The supermarket has come of age

When Pavi opened its doors in Qormi just before Christmas last year, shoppers flocked to check out Malta's largest ever supermarket. The awe factor may have worn off, but customer loyalty is flourishing. Now a Lm5 million high-yield bond issue could just be the added incentive to keep them coming in greater droves. Joanna Ripard met Pavi managing director Victor Grech and chairman Paul Gauci.

The bottled mineral water and the soda crates go in the trolley first, then the detergents and the toilettries, then the canned foods and so on... then the cheeses, hams, frozen foods, and lastly the fresh bread, then check out.

Victor Grech has spent every working day of the past 27 years on the supermarket shop floor - long enough for him to know Maltese groceries shoppers' every want and wish, like how they prefer to stack their trolleys.

So he designed a supermarket to meet those criteria. First: ample parking (500 spaces should be ample enough). One floor - no escalators; shopping should not involve escalators. From the entrance to the exit, items stacked in a convenient, practical order with no sections to get in and out of, wide aisles, a vast selection of brands and products (fresh or pre-packed), a choice of price ranges, friendly customer care, minimal queuing at the check out.

Thirty thousand customers every week, 200 new applications for the bonus card loyalty scheme a day, and a turnover of Lm4.7 million in Pavi's first six months which is set to double by the year's end, should stand as adequate evidence that Victor Grech seems to have got it right. And the Lm8.4 million complex's first birthday is not until another month.

Mr Grech is the third youngest of the 11 hard-working, hands-on siblings behind the hugely successful Smart Supermarket in Birkirkara. The brothers and sisters had agreed that their children would not join the business, and with three children of his own with acumen to nurture, Mr Grech decided to part company with the venture he helped grow, and set off to realise a long-standing ambition - Malta's first custom-built supermarket.

Backed by his brother-in-law Paul Gauci, who is the chairman of Pavi Group and who brings with him 40 years of retail experience (the Gauci family have brought a string of high street fashion franchises to Malta in recent years, including top sellers Zara and Mango), and his eldest children David and Caroline as executive directors, Victor Grech has essentially left one long-standing family business to build another.

His confidence in this field is resolute. In the last 15 years, Maltese supermarkets have mushroomed and prospered, but there have been some spectacular casualties along the way. Mr Grech knows how best to look after the business - keep your finger on the pulse, always be present and keep the customer happy.

"Pavi is a solid business," he says. "It is here to stay. I'm not worried about the competition - existing or in the pipeline - because I have total confidence in this project. There is always a member of the family on the shop floor to deal with problems as they arise and solve them. Any complaints are dealt with swiftly and amicably. We have 25 checkouts so queuing time is greatly reduced.

"Pavi stands for total customer satisfaction. That is what has made it so successful. That is why we do not need to advertise heavily or embark on glossy marketing campaigns. Our reputation has spread by word of mouth - the best way.

"Pavi is not a showroom that has been converted into a supermarket. This is a carefully designed shopping complex, accessible from every part of Malta within 25 minutes, with a top quality, convenient supermarket at its core. You can get your shopping done in 15 minutes or spend an hour and a half here if you like. Stop for coffee or a snack before or afterwards, have your car washed in the meantime, drop off your drycleaning, visit the bookstore, check out the latest mobile phone offers, pop into the perfumery... it's a one-stop shop. The market demanded it."

The market, he points out, demanded even more choice. Maltese groceries shoppers are demanding and insist on availing themselves of their favourite Italian, British, French and Maltese brands. With over 45,000 items on the shelves, Pavi has met those demands, and Mr Grech points out, surpassed them.

Under an exclusive franchise agreement with Auchan (Italy), Pavi also stocks Auchan's entire 'Primo Prezzo' economy range - everything from tissues to frozen pizza - at half the price of mainstream brands. That besides a wide range of products bearing the Auchan brand, a middle range between the economy range and the continental brands. Both the 'Primo Prezzo' and the Auchan ranges have proved to be highly popular with shoppers, and shelves have to be continuously restacked.

Pavi's 6,000 square-metre retail area is supported by a back office and manufacturing operation, besides storage and parking, occupying most of the remaining 10,000 square metres of the site of the former Castellana jeans manufacturing plant (Pavi Group is the freehold proprietor of both the site and the complex).

Besides the administration offices, there are two floors of storage - one for toiletries and detergents and another for foodstuffs - preparation areas for traditional Maltese foods, Chinese food, fresh pasta, a confectionery, an in-house bakery, packaging areas for a range of items like spices, snacks or meat, coldrooms, and greengrocery storage. Mr Grech explains that by housing the entire operation under one roof, there is more efficiency in quality and stock control and transportation costs are significantly cut.

Now Mr Grech and Mr Gauci are hoping customers will have an added incentive to show their loyalty to Pavi - by investing in it. The Malta Financial Services Authority gave Pavi the green light to issue Lm5 million (€11,646,867) 7 per cent secured bonds on September 28.

Mr Gauci, the financial 'visionary' on the Pavi Group board, explains: "It is a matter of rescheduling our financing and paying off some creditors we have left. And it is an excellent opportunity for the public to be part of this project."

Is there a second Pavi in the pipeline? "No," Mr Gauci insists. "We are committed to the expansion of this project. McDonald's open a restaurant here in April, and we are studying how to fill some vacant retail space wisely. We have still to open the bottle shop stocking a wide range of wines and spirits, besides a large wine cellar for our more demanding customers. Then there's the DIY centre that will open next year.

"We will concentrate on increasing our customer base, improving our service, and ensuring that Pavi is the best place to shop for groceries and much more. I'm not excluding anything. But, no, there won't be another Pavi any time soon."

The Lm5 million bond issue is backed by property valued at Lm8.4 million and carries a coupon of 7%. The bonds are available at a nominal value of Lm100 (minimum subscription Lm1,000) and are due for redemption in 2017 unless redeemed early in October of any year from 2014. Subscriptions open on October 15. An announcement on the basis of acceptance will be made on October 26. The Pavi Bond will be traded on the Stock Exchange's Alternative Companies List. Charts Investment Services Ltd is the sponsoring stockbroker. Bank of Valletta is the security trustee.