July 23, 2012

Olympic peace for retailers

London Olympics (photo: Steve Oldham_Flickr.com)
Summer Olympics 2012: London in sports euphoria
Few on this planet will not wish the London 2012 Summer Olympics well. At best, they could inspire a generation of young people to health and fitness, regenerate a neglected part of London, and promote international understanding. The London Organising Committee of the Olympic and Paralympic Games, the delightfully eccentric Mayor of London Boris Johnson, and the UK authorities have strived to make the games as enjoyable and as safe as possible. Among other security measures, troops have been drafted into the metropolis on a massive scale and surface-to-air missiles stationed on rooftops. However, are retailers in London and other cities safe from a recurrence of the violence, arson and plunder witnessed on UK streets only last summer?
July 23, 2012

Talk with Mr. Tabasco

Paul McIlhenny, Chairman & CEO McIlhenny Company (photo: Gero Breloer)
Paul McIlhenny: "We get offers all the time!"
It is unusual for the owner of a company to term his products "hot as the hinges of Hades", especially when the Queen of the United Kingdom has given them her Royal Warrant. Yet this is probably an understatement when referring to Tabasco. Hellishly hot or no, Paul C.P. McIlhenny, the 68-year-old Chairman & CEO of McIlhenny Company, has a lot to be proud of given that his family's pepper sauces dominate their segment in the US. Just because Tabasco goes down like a house on fire with Cajun food in local Louisiana, doesn't necessarily mean though that it will do so in Japan or Estonia. Apparently, however, it does.
July 19, 2012

Nicolas Berggruen turns Karstadt terminator

Karstadt CEO, Andrew Jennings (photo: Karstadt)
Berggruen's executor in Germany: Karstadt CEO Andrew Jennings
Oh dear, it's started to happen already: former golden boy investor Nicolas Berggruen has made his loyal staff take the first sip of what is likely to prove a bitter cup. At the first possible moment — management hands were tied till now by insolvency agreements where staff renounced tariff wages for three years — two thousand full-time employees are to go at German department store group Karstadt. They are to leave by 2014 under the all-purpose banners of simplifying structures and greater competitiveness. Staff numbers were already decimated by about a third from 2006 to 2011. Around 2,000 full-time jobs fell to natural wastage during insolvency year 2009/10 alone. It seems to be the stock reaction of Karstadt management, whoever is at the helm: when revenues and earnings fall, staff are cut.
July 10, 2012

Metro Group's E. European hypermarket empire

real,- eastern Europe CEO, Didier Fleury (photo: Metro)
Didier Fleury: Runs real,- in eastern Europe
Metro Group's hypermarket subsidiary real,- is beginning to look like the late Roman empire — troubled within and under constant pressure to redraw its eastern borders. According to our sources, Metro could be considering ending the separation of real,- into a domestic and an international division as a possible preliminary to the sale of all Central & Eastern European (CEE) operations. (Last year "real,-" posted annual revenues of €11.2bn, a quarter of which was in the CEE region, on a meagre ebit margin of 1.2 per cent.) The same sources also indicate that both divisions could be united under top manager Didier Fleury, who has run real,- in eastern Europe since 2008. If this is true, it would seem an odd decision when one considers the need to be an insider here in Germany.
July 4, 2012

Aldi was the brand

Aldi Süd (photo: Hans-Jürgen Schulz)
Germany's most trusted retail brand
Aldi’s vast, efficient and profitable business empire has always been German retail’s greatest exponent of hard discount according to first principles. Thus, despite the occasional mild flirt with listing brands, Aldi has essentially always defined itself via own label. This could be compared with a steady and loyal breadwinner, who has been married for decades, drinking an occasional espresso with a lady colleague in the staff canteen. Now that Aldi Nord (Aldi North) has joined Aldi Süd (Aldi South) in dalliance, however, shock waves are being felt throughout the industry. Both siblings are now actively sounding the market for further brands to list.
June 28, 2012

Talk with Beam, Inc. boss Matt Shattock

Matt Shattock, CEO Beam (photo: Beam)
Matt Shattock: "We see a bright prosperous future as a stand-alone company"
This year has been a historic one for Beam, Inc. In October 2011, the world's fourth-largest spirits maker separated from Fortune Brands to become a publicly-traded company on the NYSE. The Deerfield/Illinois-based company has built on strong momentum in 2011 and posted double-digit top-line and bottom-line growth in Q1 this year. Like its major rivals, Beam finds Germany an increasingly attractive market. This is surely why Matthew (Matt) J. Shattock, President & CEO, was happy to talk on a visit to Beam Germany head office in Frankfurt. Beam, with global sales of $2.8bn last year, clearly considers Germany an investment priority. Given the Federal Republic's general saturation, stagnating population, and hard-discount-dominated retail market, this would seem a counterintuitive play.
June 21, 2012

Alliance Boots boss Pessina talks Walgreens

Stefano Pessina, Executive Chairman Alliance Boots (photo: Alliance Boots)
Stefano Pessina: "This deal, creating a global company, has never been done before"
The $6.7bn cash and stock deal between Walgreen Co and Alliance Boots, announced on Tuesday, is one which simply had to happen. Pending regulatory approval, the leading US drugstore chain will gain a 45 per cent stake in the UK's foremost pharmaceutical-based retailer as per September 1. Stefano Pessina, co-owner and Executive Chairman of Alliance Boots, is the born dealmaker, and the billionaire Italian has never made any bones about his wish to create the world's largest health & beauty company. Also, whatever official noises may be made by both parties to the contrary, Pessina was probably under pressure to at least offer co-investor KKR a medium-term exit option. Despite the obvious efficiency and synergy increases Pessina has achieved at Alliance Boots, the fact remains that the joint-venture was entered into at the top of a market. Unluckily, the resultant debt mountain has to be repaid through a world banking crisis, the worst UK recession in living memory, and a Europe in economic turmoil.
June 14, 2012

German cartel office bares teeth to retailers

Alain Caparros, Rewe CEO (photo: Rewe Group)
Not amused, Rewe CEO Alain Caparros: "What future for Dohle, Coop, Wasgau?"
The Bundeskartellamt (Federal Cartel Office) seems determined to prove to Germany's retail oligopoly that it is not a paper tiger. To date, the competition authorities seemed content to bridle Edeka-Gruppe, Germany's largest food retailer with a 20.2 per cent market share, imposing strict conditions on its purchase of discounter Netto and regional retailers Ratio and Trinkgut. Now, however, they have turned their guns on Rewe Group, Germany's no. 2 food retailer with a 16.7 per cent market share. The bone of contention is Rewe's buying co-operation with regional multiple Wasgau which both parties had wanted to start on July 1. A written reply by the cartel authorities to an enquiry by Lebensmittel Zeitung did not pull any punches:
June 5, 2012

Metro Group sells Makro C&C stores in the UK

Olaf Koch, CEO Metro Group (photo: Bert Bostelmann)
Olaf Koch: "We must now show results rather than just announcing them"
Viewed in isolation, there was nothing untoward about Metro Group selling its English C&C business to local wholesaler Booker last week. After Morocco, the UK is only the second country the company has ever exited, and its business empire still spans 30-odd nations and three continents. Looked at more closely, however, the long-expected departure from the British Isles is symptomatic of a wider malaise within Germany's largest retailer by annual revenues. "After generating losses (in the UK) for years...it's a logical step to terminate a business which doesn't meet our medium- and long-term expectations...Metro can now concentrate on its core markets," says CEO Olaf Koch. So far, at least, so logical, but it wasn't a pretty sight.
June 1, 2012

Talk with Diageo Europe CEO Andrew Morgan

Andrew Morgan, Diageo Europe CEO (photo: Diageo)
Andrew Morgan: "Germany is growing like an emerging market for us"
After allowing major rivals to steal market share for years, London-based Diageo plc has rediscovered Germany. In fact, the world's largest spirits maker is on a roll here. Diageo's new thrust in the Federal Republic is a counter-intuitive move by the maker of Smirnoff vodka and Johnnie Walker whisky. After all, Germany's spirits market, like its population, is hardly on the increase. So why is Europe CEO Andrew Morgan, a man whose very name sounds like a rum brand, rubbing his hands with glee when it comes to business in Germany? At first blush, he shouldn't be. Retailing here is dominated by hard discounters, and the recession in other parts of Europe has worried local consumers enough for them to eat out less. Gastronomy has been hit correspondingly hard.