Metro – what does the future hold?

Citation

(2002), "Metro – what does the future hold?", International Journal of Retail & Distribution Management, Vol. 30 No. 3. https://doi.org/10.1108/ijrdm.2002.08930cab.006

Metro – what does the future hold?

Metro – what does the future hold?

The possible future options for Metro, Germany's largest retailer, are discussed in a new report, published recently by IGD. As the top player in Europe's number one economy and a major international operator, Metro is likely to play a key role in any future pan-European retail consolidation.

There has been speculation that the company could streamline its existing structure with most industry commentators, convinced that the best option for the company would be to divest its non-core operations and concentrate on its two profit drivers – Consumer Electronics and Cash & Carry.

Should Metro decide to sell its food retail activities, who might be interested in acquiring them?

Despite being one of the toughest markets in Europe, Germany does have several strategic attractions for international retailers:

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  market size;

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  geographical location;

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  Wal-Mart's limited scale.

Metro's Real chain of hypermarkets would be a prime entry vehicle for someone new to the market or could help Wal-Mart in its search for critical mass. Real is the clear hypermarket market leader and the only national chain. However, Germany is not currently seen as a must-have market, as it suffers from inherent structural difficulties that can hinder the profitable progress of new entrants and a number have failed in recent years. Also, eagerness to enter the German market has diminished, as retailers focus on other areas of growth, most notably Central Europe, Russia, China, Japan and other parts of Asia.

The candidates that are most frequently believed to be interested in acquiring Real are Carrefour, Tesco, Ahold and Wal-Mart.

Carrefour

Carrefour's main ambition is to become a truly global player; therefore it cannot afford to ignore the world's biggest markets. Germany is not considered a high priority but Carrefour would most probably react defensively to a scenario in which Wal-Mart bid for Real. Geographically the German market is located between its home markets and other strategic markets such as Poland and the Czech Republic.

Tesco

Generally believed to be the least likely major international retailer to make such a move, as its strength is in organic growth. Buying Real and trying to gain additional market share could eat deeply into profits.

Ahold

Germany has been described as Ahold's "less preferred market" out of the three key European markets in which it is not present (Germany, France and the UK). Ahold is primarily a supermarket business and has only recently identified hypermarkets as an expansion route for Central Europe. Ahold could impact on the German market through the transfer of best practice, but it appears unlikely that this would be enough to justify the high entry price.

Wal-Mart

The most likely candidate to acquire Real. Currently Wal-Mart has failed to develop critical mass in Germany and such a move would allow it to establish a national presence. Wal-Mart could easily afford to outbid other players and therefore increase its business in Germany threefold. There has been past speculation that Wal-Mart could buy the Metro group outright, creating a company four times bigger than Carrefour. Ultimately this scenario is highly speculative and it is unlikely that the Metro controlling families would agree to such a deal.

IGD's International Programme Manager, Louise Spillard, said: "The timing may not be right for some international players but, should the bidding start for Real, the cost of not securing the deal could be significant."

For further information contact Jane Beard. Tel: +44 (0) 1923 851910, mobile 07770 640448 or Catherine Ellwood. Tel: +44 (0) 1923 851916; IGD, Grange Lane, Letchmore Heath, Watford, Herts WD25 8GD.