New Metro CEO Olaf Koch offers culture change
The 41-year-old former IT expert will need to act fast though if Germany's largest retailer/wholesaler by sales is not to be pushed down the ranking ladder by rival Schwarz-Gruppe (Schwarz Group) this year.
Already in 2011, Dusseldorf-based Metro Group posted annual revenues of €66.7bn compared with around €64bn at Schwarz Group.
This is surprising because Metro holds a number of trump cards. As a plc it is able to tap the capital markets more easily; the group can diversify risk and seize chances across a broad store portfolio; and its main cash & carry division is not highly capital-intensive and spans both stable western European markets and higher-growth ones in eastern Europe and Asia.
Regrettably, however, Metro has been embroiled in family squabbles among shareholders and top management, resulting in a 40 per cent decline in the share price last year.
Don't worry, no analysts
The colossus seems to have lost strategic direction, announcing that its "real,-" hypermarket and "Kaufhof" department store divisions were up for sale only not to sell them.
Meanwhile, Dieter Schwarz, the taciturn owner of Schwarz Group, has never had to worry about analysts and minority shareholders or even about group synergies. The 72-year-old billionaire has always run "Kaufland" hypermarkets and "Lidl" hard discount stores as separate entities.
The thrifty Swabian is also said to have reinvested nearly all annual profit in the business – profit which is believed to have always been higher than at Metro whose ebit came in at €2.1bn last year.
Dieter Schwarz's holding, based on ultra-efficient buying and logistics structures, has also been able to grow the store base via cash flow and loans from literally hundreds of local banks.
Aldi Süd and Aldi Nord (Aldi South & North), totalling 4,306 discount outlets and net annual revenues of €22.4bn, are larger in Germany than Lidl (3,277 outlets; €14.2bn), but Lidl has outpaced its arch-rival internationally.
Parallel to this, Kaufland has gone from strength to strength both at home and abroad (cf. separate blog).
At any rate, Kaufland (+2.4 per cent) and Lidl (+1.9 per cent) have clearly beaten real,- (-1.1 per cent) and Metro C&C (-4.4 per cent) on their home market during 2011 (cf. separate blog).
Koch's fine-tuneing and pruning
So what is new CEO Olaf Koch going to do about this? Clearly, he intends to keep finetuning Metro's organisational structures. This includes more centralised buying for decentrally-organised electronics entertainment subsidiary Media-Saturn as well as for group own label food programmes.
While taking a critical look at Shape 2012, the cost savings and efficiency plan initiated by his predecessor Eckhard Cordes (cf. separate blog), Koch wants to reduce future group costs by a further €150m p.a. He clearly also wishes to focus on boosting revenues rather than exclusively on optimising earnings.
Perhaps more significantly, Olaf Koch says he wishes to instigate a culture change at Metro: "We don't want a top-down culture based on mouth-honour and fear. We want open, bold and controversial discussion where people can call a spade a spade...and I must set an example..."
This is incredible stuff when one recalls the grim authoritarian culture that has prevailed in the past. Refreshingly, Koch goes even further in his criticism of the status quo:
"There are still people here who seem to think that employees are two hands rather than a brain...and that our culture is one of orders and obedience...In the past, even when people received an order that made no sense, many just clicked their heels and said 'Yes, sir!'"
For those who think this is too good to be true, it is worth remembering how Olaf Koch lists his leisure activities: "jogging, cooking, listening to hard rock, and playing the guitar". Given that one former CEO was happy to include "paramilitary" discipline in a description of his private life, it would seem that the world is beginning to change even in Dusseldorf.