March 19, 2010

Rewe Group gets an investment rating

Norbert Fiebig, CFO Rewe Group (photo: Rewe Group)
Living by numbers: CFO Norbert Fiebig has gained an investment grade credit rating for Rewe (photo: Rewe Group)
Some say that the man who woos a girl has made significant progress when she tells him her dress size. At all events, we now know Cologne-based Rewe Group's vital statistics. Standard & Poor's Ratings Services (S&P) have assigned Germany's second-largest food retailer its first long-term (BBB-) and short-term (A-3) corporate credit rating. Although this represents the first rating achieved by a German retailer co-operative, some of the agency's explanations are puzzling: "We consider the ratings constrained by Rewe's high leverage ratio, which we view as currently below the levels usually commensurate with an investment-grade rating. The group generates low free cash flows due to its significant capital expenditure programme. We consider, therefore, that Rewe will rely on divestments in the future to achieve further deleveraging." Despite financial debt levels of around €2.4bn to the end of 2009, it is the last sentence that surprises here. For years, Rewe has denied media speculation that it might be tempted to sell its "Toom" DIY stores and hypermarkets or its tourism division.
March 12, 2010

German discounters turn cannibal

Aldi Süd logo (photo: Hans-Jürgen Schulz)
Still king: More than one in four German discount stores bear the name (photo: Hans-Jürgen Schulz)
In the US and the UK most major grocers are publicly quoted companies. For decades investors, retail analysts, small shareholders and even consumers have been able to debate such arcane acronyms as WACC, ROCE, ROIC etc. However in the secretive, clannish world of German retail every spring we can look forward to, wait for it, wait for it, and, oh wonder of wonders – the latest store counts! But the figures just published by market researcher TradeDimensions on the state of the local discount segment as per February 25 do enable some interesting conclusions to be drawn. In the Federal Republic eight players run a total 15,331 discount: Aldi North & South; Edeka subsidiary "Netto Marken-Discount" and former Tengelmann subsidiary "Plus", most of which will be subsumed into the Netto empire by mid-year; Schwarz Group subsidiary "Lidl"; Rewe Group subsidiary "Penny"; Norma; and the Dansk Supermarked/Edeka joint-venture "Netto Supermarkt". The pack is still led by alpha wolf Aldi, whose northern and southern branches operate more than one in four of Germany's discount outlets.
March 5, 2010

Schlecker prunes foreign drugstore operations

Schlecker XL store interior (photo: Jans Rudolf-Schulz)
Great blue hope: The new and larger Schlecker XL store format opens in Spain today (photo: Jans Rudolf-Schulz)
The European discount drugstore empire of owner-manager Anton Schlecker continues to retreat on a number of fronts. The group has confirmed to our newspaper that it plans to end its 20-year presence in the Netherlands by the end of this year. Currently, Schlecker's c. 100 Dutch stores post estimated annual revenues of around €35m to €40m. Also, local trade union Setca claims that 32 of Schlecker's 36 Belgian stores are due for closure. Following the withdrawal from Denmark last year, Europe's largest drugstore multiple has reduced its activities to ten national markets. Can it be, we ask as breathless reporters, that the flaming Schlecker bull is finally running out of steam?
February 23, 2010

Sweet makers condemn cocoa price speculation

Chocolate (photo: Infozentrum Schokolade)
Bitter-sweet: A third of the world's cocoa harvest last year was bought for speculation purposes (photo: Infozentrum Schokolade)
Now that the chocolate powder has settled on last month's Internationale Süßwarenmesse (ISM), the world's largest confectionery trade fair in Cologne, it would seem that Germany's sweets and biscuit makers have discovered a new bête noire. Apparently, a considerable number of them went in for a round of banker-bashing at this year's venue accusing Deutsche Bank, Goldman Sachs, Merrill Lynch & Co. of irresponsible speculation regarding raw materials prices. In particular, cocoa prices at all-time highs of £2,300 (€2,620) per tonne have got everyone hot under the collar. Jürgen B. Steinemann, CEO at cocoa and chocolate products maker Barry Callebaut, cites weekly reports filed by the U.S. Commodity Futures Trading Commission that a third of the world's 3.5 million tonne cocoa harvest last year was bought by hedge funds, institutional investors and pension funds rather than by food processors.
February 22, 2010

German shoppers drive, French click & drive

Chronodrive (photo: Les Linéaires)
Chronodrive: Auchan customers can drive to a packing station to collect their online orders (photo: Les Linéaires)
"Chronodrive est magnifique!" This fulsome praise in a recent e-mail from a great-aunt in Belgium was intriguing. Tante Françine, despite being in her mid-80s, is impressively tech-savvy and orders more on the internet than most young people. She then drives in her automatic car over the border into France to collect her shopping at the Chronodrive packing station. The click & drive activities of the Auchan subsidiary as well as those of its major local rivals are impressive. French retailers have clearly stolen a march on their German rivals. We therefore asked Germany's major retailers whether they plan to develop online drive-in systems. Their response, or lack of it, was significant.
February 19, 2010

Talk with Rinascente CEO Vittorio Radice

Vittorio Radice, CEO La Rinascente (photo: La Rinascente)
Vittorio Radice: "Retail is entertainment" (photo: La Rinascente)
An interview with La Rinascente CEO Vittorio Radice is a bit like a trip down the memory lane of UK retailing. Radice was the creative Italian who turned Habitat (later acquired by Ikea) and Selfridges around in the 1990s. He then had a brief stint on the board of Marks & Spencer in 2003. During his seven years at London-based Selfridges, Radice transformed what had become a rather dowdy department store operator into a cool, swinging operation. In order to do so, he didn't flinch from introducing loud pop music, body-piercing salons, or extravagant annual promotions, including mass photo shoots with naked customers.
February 19, 2010

Aldi calls Rewe Group's price bluff

Rewe price guarantee advertising (photo: Rewe)
Naughty: Rewe's new ad campaign for own label range "ja!" (photo: Rewe)
It wasn't likely to have been a Valentine's Day card coming from Aldi Süd. But insiders at Rewe Group insist that the warning letter they have received from Germany's largest discounter was politely written. Perhaps Aldi could have lived with and quietly smiled at Rewe's new ad campaign slogan "Niemand ist billiger" (No one is cheaper) for its 400-line, price-entry own label range "ja!". However, the sub-text was asking for trouble with an 800-pound gorilla: "Daily comparison of ja!'s lowest prices with German discounters such as Aldi. If the price of any comparable product is found to be lower, the ja! price will be adjusted downwards to match this." Clearly, Rewe's controversial marketing initiative reflects the perceived need of the multi-channel, full-assortment retailer to improve its price image with consumers, especially now that arch-rival Edeka is pushing its own price-fighter range.
February 12, 2010

Lidl trims its sails

A Lidl store in Germany (photo: Thomas Fedra)
Pause for breath: Lidl is slowing the pace of its frantic expansion -- a little (photo: Thomas Fedra)
After years of double-digit growth, Lidl's expansion seems to be flagging. Revenues at the hard discount subsidiary of secretive Schwarz Group stagnated in Germany during 2009. Also, for the first time in many years, Lidl's substantial foreign empire is unlikely to contribute further rapid growth. According to market research company GfK, Lidl posted revenues of around €14bn on its home market – a mere 0.2 per cent increase despite 80 new stores. Lidl is experiencing a growing cannibalisation effect on its home market where new outlets increasingly rob sales from existing stores. Profits have also come under pressure as archrival Aldi lowers prices, but net margins are still estimated at 2.5 per cent. Meanwhile, Netto Marken-Discount, the discount subsidiary of Germany's largest food retailer Edeka, has been transformed into a national rival through its recent merger with Tengelmann soft discount subsidiary Plus.
February 7, 2010

Aldi leads the pack

Aldi Süd (photo: LZ-Bildarchiv)
A successful run: Aldi Süd's net margin of 4.9 per cent beats all major German rivals (photo: LZ-Bildarchiv)
Despite a decline in priced-adjusted revenues at Aldi Nord (3 to 4 per cent) and Aldi Süd (1 to 2 per cent), both sister companies managed to keep earnings stable in 2009. This is particularly impressive as the north and south divisions of Germany's leading hard discounter lowered prices on more than 250 lines within their limited assortments last year. Following solid gains in 2008, Essen-based Aldi Nord posted a 5.5 per cent rise in revenues to €10.3bn, and Mülheim-based Aldi Süd grew 5.2 per cent to €12.5bn. But just look at those lovely net margins! Aldi Nord (3.2 per cent) and Aldi Süd (4.9 per cent) continue to lead the local trade. Doubtless much to Aldi's annoyance, our newspaper ploughs through the many separate figures for its various companies each year and publishes a results estimate. This tour de force is necessary because the secretive privately-owned group circumvents German balance sheet law by dividing its vast empire into small regional companies with only a limited statutory obligation to disclose results. This is quite legal, but provides a happy hunting-ground for trade journalists
February 2, 2010

Talk with sherry dynast Tomás Osborne

Tomás Osborne, CEO Osborne Group (photo: Osborne)
Tomás Osborne: "I am open to anything" (photo: Osborne)
Rarely are journalists paid for having pleasure. A visit to Grupo Osborne in the sun-drenched Andalusian region of Jerez from the depths of a German winter surely rates as such. Nestled snugly in Spain's "sherry triangle" is the town of El Puerto de Santa María (Cádiz) from where Columbus set out on what also proved to be quite an interesting business trip. Since 1772 this has also been the home of the Osborne family, purveyors of sherry & wine, brandy & spirits, ham, water and juices. As soon as you arrive at Jerez airport, you know this is Osborne country. Imposing metal signs of "El Toro de Osborne" (the Osborne bull) loom over roundabouts and roadsides or from hill tops. Grupo Osborne (2008/09 net revenues: €270m) is, after all, a local hero. With orange trees flowering under an egg shell blue sky, the locals were unlikely to be grim. There were smiles from rough-looking taxi drivers to hotel receptionists, all astonished to meet a visitor in December. At Osborne headquarters, laid out in classic hacienda style, guests are greeted cordially by family Chairman, Conde Tomás Osborne Gamero-Cívico.