The three Baltic states that sit between Russia and Belarus to the east and Poland to the south have experienced some two decades of rapid development since their independence from the former Soviet Union, emerging with modern grocery retail sectors. The growth of the sectors in the Baltics has been clearly influenced by the countries’ cultural ties, and geographical vicinity, to Scandinavia, although Lithuanian retail group Maxima has established itself as the market leader across the region.

Although one of the smallest countries in eastern Europe, Lithuania is the largest nation in the Baltic region by population and, with the exception of Estonia, the most developed of the three nations.

According to market analyst Planet Retail, the top five retailers in Lithuania account for around 60 per cent of the overall market, principally due to the domestic dominance of Maxima, which itself controls an estimated 35 per cent share of the sector.

The retailer currently operates 229 stores in the country, giving it a share of over 36 per cent in the Lithuanian grocery retail market. A similar picture is repeated in nearby Latvia, where Maxima has 128 stores with a 10.6 per cent market share, and Estonia where the retailer operates 74 outlets with a 16 per cent share of the market.

But, while Lithuania has by far the most developed economy in the region, it has been no less affected by the global economic recession.

Although the country’s gross domestic product has increased steadily over the last decade, growth abruptly slowed to a halt in 2008, before Lithuania slipped into recession last year. According to Planet Retail, the first signs of recovery are not expected until 2011.

Evidence of the affect the recession has had on consumer spending in the country, where some 50 per cent of retail sales are generated through food sales, can be easily found in the form of a slump in Lithuanian grocery retail sales over the last 12 months.

Figures provided by Planet Retail show that total grocery retail sales in the country dropped to €4.6m last year, from €5.4m in 2008.

A similar pattern could be seen, albeit to a lesser extent in the neighbouring Baltic republics of Estonia and Latvia, where 2009 grocery retail sales totalled €2.3m and €2.8m respectively, from €2.6m and €3.4m a year before.

The affects of the downturn could be clearly seen in the results of the only foreign-owned player in the sector, Ahold’s Rimi Baltic chain, which is operated through its Swedish subsidiary, Ica. Rimi Baltic, which holds a 16 per cent share of the Estonian market although it only has stakes of 10.5 per cent and 7 per cent in the Latvian and Lithuanian equivalents, ended 2009 with a 19.3 per cent sales decrease in December.

In the subsidiary’s strongest market, Estonia, where it operates 78 stores, sales fell by almost 13 per cent compared with December 2008, while in Lithuania sales slumped by just over 22 per cent. For the year as a whole, Rimi Baltic’s sales in the three countries, where it runs 245 outlets, totalled €1.15bn, a 12 per cent decrease compared with 2008.

However, although Rimi Baltic has undoubtedly suffered tougher trading times of late, its considerable presence in all three countries serves to demonstrate the growing interest of foreign retailers from outwith the Baltic region in the market.

International buying group Coopernic acquired an 80 per cent stake in Lithuanian retailer Iki in 2007 and the company now operates a total of 118 supermarkets in Lithuania and 59 stores in Latvia. Finnish retailer SOK also opened its first two stores in Lithuania in 2009, despite the domestic dominance of Maxima and Rimi Baltic.

But, while western retailers like Ahold and Coopernic have been building their stakes in the Baltic market, others have had rather less positive experiences. The Hungary-based retailer CBA entered the Lithuanian market in 2003 in a joint venture deal with the country’s Aibe group. However, the company withdrew from the arrangement in 2007. Similarly, top German discounter Lidl withdrew from its stated plan to enter Lithuania in 2006, citing the country’s small size.

But, in spite of the presence of Ahold, Lithuanian group Maxima remains by far the largest grocery retailer in its native country, dominating both the hypermarket and supermarket sectors.

Maxima also has strong presences in Estonia and, in particular, Latvia and, according to Planet Retail, the company now has its sights set on expansion into Poland, although the analyst stresses that it “remains to be seen whether or not such a move is too ambitious” a step for the group.

But, while Maxima has made a substantial impact on the Lithuanian and to a lesser extent Latvian markets, the Estonian grocery retail scene is dominated by its own domestic success story – the ETK association of retailers. The group operates a network of around 188 supermarkets and neighbourhood stores around the country, particularly in low income, rural areas where there is little competitive pressure from retail chains.

However, Planet Retail predicts that given the long-term trend for significant sections of the Estonian population to migrate from the countryside to cities, the future for cooperatives such as ETK “will become starker”, especially as it says that many of the group’s stores are outdated in terms of store design and technical equipment.

Further expansion across the Baltic states may also come from Maxima’s Lithuanian rivals, who have already began to make progress outside of their domestic confines.

Coopernic-owned Iki entered Latvia in 2004 and now operates a substantial network in the country, while Lithuania’s second largest retailer Norfa, which currently has 124 stores and an estimated 10.5 per cent of its domestic market, expanded into Russia in 2007. The company has reportedly opened stores in Ryazan, Kolomna and Yegorovsk and is understood to be looking to purchase more plots of land.

Of course, none of the Baltic republics are particularly dynamic grocery retail markets when compared with larger, western European countries, but the gradual predicted recovery of the three nations from recession over the next two years could yet entice more development in the region over the months to come.