For its first step out of Zagreb, Žabac Food Outlet has chosen Velika Gorica

On one of those hot days between the two August holidays, when Zagreb relaxes so much that even the parking lots near large shopping centers are empty, and the few customers in supermarkets wander around carelessly, more with the intention of staying in the cooled space as long as possible than to shop, there is a crowd in the tiny store Žabac Food Outlet in the rented space of Name at Kvatrić, or just behind it, on Nemčićeva Street. In the store overcrowded with a relatively small assortment but at the same time large quantities of goods, two cashiers are ‘printing’ receipts without a break. I ask one if it is always this crowded.

– Always! We have the lowest prices! Are you visiting us for the first time? – she replies with a counter-question.

I shyly admit that I am. A younger woman joins the conversation, who is packing everything she bought into her bag at the checkout, which is about 50 liters in volume, and in the end, when the cashier hands her a bill for 31 euros, she concludes that it is not enough and adds another ten packets of candy.

– You live in Zagreb and this is your first time in this store. I come from Split to shop here – says the woman.

Symbolic but Healthy Profit

I recount this incident to Mario Žamboki, the initiator of the Žabac stores, and he says that indeed, people from all over Croatia come to Zagreb to shop at Žabac. I ask him what is being waited for, why Žabac does not bring itself closer to customers outside of Zagreb, and I learn that this process has just begun. By the end of this year, Žamboki announces, Žabac is stepping out of Zagreb for the first time and opening a store in Velika Gorica. This will be the ninth store under the name Žabac Food Outlet and will cover 600 square meters, the same size as the largest store in Zagreb.

– Our expansion plans are realized in exactly this order: Zagreb – Croatia – Europe – the world. We have covered Zagreb and will no longer open new stores there. Now we are going to gradually open them across Croatia, at a pace that will allow us to gather funds. Opening new locations is very expensive, and we do not have inexhaustible sources, so we have to do it measuredly – says Žamboki.

Although the revenue of the company MMV Frog, which stands behind the Žabac brand, is skyrocketing, the net profit is more than modest, but in fact, considering the unique business model, it is a real miracle that it even exists. In the last five years, the company has increased its revenue by more than 150 percent, from 4.86 million euros achieved in 2020 to 12.45 million euros last year, in which the net profit amounted to only 212 thousand euros. Although this was almost double what it was in any of the previous years, it is clear that these are not amounts that can be considered for sudden expansion. And it is evident that Žamboki does not rush into borrowing either. In the credit report of the company MMV Frog, compiled by Dun & Bradstreet, with an explanation of the credit rating B2, it states that the company’s debt share in financing is below average, but so is its payment capacity; however, its credit exposure from operational business is excellent. In other words, it is a fairly healthy company.

Global Recognition of the Idea

MMV Frog is a family business whose only nominal owner is Nela Pedišić. The director is her daughter Maja Žamboki, and the owner’s son-in-law Mario is not formally represented in either the ownership or management structure. However, he is the person who, together with his wife, conceived and developed this unique retail model in Croatia, which is widely recognized as ‘a store where prices are 50 to 90 percent lower than elsewhere’ and operationally manages all segments of its business, from procurement and logistics to pricing and sales.

The first store under the Žabac Food Outlet brand was opened by the Žamboki couple at the end of 2016, realizing the opportunity in the information that more than 400 thousand tons of edible food that is nearing its expiration date is wasted in Croatia every year, whether it is surplus or in damaged packaging. The idea was simple: to buy such goods and offer them to customers at significantly lower prices than they are sold in other stores.

The following year, this idea was crowned with global recognition – at the global competition of Euromonitor International, the leading global house for market analysis and research, industry, economy, and consumers, Žabac won second place for its innovative retail model. To clarify that this is not some trivial recognition, let’s mention that that year, the first place at the Euromonitor competition was won by the Chinese Alibaba, and the third went to Caltex Australia, the largest Australian fuel supplier and leading retail chain that was just transitioning from a traditional oil company to a multifunctional retail network.

More Ethics than Marketing

Žabac and its incredibly low prices quickly became known, but just as quickly, this retail brand gained the image of a store for the poor. Partly because its stores are indeed unremarkable as they are filled with boxes in a small space, like in large discounters, partly because consumers have generally understood from the entire procurement concept that it is about goods nearing their expiration date, and partly because Mario Žamboki has emphasized the ethical aspect of the business more than the marketing in public appearances.

– Our project has a vision to bring a smile back to the population, so that regardless of how full or less full their wallet is, they can always afford the best brands on the market, and that at half the price. We looked at the matter from an ethical and economic perspective and realized that wasting food is unacceptable, as it depletes natural resources such as water and pollutes the environment – he stated when presenting the first Croatian food outlet to the media.

Thus, in the perception of Zagreb consumers, Žabac has become ‘a social store where cheap food products that no one wants because they are nearing their expiration date are sold’. Incorrect! First of all, in Žabac’s assortment, most products are from A-brand categories, and for each product, it is written in large letters next to the price when its expiration date is. In the mentioned store on Nemčićeva Street, I did not notice a single product whose expiration date is less than a month away.

Procurement Model ‘Hello, Bing!’

The assortment always contains about a thousand different items, of which only about a third is always available. The rest are products that are procured depending on what procurement opportunities arise.

– We often work on the principle of ‘Hello, Bing!’, like in ‘Alan Ford’ – Žamboki joked on this topic in an interview for Lider.

– We only work with hot goods, there are no meetings for procurement.

For illustration, in this way, Žabac procured fifteen thousand sandwiches that remained unsold after the concert of Marko Perković Thompson in early July at the Zagreb hippodrome. During the concert, the price of those sandwiches was eight euros each, and in Žabac, they sold out within four days at a price of 0.29 euros. Or, the company Stanić Beverages was changing the packaging design for the iced tea Juicy, and by the planned date for the release of the new packaging, it had twenty thousand pieces left with the old design, which ended up in Žabac just before summer. Furthermore, Orbico had a lot of unsold Lindt chocolate bunnies left after this year’s Easter. They were sold in Žabac with the marketing slogan ‘What does the bunny know when it’s Easter?’.

So, one does not come to this store with a list of what one needs, but to buy for little money what one does not need but brings joy.

There are three general categories of goods sold in Žabac: stock (surplus goods produced in factories); damage (products that were damaged during production or whose packaging is not perfect); and expiration (products nearing their expiration date). In the beginning, Žamboki tells us, it was quite difficult to convince manufacturers, traders, and distributors to sell them their surpluses that would otherwise only end up in write-offs, ‘and now they are pushing goods to us themselves’.

Demanding Logistics

Today, the company MMV Frog has procurement contracts for goods at promotional prices with almost all major food companies in Croatia, some non-food (such as Labud, from which it procures detergents sold in bulk, making it unique in Croatia) and a larger number of wholesalers and distributors of imported products. Regular customers in Žabac tell us that attractive items that are otherwise not found elsewhere in the Croatian market are often available in that store. Žamboki is constantly looking for new suppliers, and he mainly finds them at various fairs in a number of countries, from Spain, France, or Germany to Serbia, Bosnia and Herzegovina, or Hungary. Sometimes he manages to procure one hundred pieces of a product, sometimes ten thousand.

The logistics of this business model is extremely demanding. MMV Frog does not have its own warehouse because, as Žamboki says, ‘it is a big expense’. Everything that is procured is immediately transferred to the stores, and when that is not possible due to large quantities, the goods go to warehouses where they rent empty spaces. These are also places for declaring goods according to all Croatian regulations.

– Every single product we sell has a certified health certificate, and it comes to us through the official distribution channels of its manufacturers – domestic and foreign brands and retail chains from which we transparently purchase – explains Žamboki, who knows the price of every product in Žabac by heart to ‘keep things under control’.

Due to excellent cooperation with domestic and imported manufacturers of chocolates, sweets, ice creams, and similar assortments, Žabac stores are very attractive to children. A bar of Dorina or Milka, Kinder eggs, or Oreo cookies at half the price compared to other stores or a 7Days croissant with a 74 percent discount is enough to attract kids.

Because of the kids, Žamboki abandoned the realization of the second business idea he had announced – a drink outlet.

– We abandoned hospitality because we did not want to sell cheap alcohol to young people – he told us.

No Big Bosses

According to data we are copying from Poslovna Hrvatska, the company MMV Frog had 91 employees last year. Among them are a few foreign workers (– If it weren’t for the Filipinos, we wouldn’t be able to open new locations – Žamboki told us), and in cooperation with the Center for Inclusive Activities, people with disabilities are regularly employed in Žabac, often for their first job. The center provides job assistants, while Žabac provides training and salaries. As for salaries, the average monthly net salary last year was 725 euros. And although I know of some much larger retail chains, with much larger revenues and profits, where salaries are even lower than that, I wonder what motivates cashiers – who without a break in one working day transfer several tons of goods from the beginning to the end of the cashier tape – not to seek a better-paying job.

The answer is likely hidden in the work and business ethics of their employer, who claims on the Žabac website that there are ‘no big bosses in leather chairs, nor managers without warehouse experience’ (…), that ‘all the managers of our branches started with us as cashiers, so it is not a problem for them to jump behind the cash register whenever there is a crowd or need. The male part of the management still unloads goods from trucks today’. (…) ‘From a handful of people who fit in a caddy, we have grown into teams for trucks. Soon there will be more than a hundred of us, and we plan to continue to (g)row and expand. One thing will never change: all our directors will continue to be workers!’