May 31, 2016

Schwarz Group surges relentlessly forward

Speedometer (photo: Björn Wylezich/Fotolia)
Flashing its lights for the guy ahead to get out of the way, Schwarz Group continues to thunder down the fast lane of the international retail autobahn like a Porsche Cayenne.

The secretive Swabian parent of small- and big-box discounters Lidl and Kaufland now looks almost unstoppable on its route to world domination.

Meanwhile, the sober clique around elusive founder Dieter Schwarz at head office in Neckarsulm must be almost drunk with success. Exaggerating? Just look at the needle on the speedometer, dear reader, you'll find the latest figures exhilarating...

Bullish as ever, CEO Klaus Gehrig is determined to break through the €90bn sales mark this year. He is likely to succeed given his past record. In the business year to the end of February 2016, the group pushed net revenues by an impressive 8 per cent to €85.7bn, following a 7-per-cent rise the year before.

A modern Lidl store near HQ in Verona (photo: Lidl)
Super modern: Lidl is constantly upgrading its store base
This only increases the lead over its rivals. Net sales at French leviathan Carrefour rose by a healthy 4 per cent last year to €77bn, but this was matched by Kaufland with plus 4 per cent (€21.1bn) and not a patch on Lidl with 9 per cent (€64.4bn).

Depending on how one chooses to calculate food & non-food, national VAT rates and currencies, this would already make Schwarz Group the world's third-largest food retailer after US giants Walmart and Kroger, but before Aldi.

The major growth at Schwarz Group is essentially attributable to a continuous increase in capex which is set to jump this year from €5.2bn to €6.5bn. These vast sums are primarily funnelled into the building of new stores and the modernisation of existing ones.
 
A Kaufland hypermarket (photo: Kaufland)
Bright light: A Kaufland hypermarket
Most of Kaufland's 650-odd store base are being revamped as part of a five-year plan, while Lidl rolls out a new concept at home and sets its sights on new foreign markets. 15 outlets will be opened in Lithuania at the beginning of June, and entry into both the US and Serbia is planned for 2018.

For all the recent trading up and talk about being a supermarket, the big brass insist that Lidl will remain true to its roots. "We are discount and will stay discount," says Lidl boss Sven Seidel. "We want a modern shopping atmosphere, but we aren't moving away from a discount format."

Schwarz Group CEO Klaus Gehrig (photo: Schwarz Gruppe)
Klaus Gehrig: "We are cheaper than Aldi"
In other words, Lidl intends to stick to a limited assortment, mean & lean business processes, and low prices. But Klaus Gehrig recognises that there is a problem on price: "We are cheaper than Aldi, but consumers continue to perceive Aldi as price leader. We intend to change that."

Lidl plans to combat this with a considerable increase in special offers. Its new "Super 5" offer, for instance, puts five brands on offer for one whole week.

This is echoed by sister company Kaufland whose CEO Patrick Kaudewitz is also sharpening prices. Here the compact hypermarket operator can draw on both brands and its "K-Classic" own label programme.

So watch out the competition. In 2010, Lebensmittel Zeitung warned the trade that Schwarz Group would soon beat Tesco in the international sales ranking. It did, albeit with a lot of help from Tesco itself. One must now ask how long it will take before Lidl alone is as big as Carrefour? And perhaps Kroger should look for another acquisition?


Related article in German: By Christiane Preuschat, Angela Wisken, Jan Mende & Hans-Jürgen Schulz in Lebensmittel Zeitung, no. 21, 27.05.2016


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