Amaral explained.
Since Poland is the largest retail market in Eastern Europe, several major chains have entered in the last 10 to 15 years, including Carrefour, Tesco, Real, Auchan, Lidl, Jeronimo Martins, Aldi and Netto. Others, like Ahold, Casino and Rewe, have come and gone.
“The level of competition is very intense,” Amaral said. “Independent retailers have lost 30% of their market share in the last 20 years — first when big-box hypermarkets took a big chunk of sales on the periphery of big cities, and more recently, as hypermarket concentration reached a saturation point and the discounter segment began growing the most.”
Discounters are a bigger threat to independent retailers than hypermarkets, he said, because they can be closer to people's homes and they can open stores in city centers as well as in smaller towns.
“Their price offer, as well as the assurance of simpler choices, are good weapons in these uncertain times,” Amaral explained.
Independent retailers are answering these threats by joining franchise networks, he said, noting that more than 25% of independent stores operate under a franchise banner.
“We definitely believe we are more competitive as part of IGA for at least two reasons. The first is the ability to share experiences on an international basis. We have been to the U.S., Canada and Australia, and we've collected many ideas for how to develop our business in Poland, how to improve operations and how to improve the consumer appeal of our customers' stores,” Amaral said. “The second reason is, we have benefited from the development of the IGA Cola-Cola Institute to train store personnel and licensees.”
Big Player in Sri Lanka
Ranjit Page, owner of Cargills Food City IGA in Colombo, Sri Lanka, said Cargills is the largest player in the Sri Lankan retail food industry, with 159 stores and 50% of the trade market — and with more than 5,000 employees in the retail sector.
“As the retailing industry in Sri Lanka grows and becomes more competitive — and as international players consider coming into this country — we need more operators geared to offering better service that's on par with global standards,” he told SN. “In addition, to attract and retain talent, we need to motivate our teams with realizable career paths. IGA helps us achieve both.”
Page said IGA has added value to its own training and development programs and has helped Cargills stand out as a corporation that develops its team on par with international industry standards. As a result, Cargills is able to attract the best talent in the country, and is sought after as a preferred employer, he said.
“Our employees are largely from rural parts of the island, and the majority are below the age of 25, so the opportunity provided by IGA for them to gain international training online gives our team the chance to upgrade its skills and move up the career path while improving the service standards offered by Cargills,” Page said.
The exposure to IGA has “upgraded the industry on par with other recognized industries in Sri Lanka, including the hospitality trade, which makes it easier for us to attract and retain quality human resources,” he explained.
IGA has also been helpful in setting international standards for the retail food business by providing evaluation criteria.
“In addition, because of IGA, we've been able to reduce inventory and double sales growth in produce and grocery,” Page said.
Canada Back on Track
Win MacIntyre, executive vice president and chief operating officer, H.Y. Louie Co., Burnaby, British Columbia, Canada, said IGA's focus is on success for all players in the system — licensed distribution centers, retailers and vendors.
In March, H.Y. Louie assisted IGA in its global rally in Vancouver.
“Spending a few days with the staffs of IGA's licensed distributors and IGA retailers from around the world made us feel as though we truly are part of a global alliance of independent grocers as we witnessed firsthand the dedication IGA has to making the organization a bigger and stronger worldwide alliance,” MacIntyre told SN.
“There seem to be an unlimited number of opportunities for IGA, given the global nature of the organization,” he said. “Locally, we see additional growth for IGA in both traditional neighborhoods and in high-density urban areas with smaller footprints and more reliance on perishables to meet the needs of tonight's dinner.”
H.Y. Louie was originally an IGA wholesaler from 1955 until the Canadian wholesalers secured the rights to operate totally independent of Chicago-based IGA, although H.Y. Louie stayed in touch with the alliance, MacIntyre said.
In February 2005, H.Y. Louie decided to join IGA Inc. again while remaining part of IGA Canada.
“Due to internal mergers within the Canadian wholesale system over the last decade, IGA Canada is now smaller, so our reentry into IGA Inc. has been good for our business and very timely,” MacIntyre explained.
“The decision to rejoin has not yet resulted in improved sales — there are too many complexities between countries to have an immediate impact — but we believe absolutely that we are able to be more competitive as part of IGA because the complexities of operating a business today are overwhelming, and a true entrepreneur needs to be able to grow the business and not be troubled or bogged down by infrastructure, which is what we as a wholesaler provide to the associate owners in our system.
“One of the many direct benefits has been IGA's assistance in developing a private-label program for us. Due to the changing landscape of IGA Canada, the IGA private label had all but disappeared here, but Mark agreed with us that this was a niche that needed to be addressed, and he saw this as a great opportunity to expand and strengthen the IGA brand worldwide. He and his team stepped up to the plate and have been the driving force to help us build an IGA private label in Canada.”
Community Is Key
According to Batenic, becoming a global company has taught IGA that, “at the end of the day, independents are the same, whether they operate in Australia, Russia or Sri Lanka — they all have a burning desire to take care of their communities, their employees and their customers.
“But the underpinning of IGA all over the world is community,” he said.
“In the U.S., we have 13 different wholesalers, but all IGA stores project a similar message, though it's communicated differently. In Australia, all IGA stores are served by a single wholesaler so it's easy for them to project the same, concise message to the entire store base.
“And in China, where we have 17 different distributors that each has its own way of going to market, the IGA identity is the glue that makes all experiences consistent.
“So we think it's an advantage to be part of a global brand because it enables everyone to learn from each other. We post the best practices from our U.S. stores online for all members to see, but in China they get together as a group — all 17 owners — and share best practices with each other. So there's a connectivity there.
“And at our global rally in March, members from all over the world mixed well and found their challenges were the same — they all have to manage gross margins and labor scheduling, and they all deal with consumers every day.”
When a company asks to become an IGA licensee, Batenic, Haggai and others visit the country's distribution and retail operations to decide which ones to present to IGA's nine-member global board. “We don't put anyone up for a vote if we don't want them to be accepted,” Batenic explained.
Once a new member has been approved and all contracts have been signed, IGA invites the wholesale distributors to Chicago for a week to learn how IGA operates so they can adapt those methods to their own country's needs, he said.
For newly licensed retailers, IGA offers access to the IGA Coca-Cola Institute, which offers 60 online courses in six languages (English, Spanish, Portuguese, Russian, Mandarin and Polish) “so they can educate themselves about leadership or how to operate better or how to run specific departments.”
More and more members around the world are making use of the course offerings, Batenic said, noting that enrollment in the institute rose from 17,000 in 2008 to 80,000 in 2010. “And through the first quarter of 2011 alone, we had 60,000 enrollments,” he pointed out.
While only 11,800 enrollees completed at least one course through 2008, that number rose to 62,800 which completed one course in 2010, “which is a huge improvement,” Batenic said. “No one else has online training with those kinds of results.”
The IGA brand stands for different things in different countries, he said. “In China most IGA's are hypermarkets, whereas in Russia most are limited-assortment stores and in South Korea they are convenience stores.”
Overall, however, IGA operations do not differ significantly from country to country, Batenic said.
He noted one exception to flying the IGA banner: “In Russia we have to make sure the letters ‘IGA’ in front of the store are written in Latin type because in Russian, those three letters translate to their name for Attila the Hun.”
