Building a national champion: the rise of Profi
Stores and sales more than tripled and headcount doubled as Profi drew on MidEuropa’s proven sector expertise in scaling retail businesses to create Romania’s leading supermarket chain.
There are lots of recipes for success, but the key ingredient for retail businesses is customer-centricity. Putting clients at the front and centre of strategy and creating objectives to drive it ensures sales follow.
MidEuropa knows this well, having recently sealed the largest private equity-backed grocery deal in Continental Europe with the sale of Profi Rom Food SRL (“Profi”) to Ahold Delhaize, one of the world’s largest food retail groups. The transaction marked the end of a highly successful six-year growth journey, which saw the company become a national champion through careful fine-tuning of the customer proposition, including an ambitious roll-out of stores and very local approach to suppliers and customers. Profi stores more than tripled in number to over 1,650, while employee numbers grew by 15,000 to exceed 26,000, making Profi the largest private employer in the country. A keen focus on customers saw revenues soar from c.€800 million to c.€2.6 billion – with much of it invested back into Romanian suppliers, including food producers, farmers, and distributors.
The enterprise value at sale was €1.3bn (corresponding to €1.8bn post IFRS-16) and reflects a phenomenal journey, which saw sales grow 3.3x. The exit was the fifth liquidity event for MidEuropa in 2023.
The success underlines the importance of extensive sector knowledge and experience-based expertise – Profi’s sale is MidEuropa’s second €1bn+ exit in the region’s retail sector, following the sale of Polish convenience chain Zabka to another PE house (CVC) in 2017. Zabka’s story, like Profi, was predicated on MidEuropa’s experience in Central European retail roll-out.
MidEuropa’s stewardship saw Profi’s logistics functions upgraded and centralised, with three new distribution centres opened. The customer experience was enhanced through segmented offerings to reflect local tastes, and stores were modernised to make them more inviting with tailored assortment and fresh food offering. Corporate governance was also enhanced, with best practices implemented – a bread-and-butter value accelerator for experienced private equity firms such as MidEuropa.
Putting people first
The numbers are impressive, but the story is also a human one, with the roll-out bringing fresh, local produce in a modern shop to rural Romania and helping communities to conveniently access healthy food at reasonable prices. The business was founded in 1979 and covered all 41 counties across the country at the time of its sale to Ahold Delhaize.
Profi is a truly Romanian retailer, with local producers having a much bigger shelf space than foreign imports, in line with local customer demand,” explains Robert Knorr, Managing Partner at MidEuropa.
He adds that the focus on local is a real differentiator between Profi and other own-brand retailers and discounters, with around 80% of Profi’s assortment produced in Romania.
So keen is the focus on local, in 2022 Profi hosted an event in the Sibiu village of Apoș attended by almost 1,000 local people to celebrate local producers, promote gastronomic traditions, and preserve the cultural heritage of Romanian villages. Profi offered rural residents free access to medical consultations in a medical caravan in collaboration with the Association for Anesthesia and Intensive Care “Aurel Mogoșeanu”.
To ensure the brand could truly reach all Romanians, MidEuropa invested very significantly (over €600 million), and – anathema to most for-profit initiatives – actually fine-tuned prices to attract customers and gain market share, thus making the business sustainable in the longer-term. It required refocusing and retooling the customer proposition and processes to enable the company to grow even further. During the pandemic, the store remained open to serve its local communities despite the increased cost of labour at that time, prioritising service during a period of need.
The secret to success online is the same as offline, according to Alain Beyens, Operating Partner at MidEuropa.
It’s about putting the customer at the centre of all you do. It’s about knowing your customer and using that knowledge to provide them with the best offering to keep them coming back.”
This laser customer focus prevailed over operational improvements, with organic growth including digital enhancement playing a big part in the latter years of the investment. MidEuropa supported Profi to invest significantly into digital capabilities, with an app launched in 2022 attracting over 700,000 sign ups within two months, growing to 1.6 million by the middle of 2023. It features personalised offers, menu inspiration and games to make the experience more fun. Happy people spend more: customers’ shopping baskets are at least a third larger than non-app users.
Data is an asset that never depletes, never wears out, and can be used across unlimited areas at a near zero marginal cost,” says Gaëtan Pacton, CEO of Profi.
The data helps Profi better serve customers by personalising the experience, while automation creates positives for customers and staff alike. “The use of tech for process automation is improving the lives of customers as well as employees, as the former benefit from efficiency in their shopping while the latter are freed up from repetitive tasks to focus on more value-adding and often client-facing roles,” Gaëtan says.
Overlaying human intelligence with generative AI also helps enhance customers’ use of Profi’s app as it enables them to benefit from ideas and cost savings. A pilot in 2023 saw store vouchers and leaflets loaded into the AzureAI platform and Microsoft 365 CoPilot generate a menu or set of recipes based on the loyalty offers available.
Once the transaction is cleared by the relevant competition authorities, Profi will become part of one of the world’s largest food retail groups. Bringing Profi together with Mega Image, Ahold’s Romanian brand, is expected to complement and expand Ahold Delhaize’s Romanian footprint to provide an even stronger offering for Romanian consumers as it better serves both urban and rural areas.