Doing Business in Hungary 2010 - International Franchise Association

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Distribution and Sales Channels Return to top
Budapest and its suburbs have become a preferred location for multinationals (e.g., GM/Opel,
Ford, Pepsi, Coca-Cola, Hewlett-Packard, and AIG/Lincoln) to establish headquarters in Central
and Southeast Europe. Nevertheless, while Hungary’s retail and wholesale distribution
operations are improving compared to Western Europe, weaknesses remain. For example, the
trading company structure is relatively undercapitalized, and usually combines both retailing and
wholesaling. In 2009, the overall volume of retail trade in Hungary decreased by 6 percent,
down 4.2 percent from 2008. Retail growth is expected to stagnate and reach only 1 percent
annual growth rate in 2010 due to the stagnating economy, lack of transparency, the central
government’s austerity measures, and increasing taxes.
Most successful distribution companies in Hungary are wholly-owned subsidiaries of European
or U.S. chains, such as Auchan, Tesco, Cora, Office Depot, Metro, Brico, OBI, Praktiker, and
IKEA. The middle section of Hungary’s distribution pyramid - stocking distributors and mass
merchandisers - is not yet fully developed. A typical distribution channel in Hungary is for
importer-wholesalers to service retailers and end-users directly. Hungarian agents or
distributors usually look to foreign partners to share the marketing and promotion expenses and
to provide training and financing.
Until recently, small, family-owned stores dominated Hungary’s retail sector especially in the
less populated parts of the country. Thousands of these stores continue to serve rural
populations, posing logistical challenges for distributors and suppliers. However, medium-sized,
financially well-established local chains are making inroads in Hungary’s retail sector; such
chains include Real, RealPont having close to 2,300 shops and CBA having 1,200 stores
nationwide. Discount food chain stores have also burst onto the scene. Lidl has 72 stores
nationwide, Penny Market 177, Spar/Interspar has 374, and Profi 1133.
Unlike the countryside, Budapest's retail sector has many superstores, shopping centers,
hypermarkets, and supermarkets. Foreign chains include Auchan, Cora, and Bricostore
(France); Metro, OBI, and Baumax (Germany); Lidl, Humanic, and KIKA (Austria); Ikea
(Sweden); Match/Smatch (Belgium); and Penny Market, Marks & Spencer, and Tesco (UK).
Shopping malls have expanded rapidly. Twenty-five operated in Budapest by the end of 2008,
compared to 31 in the smaller cities. Unfortunately, due to the economic stagnation, only one
new shopping mall construction project was completed in Budapest in 2009, the other two
shopping malls were postponed to 2010. Budapest’s largest mall is Arena Plaza, with 64,000 sq
m, followed by Mammut I+II, with 56,200 sq m and Market Central (AIG/Lincoln investment
project) with 44, 000 sq m. Between 2005 and 2009 four up-scale malls with large movie
theaters with IMAX capabilities opened in Budapest: Recsei Center, Mammut II, Arena and
Sugar. Malls have also opened in countryside cities such as in Szeged, Gyor, Debrecen, Pecs,
Miskolc, Nagykanizsa, Kaposvár, Zalaegerszeg, Szekesfehervar, and Kecskemet.
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