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Zadik Bino's company Paz intends to expand the Yellow chain of convenience stores, attached to its gasoline stations throughout Israel, with the aim of transforing the chain into the third largest grocery chain in Israel. The holding company plans to increase the number of Yellow outlets, located at most of Paz's 260 gas stations, and expand some of the existing stores. It has apparently not been decided whether the stores would be branded as Yellow, Yellow Market, or some other brand.

Yellow Market was launched as a new pilot format this year, on a 200-square-meter area that serves as a fully stocked small grocery store, including fruits, vegetables and frozen meat products. The company had earlier announced that three branches would be tested in the Netanya area, Hadasim and Rehovot, and now intends to increase the number of outlets.

In an interview to TheMarker last September, outgoing Paz CEO Modi Ben-Shach described the issues that lay ahead. "We have yet to complete the big retail move, in other words, to decide whether to complete the broader distribution of outlets, and then make a decision on whether to establish a new chain," he said. "The [new] CEO will have to consider this question. The decision will be whether or not to transform the convenience stores into something larger, similar to the Yellow Market, or whether to get out of the gas station sites, and compete with existing grocery chains."

At the time, Ben-Shach also clarified that Paz did not intend to acquire an existing chain.

High margins, for a grocery chain

Paz's chain of Yellow convenience stores, founded in 1998, currently has 167 outlets. According to the company, its 2006 revenue reached NIS 270 million, after its 2005 sales totaled just NIS 162 million, reflecting an increase of about 65 percent. The company also reports gross profit totals more than 30 percent on its sales, high for a grocery chain. The Blue Square and Super-Sol grocery chains reported gross profits of 26 percent on 2006 sales.

In the past, the chain has forecasted an ambitious sales turnover of a billion shekels by the year 2010.

With the release of its quarterly financials, incoming CEO Yona Fogel told TheMarker that Yellow?s increased activity in 2007 is due to the opening of new outlets, and in particular, the development of existing stores, whose turnover has risen by more than 25 percent compared to last year. "We continue to implement innovations with various moves such as increasing introduction of fresh food, presentation of the chain as a quality outlet for coffee and food, and expansion of advanced services in the stores," he said.

Bino, a banker by trade, has considered entering the retail grocery business a number of times. Paz made a bid for the Blue Square chain of supermarkets, but lost to Dudi Weisman's Dor Alon, and for years considered possible cooperation with Super-Sol. A spokeswoman for Paz responded that the company has no intention of going into the large supermarket business.