International expansion pays off for Metro
international diversification is paying off for the company.
The Germany-based retailer today reported sales rose to €13.83bn in the second quarter from €13.35bn a year ago. For the first time international sales accounted for over half of the company's sales.
The company's results provide further evidence for food suppliers that they must follow their buyers, who are expanding eastwards to drive sales.
The European food retailing is highly competitive, with companies facing falling margins and price wars to keep their market shares.
Germany currently has the largest food and grocery market in Europe, worth €202bn in 2004. But by the end of the decade France will take over as the largest market according to forecasts by IGD.
Year-on-year market growth in Germany is limited, primarily due to economic stagnation and the increasing focus on price, which has been driven by discount retailers. IGD predicts that asGermany's tough economic climate bites, the country will fall from the first to the fourth place by 2020, with a market worth €245bn.
By 2020, Russia will take over from France by becoming the largest food and grocery market in Europe. The Russia market will be worth €375bn by that time, rising from the current €134bn.
In the second quarter Metro's sales rose 3.6 per cent, while outside Germany the increase amounted to 9.9 per cent. In Eastern Europe thegroup's sales rose by 22.3 per cent.
"For the first time distinctly more than half of our total sales came in from abroad, at a share of 52 per cent," said the company's chief executive, Hans-Joachim Körber. "Moreover,the international business made an above average contribution to the result. Today, the Metro Group is reaping the benefits from the consistent implementation of our internationalisation strategywhich we launched years ago."
As at the end of June 2005, the group had 2,445 locations worldwide. In the second quarter, 18 locations were newly opened, 14 of them as Metro Cash & Carry as well as Media Markt and Saturn.The three brand outlets account for about 70 per cent of the group's sales.
For the half-year, sales rose by 3.9 per cent to €27.24bn. International business sales rose by 9.5 per cent to €13.76bn. The strongest growth was reported from Eastern Europe where salessurged 22.3 percent.
"In Germany, by contrast, the discussion about parliamentary elections and the potential increasing of VAT once again fueled consumer confusion," the company stated. "Thisuncertainty depressed business activity in an already difficult market environment."
