docGerman food retail sector – blessing or curse?
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German food retail sector – blessing or curse?
Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene German food retail sector – blessing or curse? Prof. Dr. Dr. Thomas Roeb M.A. Münster, 20 May 2011 EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 1 German farmers are under heavy pressure from the retailers´ side and there is no sign of improvement anytime soon The major German food retailers are marked by low profitability due to the fierce competition from Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten the discounters Zweite Ebene But discounters have their own problems: Lidl and Netto are far away from catching up with Aldi Dritte Ebene South, but Aldi South is experiencing a slight erosion of sales Vierte Ebene Fünfte Ebene Aldi and Lidl have the additional problem of difficulties in their expansion abroad Supermarkets are suffering from self-inflicted wounds, having privileged corporate stores over franchisees despite the former´s underperformance Hypermarkets are in store format crisis with only Kaufland beating the trend – through price aggressiveness German retailers have turned price aggressiveness into the key answer to these problems and have tried to shift the burden for this onto the suppliers They are creating additional pressure on the supply chain by vertical integration The abattoirs, the farmers´ key clients, are reacting to this by their own vertical integration and a bit of price fixing EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 2 The biggest German food retailers are much less profitable than their foreign counterparts EBIT in % of net sales Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene source: annual reports 2010 (Tesco), 2009 (Albert Heijn, Rewe, Edeka) EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 3 A main contributing factor is overstoring Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene source: research and analysis Prof. Dr. Dr. Thomas Roeb, annual reports by Tesco, Sainsbury, Morrisons, Guyenne et. Gascogne EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 4 The key reason, however, is the dominance of discounters Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene source: IGD EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 5 Most surprisingly, discounters even grew further until recently from their already high level of market share Market share in German food retailing Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene source: Nielsen Universen 2005 - 2010 EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 6 German farmers are under heavy pressure from the retailers´ side and there is no sign of improvement anytime soon The major German food retailers are marked by low profitability due to the fierce competition from Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten the discounters Zweite Ebene But discounters have their own problems: Lidl and Netto are far away from catching up with Aldi Dritte Ebene South, but Aldi South is experiencing a slight erosion of sales Vierte Ebene Fünfte Ebene Aldi and Lidl have the additional problem of difficulties in their expansion abroad Supermarkets are suffering from self-inflicted wounds, having privileged corporate stores over franchisees despite the former´s underperformance Hypermarkets are in store format crisis with only Kaufland beating the trend – through price aggressiveness German retailers have turned price aggressiveness into the key answer to these problems and have tried to shift the burden for this onto the suppliers They are creating additional pressure on the supply chain by vertical integration The abattoirs, the farmers´ key clients, are reacting to this by their own vertical integration and a bit of price fixing EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 7 Key success driver in discounting is sales per POS, where Aldi South has left the competition and Aldi North far behind Sales per store as success driver in discounting Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Improve through utilization Vierte Ebene of employees at the till and while replenishing shelves Fünfte Ebene reduced as % of sales, because fix occupancy costs POS reduced per item, because bigger drop size Reduced through utilization of employees because of bigger deliveries Aldi Süd Aldi Nord Albrecht 1948 Year of foundation 1962 Lidl Netto 1973 1982 personnel costs POS transportation costs warehouse costs 2009 source: Trade Dimensions, Analyses Prof. Dr. Thomas Roeb M.A.; all figures rounded EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 8 This deficit is the result of problems reaching far back into the past gross sales per PoS in mio. € p.a. Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Non-Food Boom Dritte Ebene Vierte Ebene Fünfte Ebene source: Planet Retail, Trade Dimensions EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 9 This is despite Lidl and Netto offering much more SKUs – but in vain, their sales are just distributed over more different SKUs no. of SKUs and gross sales/SKU p.a. of German discounters Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene source: analyses Prof. Dr. Dr. Thomas Roeb M.A.; all figures are rounded EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 10 Aldi South had to vastly increase the assortment over the last 10 years ... Discount: Wachstum/Wachstumsrate des Sortimentsumfangs Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene source: analyses Prof. Dr. Dr. Thomas M.A. EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 11 ... only to keep sales at least flat; the willingness of the consumers to accept the limited discount assortment is decreasing discount: evolution of sales per SKU Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene source: analyses Prof. Dr. Dr. Thomas Roeb M.A. EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 12 German farmers are under heavy pressure from the retailers´ side and there is no sign of improvement anytime soon The major German food retailers are marked by low profitability due to the fierce competition from Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten the discounters Zweite Ebene But discounters have their own problems: Lidl and Netto are far away from catching up with Aldi Dritte Ebene South, but Aldi South is experiencing a slight erosion of sales Vierte Ebene Fünfte Ebene Aldi and Lidl have the additional problem of difficulties in their expansion abroad Supermarkets are suffering from self-inflicted wounds, having privileged corporate stores over franchisees despite the former´s underperformance Hypermarkets are in store format crisis with only Kaufland beating the trend – through price aggressiveness German retailers have turned price aggressiveness into the key answer to these problems and have tried to shift the burden for this onto the suppliers They are creating additional pressure on the supply chain by vertical integration The abattoirs, the farmers´ key clients, are reacting to this by their own vertical integration and a bit of price fixing EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 13 In none its three expansion phases the discount has been able to replicate its success in Germany Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Market share Vierte Ebene > 40% Fünfte Ebene 16 – 40% 10 – 15% 5 – 10% < 5% EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 14 All Western European success stories are the result of unique circumstances Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten • Close to half of the discount-segement belongs to an Zweite Ebene indigenous operator called Netto, which is active Dritte Ebene since the early 80s • Aldi has been active since the 70s, but with a weak Vierte Ebene concept (Aldi North) Fünfte Ebene • Discounters are supplanting the inefficient smaller supermarkets in their role of proximity stores, but are not taking market share of the dominating hypermarkets • Many different discounters such as Aldi, Lidl, Norma, ED, Dia, Leaderprice etc. • The discount market is entirely in the hands of an indigenous operator called Reitan 1000, active since the early 80s • Lidl had to withdraw from the market • Market leader is Aldi with a presence dating back to the 70s • Lidl is active as well • Aldi market leader since 1968 • Also activities by Lidl, Penny and Plus • Discount market dominated by DIA% • limited presence of German discounters Aldi, Lidl etc. EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 15 Aldi is nowhere as price aggressive as in Germany Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene source: survey Prof. Dr. Dr. Thomas Roeb M.A. 11/2009 EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 16 Lidl, too, is more price aggressive in Germany than abroad Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene source: survey Prof. Dr. Dr. Thomas Roeb M.A. 11/2009 EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 17 German farmers are under heavy pressure from the retailers´ side and there is no sign of improvement anytime soon The major German food retailers are marked by low profitability due to the fierce competition from Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten the discounters Zweite Ebene But discounters have their own problems: Lidl and Netto are far away from catching up with Aldi Dritte Ebene South, but Aldi South is experiencing a slight erosion of sales Vierte Ebene Fünfte Ebene Aldi and Lidl have the additional problem of difficulties in their expansion abroad Supermarkets are suffering from self-inflicted wounds, having privileged corporate stores over franchisees despite the former´s underperformance Hypermarkets are in store format crisis with only Kaufland beating the trend – through price aggressiveness German retailers have turned price aggressiveness into the key answer to these problems and have tried to shift the burden for this onto the suppliers They are creating additional pressure on the supply chain by vertical integration The abattoirs, the farmers´ key clients, are reacting to this by their own vertical integration and a bit of price fixing EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 18 As opposed to the discounters, the supermarkets have neglected their store network Stores: discount vs. supermarkets Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene source: analyses Prof. Dr. Dr. Thomas Roeb M.A. EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 19 Franchised stores usually outperform corporate owned ones Supermarkets: franchise- vs. corporate owned Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene source: analyses Prof. Dr. Dr. Thomas Roeb M.A. EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 20 The superior profitability has to shared with the franchisee, though Supermarkets: franchise- vs. corporate owned Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten • Retailer as Zweite acts Ebene wholesaler Dritte Ebene • Franchisee can – to aVierte limitedEbene extentt, buy from other sources Fünfte Ebene (e.g. fresh products) • Retailer ses • is supplied 80- 95% of his needs by the retailer • Retailer receives for this support of the franchisee ca. 4 – 6% des of sales, out of which he keeps 1,0 - 1,5% as profit • Retailer operates the stores himself • The store is run by a employee source: analyses Prof. Dr. Dr. Thomas Roeb M.A. EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 21 Up until well into the 90s, independents were used for using up small surfaces, the bigger profitable ones being kept for the company-stores Independent store owners as opposed to company stores Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten • „So hat sich die Spar auf die Fahnen geschrieben, alle Flächen bis 1 000 qm zu privatisieren;. Auch aus ReweZweite Kreisen Ebene sind Zielgrößen für neue Selbständigen-Märkte von um die 1 000 qm zu vernehmen. Ähnlich verhält es sich bei derEbene Edeka…“ (LZ 8.1.1998) (Thus Spar-Group has proclaimed to privatize all stores with less than 1.000 sqm. Dritte Rewe management, too, indicates, that newly privatized stores should have about 1.000 sqm. Edeka is thinking Vierte Ebene similarly ...) Fünfte Ebene • Nun wird auch in den Chefetagen der führenden deutschen Handelskonzerne darüber nachgedacht, renditeschwache Filialsysteme durch Einführung von Franchise auf Ergebniskurs zu trimmen. Supermärkte einer Größenordnung zwischen 500 bis 700 qm hätten im Wettbewerb durchaus eine Chance, analysiert Wolfgang Gutberlet, Seniorchef des Fuldaer Regionalfilialisten Tegut -- nur eben nicht mehr als Teil eines zentral gesteuerten Systems“ (LZ 30.9.1999) (Top-Management of the leading German food retailers thinks about improving profitability of company operated stores through franchising. Supermarkets of between 500 and 700 sqm sales surface are considered to have a good chance of competing successfully analyzes Wolfgang Gutberlet, CEO of regional supermarket chain Tegut; but not as part of a centrally managed system) • Die übernommenen 29 Pro-Märkte werden von unserer Einzelhandelstochtergesellschaft Neukauf *, die eine positive Entwicklung zeigt, übernommen und weitergeführt“, Günter Mülln, GF der damaligen Edeka Duisburg, zum Schicksal der von der KG Dortmund-Kassel übernommenen Märkte (LZ 22.1.1998) (The 29 Pro-markets (taken over from Coop Dortmund-Kassel) will be integrated in our retailer subsidiary Neukauf) – „…EDEKA neukauf verfügt in der Regel über eine Verkaufsfläche zwischen 1.000 und 2.500 Quadratmetern“, www.edeka.de. vom 13.10.2009 (EDEKA neukauf (large supermarkets) usually dispose of a sales surface of between 1000 and 2.500 sqm.) EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 22 Up until today, Edeka has not succeeded in making up for the mistakes of the past: franchisees´ stores are much smaller than the corporate ones Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene Inte-gration Marktkauf takeover SPAR Source: annual report Edeka EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 23 German farmers are under heavy pressure from the retailers´ side and there is no sign of improvement anytime soon The major German food retailers are marked by low profitability due to the fierce competition from Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten the discounters Zweite Ebene But discounters have their own problems: Lidl and Netto are far away from catching up with Aldi Dritte Ebene South, but Aldi South is experiencing a slight erosion of sales Vierte Ebene Fünfte Ebene Aldi and Lidl have the additional problem of difficulties in their expansion abroad Supermarkets are suffering from self-inflicted wounds, having privileged corporate stores over franchisees despite the former´s underperformance Hypermarkets are in store format crisis with only Kaufland beating the trend – through price aggressiveness German retailers have turned price aggressiveness into the key answer to these problems and have tried to shift the burden for this onto the suppliers They are creating additional pressure on the supply chain by vertical integration The abattoirs, the farmers´ key clients, are reacting to this by their own vertical integration and a bit of price fixing EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 24 All hypermarkets besides Kaufland are suffering from low growth or even sales losses Sales of most important hypermarkets Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene 2006 takeover of Walmart Germany with ca. 2 bil. € net sales source: Trade Dimensions/LZ 19.2.2009; annual reports Metro, Edeka; LZ 17.1.2002; EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 25 In Food and Non-Food, many specialists have sprung up competing against the hypermarket´s limited assortment per category Competition and share of Non-Food at hypermarkets Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Discounter „Mom-and-Pop-Shop“ Vierte Ebene Supermärkte Fünfte Ebene Umsatzanteil Non-Food 20% 35% Independent drugstores drugstores NonFood H&M 80% kik Owner-run specialty store Deichmann 65% Food Mediamarkt ATU 1975 60s 2005 90s source: analyses Prof. Dr. Dr. Thomas Roeb M.A. EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 26 Kaufland has solved this problem by minimizing the share of NonFood … Structure of sales surface and sales at hypermarket and Kaufland Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene Source: researcb und Analysen Prof. Dr.-Ing. Dr.rer.pol. Thomas Roeb M.A.; EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 27 … and becoming price leader in food through cost leadership surface productivity and profitability at hypermarket and Kaufland Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene source: Trade Dimenstions, analyses Prof. Dr.-Ing. Dr.rer.pol. Thomas Roeb M.A.; figures are rounded EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 28 German farmers are under heavy pressure from the retailers´ side and there is no sign of improvement anytime soon The major German food retailers are marked by low profitability due to the fierce competition from Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten the discounters Zweite Ebene But discounters have their own problems: Lidl and Netto are far away from catching up with Aldi Dritte Ebene South, but Aldi South is experiencing a slight erosion of sales Vierte Ebene Fünfte Ebene Aldi and Lidl have the additional problem of difficulties in their expansion abroad Supermarkets are suffering from self-inflicted wounds, having privileged corporate stores over franchisees despite the former´s underperformance Hypermarkets are in store format crisis with only Kaufland beating the trend – through price aggressiveness German retailers have turned price aggressiveness into the key answer to these problems and have tried to shift the burden for this onto the suppliers They are creating additional pressure on the supply chain by vertical integration The abattoirs, the farmers´ key clients, are reacting to this by their own vertical integration and a bit of price fixing EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 29 In 1999 retailers started to create the organizational basis for turning occasional demands into the basic starting point of negotiations Price pressure on suppliers as key negotiating strategy of retailers Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene „Mitten in die zum Teil noch laufenden Jahresgespräche und die bisher beispiellosen Preiskämpfe im deutschen Handel platzen gepfefferte Einmalforderungen prominenter Handelsgruppen. Dritte Ebene Vierte Ebene … Rewe-Pläne, die Konditionsverhandlungen zu zentralisieren, die bisher in die Region geflossenen Industriegelder nach der Bestwertmethode einzubeziehen und für diese Bündelung und Fünfte Ebene die darüber hinaus geplante Geschäftsausweitung zusätzliche Verbesserungen zu fordern. … Markant-Vorhaben, neue Rahmenvereinbarungen zu erheblich verbesserten Konditionen“ LZ 28.10.1999 „Right into the ongoing negotiations and the so far unheard price wars among retailers are coming very high on-off demands of prominent retail groups REWE´s plans to centralize negotiations, to include the money flown into the regions into the central annual talks on the basis of best-result-for-the-whole-group and to demand additional improvements for this concentration and the planned sales increases. Markant plans, to obtain a new contractual framework at much improved conditions“ 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 source: analyses Prof. Dr. Dr. Thomas Roeb M.A. EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 30 Since 2003, annual talks have changed; occasional demands have been replaced by annual demands as component of annual talks Price pressure on suppliers as key negotiating strategy of retailers Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Konditionen: JahresFrust über Zweite Ebene JahresHersteller beißen gespräche: gespräche mit JahresDritte Ebene auf Granit Finanzkrise Nachvergespräche erhöht den handlungen Vierte Ebene Druck Fünfte Ebene Neue Gangart. conditions: „Vom Konditionsgebolze wollen die meisten Händler auch in diesem Jahr nicht abrücken“ Jahresgespräche leiden unter den Preisattacken der Discounter. Frustration with annual talks – most retailers stick to price haggling this year, too“ Annual talks with renegotiations – annual talks are suffering from price attacks by the discounters. LZ 30.10.2003 LZ 25.11.2004 ... ... Vollsortimenter: Kampfpreise gegen Discounter manufacturers are banging their heads against a brick wall Annual talks: financial crisis increases the pressure Supermarkets and hypermarkets: attack prices against the discounter LZ 8.11.2007 LZ 23.10.2008 LZ 5.11.2009 Handel ignoriert Rohstoffpreise – Konditionsverbesserungen von 3- 8% gefordert Retailers ignore price increases of raw materials – demanding improvements of conditions of 3 – 8% LZ 1.10.2010 Quelle: Analysen Prof. Dr. Dr. Thomas Roeb M.A. EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 31 German farmers are under heavy pressure from the retailers´ side and there is no sign of improvement anytime soon The major German food retailers are marked by low profitability due to the fierce competition from Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten the discounters Zweite Ebene But discounters have their own problems: Lidl and Netto are far away from catching up with Aldi Dritte Ebene South, but Aldi South is experiencing a slight erosion of sales Vierte Ebene Fünfte Ebene Aldi and Lidl have the additional problem of difficulties in their expansion abroad Supermarkets are suffering from self-inflicted wounds, having privileged corporate stores over franchisees despite the former´s underperformance Hypermarkets are in store format crisis with only Kaufland beating the trend – through price aggressiveness German retailers have turned price aggressiveness into the key answer to these problems and have tried to shift the burden for this onto the suppliers They are creating additional pressure on the supply chain by vertical integration The abattoirs, the farmers´ key clients, are reacting to this by their own vertical integration and a bit of price fixing EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 32 Farmers´ operating costs are the main cost factor of the whole value chain for meat – thus making them the prime target for pressure from retailers Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene supply chain stores slaughtering, splitting producing joints packaging source: Basis: Daten für den Einzelhandel von AIM, other data: estimations/calculations by Prof. Dr. Dr. Thomas Roeb M.A on the basis of expert interviews SWL 20. Juli 2010 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 33 Retailers are exerting backwards price pressure through vertical integration through the development of meat processing units value chain meat/Wurst Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene raising slaughtering processing Dritte Ebene abattoirs farmers Vierte Ebene „Wurst“-manufacturers Fünfte Ebene retailing retailer Meat processing units Fleischwerke/meat processing units Service counters in the store • selling • processing into pieces small enough to be sold • in some stores, processing of joints into products ready to be sold • production of Wurst Meat processing units: • purchasing of split animals or joints • further processing into smaller joints, then • packaging directly for sale as fresh meat • adding spices, sauces etc. to sell as convenience products • processing into Wurst for service- and self-service-counters • beyond this • wholesaling of products from third parties • operating the self-service counters in the store (e.g. Fuck by Dohle) Quelle: Basis: Analysen Prof. Dr. Dr. Thomas Roeb M.A auf Basis von Expertengesprächen SWL 20. Juli 2010 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 34 Unfortunately, there is no sign of price pressure decreasing, because retailers are using meat for price promotions Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene discounters pursue an EDLP (every day low price) strategy forcing them to align their everyday price with the retailers´promotional prices since early 2009, discounters have slowly but surely started to do promotional pricing themselves source: analyses/calsuclations Prof. Dr. Dr. Thomas Roeb M.A on the basis of interviews with experts SWL 20. Juli 2010 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 35 German farmers are under heavy pressure from the retailers´ side and there is no sign of improvement anytime soon The major German food retailers are marked by low profitability due to the fierce competition from Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten the discounters Zweite Ebene But discounters have their own problems: Lidl and Netto are far away from catching up with Aldi Dritte Ebene South, but Aldi South is experiencing a slight erosion of sales Vierte Ebene Fünfte Ebene Aldi and Lidl have the additional problem of difficulties in their expansion abroad Supermarkets are suffering from self-inflicted wounds, having privileged corporate stores over franchisees despite the former´s underperformance Hypermarkets are in store format crisis with only Kaufland beating the trend – through price aggressiveness German retailers have turned price aggressiveness into the key answer to these problems and have tried to shift the burden for this onto the suppliers They are creating additional pressure on the supply chain by vertical integration The abattoirs, the farmers´ key clients, are reacting to this by their own vertical integration and a bit of price fixing EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 36 Abattoirs have reacted likewise with their own vertical integration value chain meat/Wurst Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene raising slaughtering processing retailing Dritte Ebene farmers retailer Vierte Ebene Meat processing units Fünfte Ebene Fleischwerke/meat processing units abattoirs „Wurst“-manufacturers • slaughtering and splitting, i.e. in halfs or sometimes somewhat further • further cutting up into smaller pieces depending on demand then (e.g. Tillmanns by Tönnies and Westland by Westfleisch) • partially packaging to sell as fresh meat • partially adding spices etc. to sell as convenience products • a small part processed further into „Wurst“ (sausages, delicatessen etc.) Quelle: Basis: Analysen Prof. Dr. Dr. Thomas Roeb M.A auf Basis von Expertengesprächen SWL 20. Juli 2010 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 37 in addition, the abattoirs are using the oligopolistic market structure to keep purchasing prices for the animals low Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene abattoir B abattoirf A Fünfte Ebene small number of abattoirs faicilitates informal exchange of information about the market situation however: information exchange is hindered by negative personal feeling between certain players (Tönnies towards Vion) abattoir … SWL 20. Juli 2010 abattoir C Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 38 Klicken Sie, um die Formate des Vorlagentextes zu bearbeiten Zweite Ebene Dritte Ebene Vierte Ebene Fünfte Ebene Thank you for your attention EPP 20 May 2011 Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. Institut für angewandte Handelsforschung 39
