Rewe planning rapid growth after excellent 2003

Related tags Cent Retailing

With Germany mired in one of the worst post-war recessions, the
excellent 2003 performance of Cologne-based retail group Rewe was something of a
novelty. But the group is clearly confident that the performance
will not be a one off, with plans for a major expansion in 2004,
despite the fact that store development laws favour the smaller
discount operators, according to the company.

Total group sales rose by 4.7 per cent last year to €39.2 billion, while turnover in the core food retailing business increased by 6.6 per cent, with the 7,284 German stores posting sales of €23.1 billion, up 1 per cent in spite of the extremely competitive market conditions.

These tough conditions helped drive sales at Penny, however, whose sales rose 3.5 per cent to a record €5.4 billion. Rewe's larger stores also performed well, lifting sales by 2.6 per cent to €8 billion.

But it was the group's foreign businesses which remained the engine for growth in 2003. Rewe operates 2,884 stores in 12 countries including France, Italy, Austria, Poland, Hungary, the Czech Republic and Romania, and these foreign units posted sales of €10.01 billion in 2003, with sales in western Europe up 28.3 per cent to €7.6 billion, boosted by the acquisition of Bon appétit in Switzerland, and central and eastern European sales rising 4.4 per cent to €2.4 billion.

The acquisition in Switzerland also helped Rewe's wholesale operations lift sales by 21.6 per cent to €11.2 billion. Rewe's wholesale delivery business, which supplies the stores operated by the independent Rewe retailers, increased its turnover to €6.5 billion, while Rewe's cash & carry stores increased their turnover by 18.8 per cent to €2.6 billion.

Rewe's 1,055 no-food stores (specialising in DIY, home entertainment, pharmaceuticals and clothing) posted combined sales of €2.48 billion in 2003, up 0.4 per cent.

Germany is a market dominated by discount food retailers such as Aldi, Lidl and Tengelmann, but Rewe CEO Hans Reischl said he believed that there was still potential there for traditional supermarket outlets. He highlighted the successful development of Rewe's HL and miniMAL operations, as well as its eponymous supermarket chain, all of which saw sales rise at well above the national average in 2003.

This is why some 100 of the 240 new store openings planned for 2003 will be traditional supermarket formats, Reischl said. "We would open even more supermarkets and smaller grocery stores if the regulations on building usage did not stand in the way of building modern full-range stores with the necessary retail sales area of 1,500 square metres,"​ said Reischl.

Discount stores continue to enjoy massive advantages in the designation of store sites in Germany, he claimed, as discounters only require around 700 square metres for their narrow product ranges. This was the main cause of this segment's growth, he suggested.

Faced with the difficulties of finding new sites for store growth, Reischl said that the company would invest substantially in refitting its existing supermarket outlets. "The supermarket of tomorrow concentrates on a product range that has clear advantages over the discounters,"​ he said. "These means above all fresh products such as meat, sausages, bread, baked goods, fruit, vegetables and a wide variety of drinks, including those in reusable packaging.

"Tomorrow's supermarket also offers a growing range of fresh convenience products. The presentation of the product assortment creates a distinct atmosphere, is well organised, and simplifies customer orientation."

Reischel stressed that Rewe's supermarkets also offered a number of other advantages over the no-frills discounters, such as cash-back, credit cards and "stress-free shopping"​.

But the success of Rewe's own discount business means that it will not be ignored completely in 2004, with some 100 new Penny stores planned for the year. Reischel said that Penny was also not the average, run-of-the-mill discounter either, offering the same level of service as the group's main supermarket outlets, including non-stop opening hours, fresh products such as meat and bread.

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