Germany-based Rewe Group has announced plans to acquire 100% of the shares in Lekkerland as it looks to target the growing on-the-go shopper. No financial details were released in relation to the deal. The merger of the two companies, though, will require clearance of the competition authorities in Germany, which is not assured.

Acquisition would lead to new business unit

Announcing the deal, Rewe and Lekkerland said the merger would lead to the creation of a new business unit in the Rewe Group, under the name ‘Convenience’. Rewe said the merger would enable it to better target the fast growing on-the-go consumption trend, which it described as ‘one of the areas offering the most promising growth prospects in food retail’.

The companies said the grouping would enable them to combine their differing expertise to maximise the opportunity within the on-the-go trend. They highlighted that Rewe had ‘ expertise in the goods and category management business areas’, which would compliment ‘ Lekkerland’s logistical performance capability and varied wholesale expertise’.

Combination would lead to €73bn company

Rewe revealed a strong performance in 2018 in its recent annual results, where it said revenues rose 4.7% to €61.2bn. Announcing the deal, the companies said Lekkerland generated a turnover of €12.4bn through sales to its client base of service stations, kiosks, convenience stores, bakeries, food retailers and quick service restaurants.

However, it is not guaranteed that the competition authorities will sign off on the deal. The protracted acquisition of Tengelmann’s Kaiser division by Edeka and Rewe, which took close to two years, shows how the acquisition of Lekkerland may not be smooth.

A lot will depend on how the authorities define the market. Rewe’s acquisition of Lekkerland mirrors Tesco’s purchase of Booker in the UK. While many expected the purchase to face scrutiny from the UK’s Competition and Markets Authority, ultimately the purchase was approved without conditions. Given Lekkerland’s presence in seven countries in Europe and supply of 91,000 points of sale, the acquisition could face challenges from a number of places.

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As Edeka and Rewe announce initiatives in their home market, we round up news from the retailers.

Edeka to expand organic focus

As shopper interest in organic products grows, Edeka has rumoured to be investigating opportunities to launch a format specifically aimed at such ranges. Trade publication Lebensmittel Zeitung said Edeka would use the Naturkind brand for both standalone stores and shop-in-shop outlets in some of the retailer’s hypermarkets. The concept would stock both the Edeka Bio private label range and branded alternatives. To support its growing focus on organic, Edeka could expand its private label range with up to 440 seasonal items.

Rewe trials faster checkouts…

Rewe, at a store in Cologne-Rodenkirchen, is testing a self-scanning solution to enable shoppers to scan their own products. The technology will allow shoppers to either use specific scanning devices, while in future the technology could be extended to their smartphones. To benefit from the service, shoppers will have to download the Smart Shopping app and register with their Payback account details.

…As it invests in prices…

Following the publication of its 2018 results, Rewe’s chief executive Lionel Souque said that the retailer will remain price competitive in the market. Souque was quoted as saying: “We track the prices of Aldi and Lidl every day and adjust our prices accordingly. We will not allow Aldi price leadership in branded goods.”

…And its Billa operations in Bulgaria

Rewe is set to invest more than BGN34m (US$19.6m) in its Billa operations in Bulgaria in 2019. It said the money would be spent on opening at least two new stores in Paradise Center and The Mall shopping centres in Sofia and updating some of its existing 124 sites. The announcement comes after the retailer discussed its 2018 results, when it said sales rose 5.9% in Bulgaria in 2018.

Want to find more insight on the German market? Subscribers can read our country presentation that explores the key trends in and the growth strategies of the leading retailers in the country.

Germany-based Rewe Group announced revenues rose 4.7% to €61.2bn. Its performance was driven by growth both in its home market, where revenues increased by 4.5%, and internationally, where they rose by 5.2%.

“REWE Group is on a healthy growth trajectory, both nationally and internationally. In 2018, we once again profited from our huge investments made in previous years in the modernisation and expansion of our stores and in strengthening our Travel and Tourism division, both in Germany and in other European countries."

Independent food retail drives growth

Rewe said that while its performance was positive across its business units, the independent food retail business ‘was a driver of the positive overall development’. The group said its retailers had increased sales by 9.1% in 2018, which followed growth of 8.5% in 2017. The figures were aided by a 5.1% increase in the number of stores of Rewe retailer in Germany, which reached 1,718 at the end of 2018.

Discussing the performance, Rewe Group’s chief executive, Lionel Souque, noted the importance of its retailers ‘being local enterprises with roots in their respective towns and communities, high customer proximity, regional and local product ranges, as well as individual service.’ The continued success of its operating model is encouraging Rewe to maintain its focus on its independent retailers and its expansion within the area.

Supermarkets performing well in Germany and internationally

Rewe said its national full-range stores, which includes the Rewe, Rewe Center and Rewe to Go banners, amongst others, had achieved revenue growth of 12.3%, to €23.8bn, in 2018. It noted the success of its Rewe 2020 store concept and its focus on providing shoppers with ‘freshness, regionality, healthy diets, variety, innovation and expert assistance’.

Outside of Germany, its supermarkets and drugstores saw revenue growth of 6.2%, to €9.4bn. In Austria it saw revenues increase by 1.7% to €6.4bn, while in Central and Eastern Europe revenues rose by 17%. The strong growth was aided by the consolidation of the Lithuania-based Iki business for the first time and the performance of its Czech Republic-based operations, which grew revenues by 12%, to €1.1bn.

Discount remains in positive position

In Germany Rewe’s Penny discount format continued to perform positively, with revenues rising by 3.1% to €7.6bn from its 2,182 stores. Rewe said the growth was driven by ‘the consistent positioning of Penny as a neighbourhood discounter, the expansion of the organic and convenience ranges, as well as the introduction of Payback’.

Outside of its home market, Rewe said Penny had enjoyed revenue growth of 7.5%, taking its sales to €4.8bn. With its store numbers rising by 2.7%, to 1,505, the assumption is that like-for-like growth was strong across its various geographies. Rewe highlighted Romania, where revenues rose by 14.6%, and Austria, where they were up by 2.5%.

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