The Competition Council (the CC) concluded its market surveillance on competition in the retail of convenience consumer goods for the period 2018–2022, while also outlining trends for 2023. In the market surveillance it was concluded that competition between retail chains exists in Latvia as a whole, but in certain areas of Riga competition is limited and should be promoted. The entry of the LIDL brand into the Latvian market in 2021 marked a significant change in the market, creating competition for market players such as RIMI and MAXIMA.

Market structure

After 2017, RIMI and MAXIMA strengthened their market positions in the Latvian market, which was also influenced by the decision of Prisma Latvija to exit the Latvian market, leaving vacancies in several multifunctional shopping centres. In 2018, RIMI and MAXIMA also started to expand into the small store sector (Express stores), thereby intensifying competition in the local area. And during the COVID-19 crisis, consumers actively started to take advantage of e-shops. The combined market share of the two largest retail chains declined significantly in 2022 due to changes in the market structure, together accounting for around 50%.

The market concentration index (HHI) in the convenience retail market exceeded the threshold of 1800 per year between 2018 and 2021, indicating that the market structure was highly concentrated, but from 2022, when the new entrant LIDL expanded in the Latvian market, the market concentration decreased significantly to a medium-concentrated market.

In 2022, the market share of LIDL ranged between 10–15%. The new market participants forced the other retail chains to think harder about retaining their loyal customers through various promotional and support activities and increased advertising and marketing budgets. The impact of LIDL is felt most strongly by those retail chains located in the vicinity of LIDL stores.

At the same time, small retailers, i.e., buying groups with market shares below 10% of the market, were actively consolidating between 2018 and 2022 to increase their competitiveness vis-à-vis large market players.

Competition between traders

According to the results of the consumer survey, more than two thirds of respondents have a positive view of competition in the retail market for everyday consumer goods both in Latvia as a whole and in individual neighbourhoods of the Riga City neighbourhoods. MAXIMA and RIMI stores together are preferred by more than 70% of consumers. New market participants, mainly LIDL retail stores, also have a positive impact on the food and essentials market, with almost half of the respondents planning to shop there.

The retail market for everyday consumer goods in most of the Riga neighbourhoods is relatively competitive, with at least six different brands. At the same time, in the neighbourhood of the centre, Grīziņkalns, Iļģuciems, Jugla and Pļavnieki, one retail chain – RIMI or MAXIMA – accounts for more than 40% of the retail market in a given neighbourhood in terms of turnover. The CC concluded that competition in these neighbourhoods of Riga should be promoted and that mergers affecting the competitive situation in these neighbourhoods should be given special attention in the future.

In its market surveillance, the CC concluded that there are no significant administrative barriers to new market participants in Latvia. This is also supported by Latvia’s second place on the retail restrictiveness index among all EU Member States, which means that regulatory restrictions on the establishment and operation of retail outlets are minimal. The entry of new market participants into the Latvian market in the period 2018–2022 was influenced by global events such as the timing of COVID-19, while the sustainable existence of market participants in Latvia was determined by internal factors such as financial considerations.

At the same time, in the view of the CC, the opening of newly built stores in the Latvian market, in particular in Riga, is problematic. This is due to the scarcity of retail-friendly locations in the spatial plans, which may hinder the entry of new market participants. Thus, in the view of the CC, the Ministry for Environmental Protection and Regional Development should review the availability of locations for convenience stores in urban spatial plans in order to promote economic growth and ensure effective competition.

Market power is strengthened by private-label products

In the market surveillance, the impact of private labels in enhancing the competitiveness of market players was also examined. The average share of private label turnover in total retail turnover in Latvia in 2022 was 20%, slightly above the global average (19.4%) but below the Western European average (36%). The presence of private labels, following a lower price strategy, provides an opportunity for a retailer to not only increase the market share of a given product category but also the retailer’s own influence in a given market. When analysing the market shares of Latvian retailers in relation to the share of private label turnover, the CC concluded that private labels are more developed by the largest market participants, while certain buying groups have also expanded their private label assortment, which shows the importance of private labels in the context of more effective competition.

In contrast, the share of national products in total (both food and non-food) turnover in convenience retail chains varied from chain to chain between 2018 and 2022, ranging from 0–5% to 40–50%. At the same time, there was no overall increasing trend in the share of national products. In the view of the CC, retailers should be more receptive to offers from national suppliers by reviewing the share of Latvian national products on their shelves, as well as by reviewing their commercial strategy for the mark-up of national products. 

About market surveillance

The objective of the market surveillance was to examine the competitive situation in the retail of convenience consumer goods across Latvia and in the Riga City neighbourhoods, including the composition of market players and their level of concentration. The impact of private labels on enhancing the competitiveness of market players, as well as on assessing barriers to entry, was also examined in the market surveillance.

The market monitoring covered 12 retailers (retail chains) in Latvia – RIMI, MAXIMA, LIDL, SKY, SPAR, TOP, Mego and Vesko, Aibe, Citro and Eldo, LaTS, Beta, and Elvi. In addition, a consumer survey was carried out to ascertain consumer shopping habits across Latvia and in the Riga City neighbourhoods, including consumers’ views on the substitutability of retail chains.