Metro plans major own-label expansion

04 August 2010

DÜSSELDORF: Metro, the German retail giant, plans to enhance its selection of own-label products in the economic recovery, having profited from this approach in the downturn.

The company - which ranks behind only Wal-Mart, Tesco and Carrefour globally - operates Metro Cash & Carry, Real hypermarkets, electronics chains Media Markt and Saturn, and department store group Galeria Kaufhof.

Eckhard Cordes, its chairman/ceo, reported that trading conditions in Europe are currently "very challenging", although some positive signs are starting to emerge.

Conditions vary between a broadly favourable outlook in Germany, Spain, Portugal and Turkey to a "tough" environment in Eastern Europe.

"The recovery is on its way, but it will take some time," said Cordes. "Despite some bearish macroeconomic comments we remain cautiously optimistic."

In response to evolving customer preferences, Metro consolidated several own-label brands, from organic to premium goods, under the Real Quality banner in 2008, and added 130 products to this range in Q1 2010 alone.

Visitors to the hypermarkets can also buy low-cost alternatives sold using the name TiP, which has been a similar subject of emphasis since the onset of the financial crisis.

At present, own-label contributes 16% of Real's sales in Germany, where shopper habits remain in transition.

"What is important to know is that the mix in private label sales has shifted notably from TiP, our price-entry range to Real Quality where margins are substantially higher," said Cordes.

Metro's wholesale arm directly manufactures the Aro, Fine Food, Rioba, H-Line and Sigma brands, and has revamped and extended much of this selection in countries from India to the Ukraine and UK.

While Metro's Cash & Carry unit generates around 13% of sales from these in-house offerings, the target is to increase this figure to 20% going forward.

Media Markt and Saturn are also set to launch their first own-label products in the run-up to Christmas 2010, a development Cordes argued was "long overdue."

"Our revised private label strategy across all divisions is very well received by customers. Sales are up in nearly all divisions," he concluded.

Data sourced from Seeking Alpha; additional content by Warc