The German food retail trade is considered by many to be the hardest market in the world. A handful of large discounters and supermarket chains dominate the industry with efficiency and merciless price competition. Even at European level, not many competitors can keep up. A new turnover ranking of “Lebensmittelzeitung” shows how dominant German retailers are in Europe. The ranking covers a total of 50 companies – four of the continent’s six largest food retailers are having their origin in Germany. However, none of them can match Amazon’s dynamic growth.
„As in the previous year, in 2018, the European retail trade was challenged by two real fighting machines: the Schwarz Group and Amazon. With a gross sales increase of 6.3 percent, the discount giant from Neckarsulm was able to expand its position as Europe’s number one thanks to the efficiency and stringency of its sales systems. Even more spectacular is the seemingly unstoppable rise of the US online giant Amazon, which is represented in the Top 10 for the first time.
1. Schwarz Group 112,726 M€ (+6.3 %)
2. Carrefour 64,083 M€ (-1.3 %)
3. Aldi Nord + Süd 63,637 M€ (+6 %)
4. Tesco 61,445 M€ (+7.6 %)
5. Edeka 58,750 M€ (+4.3 %)
6. Rewe Group 57,281 M€ (+4.1 %)
7. Auchan 42,099 M€ (-2.4 %)
8. E. Leclerc 38,709 M€ (+1.5 %)
9. Metro AG 35,447 M€ (-1.2 %)
10. Amazon 33,260 M€ (+20.3 %)
Those who wanted to console themselves with the hope that these two colossuses could run out of breath will be disappointed by the steep development of their earnings figures last year. The Schwarz Group (Lidl and Kaufland) were able to increase its already robust sales growth rate by 0.3 percentage points over the previous year.
Completely unimpressed by this, Amazon continues to exceed all previous standards. While the Americans’ turnover had already risen by a breathtaking 17.6 percent in 2017 compared to the previous year, it grew even more strongly in 2018 with 20.3 percent. Regardless of all PR-prone attempts on the part of stationary retailers to stylise themselves up as multichannel retailers, none of them from Brest to Vladivostok was able to achieve even half of the growth dynamics of this “creative disruptor”, which mixes up an entire industry.
This tribute to Europe’s food retail industry leader and the troublemaker from distant Seattle must not, however, make us forget the remarkable dynamism of the Lidl-archenemy Aldi Group (plus 6 percent) and the leading German full-range retailers Edeka and Rewe with plus 4.3 and 4.1 percent respectively. Even though both retailers have significant discount areas with Netto and Penny themselves, the customer-oriented (freshfood-) sales strength of their cooperative members once again proved to be the trump card. […]
Of course, no matter how meticulously the review is made, it cannot fully capture the concentration tendencies that are emerging in Europe. This can be seen most clearly in the already strongly consolidated food retail sector in Great Britain. There, all full-assortment-retailers are feeling the pressure from Amazon and the extremely expansive discounters Aldi and Lidl UK. Those who still have the financial leeway in British retailing seek their salvation in takeovers and mergers. Tesco, the market leader in 2018, will be the largest retailer in the UK thanks primarily to the full consolidation of the group acquired in November 2017.“
Proven growth models based on an expansion of the outlet-network, a consolidation at national level and progressive diversification no longer provide growth nor do they automatically guarantee economic efficiency. In addition, the European markets are largely saturated and competitive pressure from discounters and online channels is increasing. For sure grocery and mass market are also growing (see Edeka and Rewe), but mainly through acquisitions and/or through focus on fresh food, specialized food or services. Already we can witness that all goods eligible to be shipped by parcel, like nonfood consumer goods in particular, canned food or sanitary items are moving over to ecommerce.
I am convinced that European food trade is facing fundamental changes, including a transnational consolidation wave, which will sooner or later impact the number of outlets and/or the number of players.
The drivers of change in European food will remain unchanged over the next ten years: stagnating demand, the weakening of traditional growth engines and the extremely aggressive Europe-wide expansion of specialised competitors such as discounters and online players. Most probably the number of headlines will increase, reporting about price wars, price declines and races for purchasing alliances, as well as sometimes reports about companies leaving the market.
In order to be in control of their future, retailers will have to be more than ever focused on costs, productivity, growth in new markets and – due to GAFA – customer access and customer loyalty.
Lebensmittelzeitung No. 16/2019