8. Pioneered by Aldi, discounters are the dominant
retail format in Germany.
50s-70s 80s-90s 2008
• Aldi as discount pioneer • New format and • Expansion into new
assortment strategies assortments and services
• Market entry of other
(e.g., non-food) (e.g., travel, M-Commerce,
discounters
fresh products, bio)
• Strong focus on
• Limited assortment with
internationalization • Beginning consolidation
focus on food
< 2,000 stores ≈ 12,000 stores 15,000
>15,000 stores
< 5 % market share ≈ 30% market share > 44% market share
8
9. Key success drivers discount in Germany
• Limited, but covering all
Assortment essential needs
• Enriched by seasonal items
• High standards, confirmed • 98% penetration
Quality e.g.
by Stiftung Warentest • Accepted by all consumer
segments
• Each household can reach three
•Low complexity, high different discounters within 10
Image continuity and convenience minutes
• High degree of
Efficiency standardization
• Attention to details
9
10. Half of German consumers can almost
exclusively be reached through discounters
98,0%
of all German households bought at discounters in 2006
51,0% 47,0%
regular purchase “sporadic” purchase
at discounters at discounters
97 trips p.a. 37 trips p.a.
65% demand 24% demand
coverage coverage
at discounters at discounters
Today:
Distribution at discounters in Germany is a success factor for brands
10
source: GfK ConsumerScan, Nov.2005–Oct.2006
12. Germany: Discount Retailers Ranking 2008
Company Turnover in bn. outlets remarks
€
Aldi Süd 13.3 1,700
Aldi Nord 11.2 2,500
Lidl 14.8 3,000
Netto/Plus 11.0 4,000 Merger in 2008
(EDEKA)
Penny 7.0 2,300 300 outlets from
Plus (2008)
(Rewe)
Norma 3.3 1,250 Focus on South/
Southwest Germany
Netto North 1.0 300 Focus on Eastern
(Dansk Germany
Supermarket)
source: Trade Dimensions, Lebensmittelzeitung, own estimations
12
13. Two Aldis in Germany:
Division Aldi Nord/ Aldi Süd
Nord: 35 subsidiaries incl.
distribution centers
2.500 stores
Simple store- and poduct design
Limited assortment < 850 sku
Turnover/store: 4,3 Mio €
Turnover/sku: 6 Mio €
Süd: 31 Subsidiaries incl.
distribution centers
1.700 stores
More sophisticated product- and
store design
Broader assortment <1.000 sku
Turnover/store: 7 Mio €
Turnover/ sku: 7 Mio €
Some identical products can have different pricing in Aldi
Nord/Süd
13
14. TOP 6 german retailers (in bn. €)
(total Market: 151 bn. € in 2008)
EDEKA Group 37.606 90 % food
(incl. Netto)
Metro Group 31.575 42 % food
(incl. real.-)
REWE Group 29.580 83 % food
(incl. Penny)
Schwarz Group 26.500 82 % food
(Lidl + Kaufland)
Aldi Group 24.500 81 % food
(Aldi Nord+Süd)
Tengelmann Group 13.990 61 % food
(incl.Plus)
14
15. The relative price increases in 2008 accelerated the growth
of discounters – Aldi back on a growth path
share of sales (in %)
change value (%) **
2002 2003 2004 2005 2006 2007 2008 ** 2008:2007
drugstores 7,8 7,9 8,0 8,2 8,5 8,7 8,6 +2,4
23,6 23,6 23,6 24,6 24,4 24,7 24,1 +2,7
hypermarkets
total
(> 1500 sq m)
28,7 24,6 23,6 23,3 +4,0
31,8 30,1 26,3
supermarkets
(< 1499 sq m)
42,5 43,0 44,0 +7,6
38,4 39,7 40,9
discounters 36,8
Aldi 18,3 18,8 19,1 18,9 19,6 18,7 18,9 +6,5
Lidl 6,4 7,1 7,1 7,9 8,6 9,2 9,7 +11,2
bn. € 134,7 136,7 136,6 136,6 140,2 144,2 151,6
+1,5 +0,0 -0,1 +2,7 +2,8 +5,1
share of retail chains* in retail food trade
15
source: IRI universe, always at end of year * according to retail panel system
** own calculations based on GfK ConsumerScan, total till roll fmcg
16. Retail formats cost comparison
Total costs as % of gross-
price
VAT
Profit
Advert
Headq
Logistic
POS
16
17. Growing consciousness of German retailers
to become retail brands
Pricing is not the right means to differentiate from competition.
German shoppers differentiate only 3 types of food retail
outlets: supermarkets, big supermarkets (hypermarket) and
cheap supermarkets (discounters). But only discounters are
synonymous for cheap prices.
Therefore, during the last 2-4- years food retailers have started
developing positionings and concepts to differentiate from
competition. There is a trend of becoming a retail brand like
Tesco, M&S or Sainsbury in the UK
17
18. German food retail (full assortment):
consciousness to become a Retail Brand
18
19. Some Touch-points of a Retail Brand (EDEKA):
overall performance of brand is most important!
19
20. Key success factor Private Label –
focus on Retail Brand
EDEKA: since 2005
REWE: since 2007
Globus: since 5/2008
real.- (Metro): since 8/2008
Privat Label is not only another „Touch Point“ , but it is an ultimate
expression of the Retail Brand, because customer takes it home and taste it!
20
23. Key economy brands:
benchmark Aldi for quality & price
Aldi movements in price & product are carefully observed and
instantaniously copied („GUT&GÜNSTIG“=EDEKA, „ja“ = Rewe, „Tip“ = real.-)
23
25. Germany: The Hard Discount Price War
Q 1/2009: Aldi leads the gang!
25
26. Food Retailers (full assortment) with reasonable
Private Label Business (>10% share)
EDEKA > 2 bn. € (75% GUT&GÜNSTIG)
REWE >1,5 bn. €
Kaufland > 1,2 bn. €
real.- (Metro-Group) > 1,0 bn. €
Tegut > 0,2 bn. € (focus organic)
Globus (St. Wendel) > 0,3bn. €
There are more chances for innovative product concepts than with
commodity products for economy brands
26
27. EDEKA Private Label structure:
cover all price tiers
Premium
Wellness/Organic
Convenience
Standard
Economy
27
28. PL-structure EDEKA. Meaning for supplier
Top-quality in product and packaging,
better/different than brand, innovative, create trends,
create value
mostly me-too, low grade of innovation,
sophisticated packaging, Low-cost, added
value
Me-too of 400 – 600 Top-Aldi
products, low cost producer, hard
price negotiations, small
revenuel, not innovative
28
29. New Launches EDEKA (2007-2009)
Even for standard Private Label, retailers look for new product
concepts, they try product and packaging innovations
29
30. EDEKA GUT & GÜNSTIG
Philosophy: Benchmark Aldi in
- assortment of core-products (ca. 500-700 sku)
- Identical in quality (packaging & product & taste) and price!
Umbrella-brand design, „cheap“-looking
Placing: medium to low
No innovations, only me-too Aldi
Suppliers: usual 1-year contract
Supermarkets: 7 regional wholesalers, 40 distribution centers
General PL Framework-Contract: responsibilities design, law,
cost, licensing, quality assurance/management (acc. IFS), audits,
test results („Stiftung Warentest“, „Ökotest“), liability, quality of
deliveries (Logistics), penalties, recall of defective products etc.
Multi-tier-retailers like EDEKA and Rewe have more than one
decision maker, that adds complexity to the buying process
30
31. Real.-: new Private Label structure (2008)
Potentials on all tiers - problems to find „selection“-products
31
32. REWE Privat Label structure (2008):
Processed Meat/Meat
(net-margin: 35-45%)
Wellness/Organic
(net-margin >35%)
Standard
(net-margin >30% or rather
beyond category-average)
Economy
(net-margin >20%, but
depending on Aldi-price)
32
33. Kaufland Private Label
(Hypermarket Schwarz-Group, 11.8 bn. €/2008)
K-Classic Label: Economy
Brand, introduced 2004
Share: ca. 10%
K-Classic „WellYou“ Wellness-
Range, introduced 2008
Centralized and efficient
decision making
5 distribution centers
Successful Hypermarket-concept in Germany: „Discount-Hypermarket“
33
34. Which part do private label products
play in Discount stores?
Besides price, discount retailers seek a differentiation through
special products, esp. within fresh/chilled products
Aldi and Lidl – try to distinguish themselves through private
label
Private label products in discounters are no longer only me-too,
but besides the basic assortment (still me-too) there are
additional assortments to deliver profit and competence.
Typically, there is no distribution of new product launches
ofbrands (fmcg) in discount stores. Therefore discounters have
to launch new concepts/products via private label.
In some areas, discounters like Aldi & Lidl made markets resp.
create new categories.
34
35. Aldi & Lidl create categories!
Fast adoption of trends: smoothies
35
37. Aldi Süd: Co-Branding with Brand!
co-branding. Co-
Brand manufacturers can avoid confrontation by co-branding. Co-branding as a result from
co- groups.
co-operation with manufacturer brands to tailor their offers to their target groups.
Aldi PL-brand
PL- French brand
+ =
37
42. Many ways to do business with Aldi (Nord +
Süd)
National Listing = become part of the normal assortment; one-
year contract
Local Listing = become part of the normal assortment of one or
more warehouses (>local products and for testing)
Promotional Listing: Listing for one – usually weekly - promotion
incl. national advertising in the particular week
Seasonal Listing: Listing for a special period, f.e. a barbeque-
product will be listed from April – September
Thematical Promotion: become part of a special advertising
(„America“, „Italian Week“, „Wellness“, etc)
Usually, you don´t need a contract
Centralized distribution
Net/net-prices (incl. your delivery cost to depot/warehouse)
Promotional listings could lead to normal national ones!
But it is always a matter of low price and high quality!
42
43. Aldi´s internal listing process: Trial & error
example cheese
Best customer is the one who shops regularly and buys much
Which varieties of cheese are really needed?
Strong demanded, easy to handle-products for every day
Best quality
Internal consideration, talks with some potential suppliers*
Check the suppliers offer
Test in some outlets or one region for some months
Analysis of test results, perhaps check another variety
Decision, to introduce into all stores or refrain from it
*suppliers too can suggest a new product
If necessary (big category/avoid risk), Aldi takes more than one
supplier per product
43
44. The other ones (Lidl, Netto, Penny, Norma)
act similar to Aldi
National Listing = become part of the normal assortment; one-
year contract or no time limit
Promotional Listing: Listing for one – usually weekly - promotion
incl. national advertising in the particular week
Seasonal Listing: Listing for a special period, e.g. a barbeque-
product will be listed from April – September
Themed Promotion becomes part of a special advertising
(„America“, „Italian Week“, „Wellness“, etc)
At Lidl, you have to sign a PL-contract. In general, not much
paperwork with discount headquarter
Centralised distribution
Promotional listings could lead to a standard national listing!
But it is always a matter of low price and high quality!
44
45. Private Label Suppliers have to be innovative
As neither German discount retailers nor full assortment
retailers have NPD-departments at their disposal, they need
innovative and creative suppliers who deliver more than just
me-too. In most cases, responsible person is the buyer/
category manager = decision maker. There is no
Marketing/Product Management at Aldi, Lidl etc!
Retailers expect ideas and suggestions for category
development by private label suppliers
UK PL food retail is still seen as leading in Europe. Therefore
suppliers with experience to UK Private Label have an asset
against competition from continental Europe.
(compared to the U.K. and Ireland, German food retail is not so
sophisticated. Price is still the key means to do the business)
Don´t consider commodities, think of innovations!
45
46. Whom to start with?
(Details depend on particular retailer)
Discount:
high turnover/sku, good structure and organization of decision &
supply chain, fast, only centralized distribution+assured
distribution into each outlet, not much paperwork, quickly follow
and sometimes (Aldi) create trends, introduction of „luxury“-
brands, no Marketing, spectrum from single local promotion to
long lasting national listing, sometimes individual
packaging/content/size required (mixed tray etc.)
Supermarkets:
low turnover/sku, complicated structure (strategic, national, local
buying), slow decision, mostly centralised distribution but no
assurance for distribution in each outlet, expect innovations from
brands+ but also open for PL-innovations, listing at Aldi is
advantage (positive argument!), much paperwork
In „discount country“ Germany try Discount Retailers first!
46
47. Thank you very much!
Hermann Sievers, smk consulting, D-Hamburg
info@smk-beratung.de www.smk-beratung.de
47
