Hungary firm buys major stake in Auchan

Hungary’s Indotek Group acquired a 47% stake in the French grocery hypermarket chain Auchan last week. Group founder-owner Daniel Jellinek, one of Hungary’ s richest men, said Auchan could realistically now become a top-three player on the Hungarian retail market. It is currently the ninth largest retail chain in Hungary.

“Our plan is to become the third-largest player for market share within five to six years, as we have the capital and presence to do so after the transaction closes,” said Jellinek, who has business links to Hungarian Prime Minister Viktor Orban’s son-in-law Istvan Tiborcz

The Indotek Group also purchased the company owning 100% of retail premises in Auchan stores. Auchan’s management will stay in place for at least the short term, but Indotek will be involved in strategy. The companies plan to share real estate experience and retail networks, and “leverage synergies”. Shop openings can be expected, especially in provincial cities, according to the group. Indotek has entered several European retail markets in recent years, and increasingly invested in the agri-food sector. 

The transaction was notified to the EU’s Competition Authority, and a procedure pending, with some competition aspects still to be clarified.  The Hungarian Competition Authority (GVH) has not yet been officially notified, and the conclusion date of the procedure unknown. The GVH’s official role will be to assess  the impact of the merger on consumers, the pros and cons of the merger, market structure and competition.

Foreign supermarkets squeezed in Hungary

Germany’s Lidl is currently Hungary’s leading supermarket in terms of sales, followed by Austria’s SPAR, the UK’s Tesco, Hungarian firms CBA and Coop, Germany’s Aldi, Ireland’s Penny Market, and Hungary’s Real, with Auchan in ninth place.

Around a decade ago Orban publicly identified four “strategic sectors” – banking, media, energy and retail – that he would like to see in majority Hungarian hands. This goal has been most difficult to achieve in retail, and foreign chains have been squeezed by the Orban government in recent years.

In December 2021, Orban’s government rushed through a law ordering supermarkets with revenues of over HUF 100bn (EUR 250mn) to hand over food too days before its “best before” date to a state-owned charity. 

Despite surpassing a HUF 100bn (EUR 263.2mn) threshold laid down in an Orban-government law, as the Hungarian retailers operate as franchises, only foreign firms are subject to the rules. The law also prevents the foreign supermarket chains from restructuring.

As food prices spiralled during lockdown, Hungary set a price cap on six basic foods, including sugar, flour, and chicken, and hiked tax rates for big retailers from 2.7% to 4.1%. Now the Orban government has added eggs and potatoes to the list of price-capped foods. 

Auchan’s controversial presence Russia

Auchan is a French multinational retail group headquartered in Croix, France. It was founded in 1961 by Gerard Mulliez and is owned by the Mulliez family, who has 95% stake in the company. With 354,851 employees, of which 261,000 have 5% stake in the company, it is the 35th largest employer in the world.

As of 2022, Auchan is one of the world’s largest retailers with a direct presence in France, Spain, Portugal, Luxembourg, Poland, Romania, Hungary, Ukraine, Russia, Taiwan and Senegal. In 2022, the company’s revenue in Russia amounted to RUB 237bn (EUR 2.41bn).

Auchan is a rare example of a Western company continuing to operate in Russia after the country’s invasion of Ukraine in 2022, actively funding and supporting Russian military effort.

Auchan Russia reportedly both organises “mandatory voluntary” collections among its employees a joint investigation found. The Ukrainian National Agency on Corruption Prevention in February listed the company among International Sponsors of War after websites The Insider and Bellingcat, and French daily Le Monde established that Auchan Russia supports the Russian military in Ukraine.

Official Auchan communications claimed these items were supplied to Donbas as “humanitarian help” but as noted in the investigation, all collected items, including cigarettes, were targeted at “adult men”, and intended for Russian soldiers. Auchan denied this and justified its decision to stay in Russia as beneficial to the civilian population.

Indotek major property manager

Jellinek and his partners founded management consultancy Kevin & Thorn Bt. in 1997, and in 1999 adopted the name Indotek. The Indotek Group entered the commercial real estate market in 2014 and is now a major player for class B and C commercial properties in Hungary with more than 300 properties, employing around 240 staff.

Indotek’s real estate portfolio includes more than 20 office buildings, warehouses and industrial facilities – managing many industrial properties at the former Csepel Works – and several hotels, including Budapest’s Gellert, and Sofitel.

In the last decade it has acquired 20 shopping centres in large Hungarian cities, among them Corvin Plaza and Duna Plaza in Budapest, Alba Plaza in Szekesfehervar and Debrecen Plaza. In 2019 the Group made its foreign market entry when it purchased Promenada Mall. In January 2020 Indotek purchased Diofa Alapkezelo, owned by Takarekbank, which is considered to be Hungary’s third largest fund manager.