Edeka plays poker with Netto
The top brass at Germany's largest food retailer are also likely to review its buying cooperation with the Dansk Supermarked subsidiary.
Both parties refuse to confirm this story. However, our newspaper believes that Edeka wants to sell its minority holding in Netto Stavenhagen and to let the joint-buying agreement expire at a still unspecified date.
Apparently, Edeka and Dansk Supermarked have not been able to agree a price. The original stake was transferred to Edeka for an alleged sum of €60m in 2005, when French retailer ITM (Intermarché) exited Germany.
Why is this happening and why now?
Wary of sharp claws
Netto's 350 German discount stores make around €1.2bn in net revenues. The buying agreement between the two partners covers the purchase of brand goods for an estimated total volume of €150m per annum.
Hamburg-based Edeka has become increasingly wary of the German cartel office's ever sharper claws. The bureaucrats in Bonn now also consider buying agreements when reviewing market dominance.
Edeka also seems worried about the confidentiality of the terms & conditions it has been granted by suppliers. This could be undermined by any change of partners within a buying group or the takeover of a specific partner.
The retailer cooperative-cum-multiple has already applied the same logic to withdraw from buying partnerships with fellow German retailers Globus, Handelshof and Budnikowsy in 2011.
Edeka has been on the qui vive following Dansk Supermarked's sale of its UK discount operation to Walmart-subsidiary Asda for around €1bn in 2010. Since then, Edeka has been trying to gauge the intentions of Møller Mærsk, Dansk Supermarked's main holding company in Denmark.
Given Dansk Supermarked's profit slump on its home country this year, Edeka is worried that Dansk could sell its German operations to a competitor and with them a partial knowledge of its terms & conditions.
Bone of contention AMS
In this context, some within Edeka have never been particularly happy about Dansk Supermarked's membership of European buying group Associated Marketing Services (AMS) where a number of competitors are members. Edeka itself is affiliated to international buying group Alidis/Agenor.
Should Edeka's supervisory board decide to sell its stake in Netto Stavenhagen tomorrow, at least it will put an end to past rumours that Edeka wanted to acquire the whole of Netto.
Such rumours were plausible in so far as Edeka runs its own discount chain under the confusingly similar logo "Netto Marken-Discount". Any such purchase would have given Edeka the Netto banner throughout Germany. Anyway, this now doesn't look likely to happen.
Let us return to the object of desire. Netto Stavenhagen represents Dansk Supermarked's largest foreign operation. It is also Germany's smallest hard discounter by annual revenues and is mainly located in the north-eastern regions of Mecklenburg-Western Pomerania, Berlin and Brandenburg.
Netto is a most efficient operation, however. Its average annual store sales of €3.4m are considerably higher than those of larger rivals Penny and Norma.
Over recent years, Netto Stavenhagen has been cautiously expanding its store base from Berlin towards Saxony as well as in northern Germany. Parallel to this, the Danes have been optimising outlet efficiencies.
Meanwhile, Netto Stavenhagen's parent company Dansk Supermarked, with net annual revenues of around €4.8bn, has a number of problems with its larger stores on its home market.
On the other hand, Dansk Supermarked's 440 Danish Netto discount branches are doing very nicely thank you. Net margins are said to be nearly as high as those of international grand master Aldi Süd (Aldi South).
While still making losses in Sweden, Netto seems to be doing fairly well in Poland where it runs around 250 stores and posts annual revenues of around €600m.
The Danes have ambitious expansions plans for Poland. After opening nearly 50 stores this year, they intend to do the same over the coming twelve months. A new distribution centre will start operations near Danzig next year.
Inevitably, this growth trajectory will bring Netto into increasing competition with Jerónimo Martins' subsidiary Biedronka and Lidl. Currently, Netto is no. 3 in the Polish discount segment.
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