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Metro Group (Germany)

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Metro is one of Germany's largest general retail groups, but like French counterpart Carrefour, it has struggled to find a path to strong growth in its domestic market as a result of fierce competition from cooperative groups and discount rivals Aldi and Lidl. The group was formed in 1996 from the merger of three separate companies - Metro Cash & Carry, Kaufhof Holding and Asko Deutsche Kaufhaus. It operates around 2,060 wholesale warehouses, hypermarkets and electronics stores in 30 countries. Key brands include Metro cash & carry warehouses, Media Markt and Saturn electronics and entertainment stores, and hyper/supermarket chain Real. It lost its lead in the grocery market with the sale in 2008 of struggling supermarket chain Extra to competitor Rewe, and was overtaken as Germany's biggest retailer in 2013 by Lidl parent Schwarz Gruppe. The group sold its Kaufhof department store business in 2015 to HBC of Canada. The following year, the group announced plans to split into two separate companies during 2017, one comprising the cash & carry business and supermarkets; the other housing the MediaMarkt and Saturn chains.


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Brands & Activities

Metro has a substantial presence across Europe, but it is still struggling with the inherent weakness and fierce competition within the German market. Although its consumer electronics division and its cash & carry business continue to prosper, the group faces implacable competition in the supermarket/hypermarket sector from hard discount giants Aldi and Lidl. Metro has steadily pruned this business, but there is as yet no clear sign of a complete turnaround.

To give its component businesses more room to pursue their own different strategies, the group announced plans to split into two separate companies in 2017. The core cash & carry business and what remains of its supermarket division will be spun off into a separate entity led by current group CEO Olaf Koch, leaving consumer electronics behemoth Media-Saturn as the core of the renamed group. This comprises the twin European chains MediaMarkt and Saturn.

Cash & Carry: Metro restructured its business in recent years to create a network of separate retail brands operating across the whole spectrum of retail markets from wholesale, food and non-food retailing and - until recently - department stores. One of the two main engines of the group is its cash and carry business, selling wholesale goods to professional customers such as smaller retailers and the restaurant and catering industry. It trades primarily as Metro, which celebrated its 50th anniversary in 2014. It also operates the Makro brand in some countries. In Spring 2012, Metro sold its lossmaking Makro division in the UK to rival Booker. Stores are divided into three formats: "Classic" fullsize stores, mainly in Germany; smaller "Junior" stores elsewhere in Europe; and "Eco" stores, mainly selling food products and targeting the catering industry. Depending on size of store, each outlet stocks up to 20,000 food and 30,000 non-food items, ranging from national and international brands to private label products such as Aro food and cleaning products, Fine Life and Horeca general foods, H-Line hotel and restaurant toiletries and cleaning goods, Rioba cafe and bar products and Sigma office supplies. Own brand products account for sales of more than €5bn.

At most Metro and Makro stores, customers have to take away their own purchases. Separate unit C&C Schaper, based in Hanover, offers a similar wholesale service within Germany, but also offers a delivery service. The wholesale division is the group's most widely-spread, with 740 superstores in 26 countries by the end of 2015, as well as an online division. The business contributes just under half of group revenues, or €30.5bn in 2014, and almost two-thirds of operating profits in 2014. More than 84% of this division's revenues are generated outside Germany.

Electronics: Traditionally, the group's second most important business is Media-Saturn, Europe's biggest consumer electronics and music retailer, with 415 outlets in Germany and another 570 in 14 other markets including Italy, Spain, Poland, Russia, Austria, Netherlands, Belgium, Turkey and Hungary. The group pulled out of China in 2012 because of poor performance. Metro acquired control of the Media-Saturn business in 2002, and had a holding of around 78% in early 2013; the remaining shares are owned by co-founder Erich Kellerhals. The group is targeting eastern and central Europe as its key growth markets. There are two brands within the business. MediaMarkt is the bigger of the two, a superstore concept specialising in consumer electronics, offering an extensive selection of telecommunications products, computers, photographic equipment, hi-fi systems and electrical appliances. Locations tend to be in out-of-town retail parks. It has more than 700 stores in 14 countries in Europe and Asia. Saturn, based mainly in central downtown locations, is best known as Germany's leading music retailer, but also offers a wide range of consumer electronics products. Its flagship store in Cologne offers more than 300,000 CDs, one of the biggest selections in Europe. There are 240 stores in total spread across nine European markets. Since the end of 2013, Saturn's marketing has featured comical fictional employee "Tech Nick", who advises customers on new products and entertainment.

Unlike most other electrical stores, each MediaMarkt/Saturn outlet is part-owned by its local manager, who shares responsibility with group management for decisions on pricing and marketing. The chains sell a selection of private label electronics products as well as third-party brands. Value-priced OK was launched in 2010 along with premium Koenic appliances. Peaq consumer electronics and Isy accessories followed in 2011. That same year the group acquired online retailer Redcoon, which operates in Germany, Austria, Spain and other markets, followed by Russia's 003.ru in 2012. The group also offers its own digital entertainment download service under the Juke banner.

Combined revenues for Media-Saturn continued to rise steadily during the 2000s before wobbling slightly in 2011. They rose once again in 2012 but have remained more or less flat since then, at just under €21bn in 2014. Almost half of those revenues were generated in Germany, where Media-Saturn is bigger than its two closest competitors - Amazon and Expert - combined. The Media Saturn group also operates its own inhouse marketing agency, Red Blue.

Plans to spin off MediaMarkt and Saturn were approved by Metro shareholders in Feb 2017. The independent business will be renamed Ceconomy.

Food: Though Metro leads the local market in both cash & carry and electronics, it has lost pole position in groceries to other companies, and now sits in 4th place in Germany behind Edeka, REWE and Schwarz. Its main business in this sector is Real, a leading hypermarket retailer in Germany, with a network of 307 stores across the country, including 85 large-format outlets acquired from Walmart in 2006. Stores stock a wide range of food products, including the extensive TiP low-cost private label brand, and higher priced Real Quality, organic Real Bio (previously Gruenes Land) and premium Real Selection. Although best-known for food, stores also offer an increasingly broad selection of non-food items such as electronic appliances, books, household supplies, sports equipment, apparel, even vacation packages. "Einmal hin. Alles drin" (or One store. You won't need more) is the current marketing slogan.

Until recently, Real also had more than 100 outlets outside Germany, mainly in Poland, but also Romania, Russia, Turkey and Ukraine. It acquired the Polish hypermarket operations of French group Géant in 2006. However the Eastern European stores have struggled, and Metro agreed at the end of 2012 to sell them to French rival Auchan for €1.1bn. It sold its last remaining stores outside Germany - in Turkey - in 2014. continues to own 12 outlets in Turkey. Until recently, the Real brand was supported by supermarket and convenience store chain Extra. However the German grocery retail sector has been under intense pressure in recent years as a result of the expansion of hard-discounters Aldi and Lidl. As a result Metro steadily pruned the smaller Extra chain, halving the number of outlets between 2004 and 2007. It took the decision to transfer its remaining 245 stores to rival Rewe in July 2008 for an undisclosed sum. Sales from the Real division rose steadily between 2006 and 2008, before slumping again during the recession. Revenues for 2014 were €8.4bn.

Other operations: Metro has gradually reduced its exposure to retail sectors other than food and consumer electronics. Until 2015, the group continued to own Galeria Kaufhof, now the biggest department store chain in Germany (ahead of Karstadt) with 105 outlets in Germany, as well as Belgium's only department store chain Galeria Inno. Stores specialise in fashion and home furnishings. Despite steady improvements in the division's profit margins, Metro has repeatedly considered plans to sell off the business. There were rumours in 2011 of negotiation with Spanish retail giant El Corte Ingles but no deal was agreed and Metro cancelled attempts to sell Kaufhof at the beginning of 2012. Combined sales for 2014 were €3.1bn. A deal was finally sealed in 2015 with Canadian group HBC, which agreed to acquire the business for €2.42bn.

Metro Group also retains foodservice and distribution business Dinea, as well as several service companies including an inhouse advertising coordination agency, Metro Group advertising (MGA). It also has a substantial real estate management division which oversees its own properties as well as third-party retail parks. Real and Galeria Kaufhof are both core members of Payback, Germany's most successful loyalty program, launched in 2000, and now claiming a customerbase of more than 50m cardholders. Payback's parent company Loyalty Partner was acquired by American Express in 2015.

The sale of Extra and fierce competition from other groups lost Metro its overall lead in the domestic German market towards the end of the 2000s. By 2010, although it remained the biggest German-owned retail group by total sales, it ranked #3 by sales in Germany alone, behind Edeka and REWE, and narrowly ahead of Schwarz Group (Lidl) and Aldi.


Combined group revenues for 2012 edged up by 1% to €66.74bn, assisted by a modest increase in Germany where, after several years of decline, comparable sales rose by just under 1% to €25.63bn. Virtually all sales were generated within Europe, with only €3.54bn from the Asia/Africa region. Western Europe excluding Germany contributed €20.86bn, and there was a further €16.95bn from Eastern Europe. Net profits plunged by 86% in 2012 because of more than €600m of impairments against divested or discontinued businesses, ending up at just €101m. Even excluding one-off charges, operating profits slumped by 27%.

The group changed its financial year in 2014. For the year ending Sept 2014, revenues were €63.04bn, down 4% on a comparable basis. However net profit more than tripled to €182m, helped by a significantly lower tax charge. Pretax earnings fell by a third to €709m. Germany contributed 40% of revenues, the rest of Western Europe another 30%, and Eastern Europe 23%. Sales outside Europe accounted for less than 7%.

The group reported another flat performance for the year to 2015. Reported sales slid 1% to €59.2bn, partly as a result of exchange rates and the sale of Galeria Kaufhof. Like for like sales rose 1.5%. However losses from continuing operations rose dramatically from negative €3m to negative €221m. Bottom line was saved only by proceeds from the Kaufhof sale, resulting in a €714m surplus.

The group was jointly controlled for several years by three partners: original founder Otto Beisheim and investment partners Franz Haniel & Cie and the Schmidt-Ruthenbeck family. However this split responsibility arguably stood in the way of more sweeping management decisions. In 2007, Haniel took an effective majority stake in the business, building its own shareholding and agreeing a deal to manage the interests of the Schmidt-Ruthenbeck family. That combined stake is now just under 46%. Franz Haniel became chairman of the supervisory board in 2011. Otto Beisheim died in 2013 at the age of 89. His family continue to control his remaining 10% shareholding in Metro Group. Media Saturn founder Erich Kellerhals still controls a 20% stake in that business.


Metro Cash & Carry stores were founded in 1964 by retail entrepreneur Otto Beisheim. Towards the end of that decade, Beisheim secured financial backing from industrial wholesaler Franz Haniel & Cie and from the Schmidt-Ruthenbeck family, who held other interests in wholesaling. The group expanded rapidly, opening stores across Germany. In 1968 the group teamed up with Dutch company Steenkolen Handelsvereeniging (SHV) to open a similar business in the Netherlands under the name Makro.

With additional funding from UBS, Metro expanded its operations through Europe and moved into consumer retail adding a variety of other chains including shoe shops and electronics outlets. During the course of the 1980s, the group's Metro Holding parent company - by then based in Switzerland - gradually built a sizeable interest in German department store chain Kaufhof, acquiring a majority stake in 1987. Kaufhof had been established in 1879 by Leonhard Tietz, originally as a textile shop. From around 1900 he, and later his son Alfred, expanded the business into a successful chain of 40 department stores. However during the 1930s the business was confiscated from the Jewish Tietz family by the Nazi government and nationalised. After World War II, Kaufhof was returned to public ownership. (Having fled the country, members of the Tietz family were partially recompensed by the post-war government for the seizure of their business).

Following its tie-up with Metro in 1987, Kaufhof began to expand its presence beyond department stores. In 1988 it acquired a controlling stake in MediaMarket, a chain of consumer electronics superstores first established at the end of the 1970s. Two years later MediaMarkt acquired music and electronics competitor Saturn, established in 1961. In 1994 Kaufhof acquired rival department store Horten Galeria and merged the two chains as Galeria Kaufhof. Meanwhile Metro also took control of computer manufacturer Vobis, and acquired a large stake in supermarket group Asko Deutsche Kaufhaus, and its DIY subsidiary Praktiker in 1993. The individual businesses continued to operate independently until 1996 when all the various retail interests of the holding company were merged as Metro AG, at that point Europe's biggest retailer. The group acquired rival DIY business Wirichs in 1997.

Metro transformed its operations with a series of further deals during 1998. The group had continued to hold a small stake in the Makro business which had grown by then to 196 stores throughout Europe. In 1998 the German company bought out its Dutch partner, and then acquired two German hypermarket chains, Allkauf and Kriegbaum for $2.7bn. The three deals added more than 400 superstores and increased group sales by almost a third.

Tip, a discount chain in Germany, was sold off in 1999 (although the brand name was retained), and in early 2000 Metro hived off the real estate ownership of 290 hypermarkets and department stores in Germany, Greece, Hungary, Luxembourg, and Turkey to a joint venture company controlled by Westdeutsche Landesbank. Although Germany remained the core of the business, the group embarked in the late 1990s on a series of joint venture arrangements with local partners to extend Metro's brand formats throughout Europe. In 1998 the first Metro C&C opened in mainland China, and a joint venture arrangement was cemented with Turkey's leading supermarket retailer to operate Metro C&C stores in Turkey. Metro also took a 50% stake in discount chain Sok as part of that deal.

However, the group's position began to change in late 1999. Metro's dominant position as Europe's largest retailer (and the world's second largest) was dealt two blows. The first was the merger of French supermarket groups Carrefour and Promodes, narrowly overtaking the German company in sales. The second was the arrival of US giant Wal-Mart (the world's #1 retail group) in Germany, and its subsequent purchase of UK supermarket Asda. By early 2000, the three families who controlled the group were rumoured to be exploring the possibility of a sale. Metro was reported to have begun preliminary discussions with UK group Kingfisher to explore the benefits of a merger. However these came to nothing. There was also speculation that the group was in negotiations to sell its Real chain of hypermarkets to UK group Tesco.

Following the purchase of a 51% stake in Primus Online, a consumer shopping e-commerce business, Metro created a separate subsidiary, Metro Online, to handle its internet operations. The company launched an e-commerce equivalent to its main Metro stores, Metro24, in July and promised to invest DM160m ($74m) in e-commerce activities in 2000. In 2001, the group announced plans for a joint venture with Marubeni, the Japanese trading house, to open bulk stores in Japan. The first outlet opened at the end of 2002. Following the downturn in the internet economy the Primus stake was sold back to partner BHS of Switzerland in 2002.

In 1999, a collection of non-core or less profitable businesses including computer reseller Vobis and a selection of specialist fashion and accessory retailers were spun off as subsidiary group Divaco. Metro then sold a 51% stake in the group to the investment arm of Deutsche Bank. The remaining 49% shareholding was sold to management in 2004. Home improvement chain Praktiker, with sales of just under €3bn, was spun off in an IPO at the end of 2005.

Hans-Joachim Koerber was replaced as CEO of Metro in 2007 by Eckhard Cordes, previously chairman of the group's supervisory board and also chief executive of industrial services supplier and founding shareholder Franz Haniel & Cie.

Last full revision 4th October 2013

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