Germany, Austria and Switzerland Market Update

Big changes underway in DACH forecourt and supermarkets – who has the winning convenience formula?

Westfalen Frischwerk
Successful new opening - the award winning Lekkerland format Frischwerk at a Westfalen site

By Christian Warning and Dan Munford

Christian Warning is Insight Representative for DACH and Dan Munford is Insight Managing Director. If you’re interested in developing DACH market opportunities and would like a bespoke market introduction, please contact us

Major change is underway in German speaking markets as multiple operators seek out a winning store formula for a DACH markets consumer whose lifestyle and shopping behaviours are on the move and fast evolving. We ask if it is going to be all about the shop and foodservice brands? Or will it come down to the store experience?

With encouraging sales volumes and margins, plus a buzzing shop business - it looks very much like 2018 will again be a record year for the German petrol station companies. There is not much to be said about network consolidation, as shown by the current number of petrol stations.

On the contrary, growth is pronounced, and if it cannot be realised in numbers, due to lack of opportunities, it should at least be valued according to the motto: not more stations, but larger stations with increased fuelling points and, above all, larger store offerings.

Creating a modern forecourt offer

The speed of market change is getting faster. Rewe to go at Aral locations is becoming ever more present. All over the country petrol station shops are being modernised by many market participants. However, the unknown component remains the customer: does the petrol station customer in Germany react in a similar way to the mobile consumer in Ireland and in the UK? Can they view the forecourt as a foodvenience destination? Will the still-value-conscious Germans take to the unmanned tank options at Aldi? What does the trend towards either larger, foodservice driven "cathedrals" for the out-of-home market on one hand and the growing attraction for a fully automatic gas station on the other mean for the majority of sites?

What is clear is that the traditional combination of a kiosk offer in shops, together with ‘pump can’ coffee and an average car wash offer, without payment at the pumps, will no longer be able to withstand future customer requirements.

Gas station owners need to take advantage of changing consumer behaviours and take the opportunity to tailor their location to the needs of their local customers. Our view is that the solution that makes a difference in one location will not work to the same extent in another, but there are clearly proven best practices which can be successfully implemented on a broader scale by petrol stations and convenience businesses alike.

Jungle Pizza
Seen at the Uniti Expo: a perfect example to boost the centre store profitability of German forcourt shops: Grab & Go The Jungle Pizza

Update on Aral – 400 REWE Partnership sites this year

BP’s brand for Germany Aral can look back on a successful 2017 financial year, with a market share of around 21.5 percent in terms of fuel sales, the blue and white gas station brand clearly maintained its market leadership.

In the shop business, Aral has further expanded its strategic partnership with REWE and increased the number of filling stations with the new REWE To Go shop concept; with over 400 to be open by the end of this year and a plan to retrofit up to 1,000 stations by 2021.

Aral’s aim is to meet the needs of mobile consumers with fresh and freshly prepared, high quality and healthy snacks and foods to go. Aral operates 2,443 stations in Germany and thus continues to be the densest petrol station network. Due to the good economy, fuel sales in the entire petrol station market grew by around 0.4 percent to around 36 million tonnes in 2017. This led to a consistently high sales volume of just over 7.6 million tonnes at Aral.

Overall, filling station operators at the approximately 1,200 stations in the company's own CODO network achieved external sales of around 1.6 billion euros, despite the temporary shutdown of shop closures. Foodservice revenue grew by one percent over the previous year to 212 million euros. The positive trend in coffee sales contributed to this once again; with more than 85,000 coffee and specialty coffees sold daily, Aral remains Germany's largest coffee-to-go provider. Aral also defended its position as No. 1 in the market for vehicle washes at petrol stations. The 1,200 company-owned (CODO) stations turned over more than 100 million euros with car washes. With a total of around 15 million car washes, statistically every third motorist washed their vehicle once at Aral in 2017.

Rewe to go
REWE is operating with 5 different C-Store brands in Germany and Austria: Rewe to go (Aral/BP Germany) Billa unterwegs (Shell Austria), Billa Stop & Shop (Jet Austria), Merkur Inside (BP Austria), Adeg am Weg (Independants Austria)

Grocery retail update - low margins, high density and cemented market shares

Germany’s big four retailers account for 60% of the total available market volume and they are investing heavily in their German networks: Edeka invested €1.9bn in their German network in 2017, Rewe is investing €2bn in 2018, Aldi Süd will invest €3.5bn within the next 2 years, Aldi Nord €2.3bn and Lidl is investing €3bn from 2016 until 2020.

The Supermarketisation of Germany’s former Discounters: Aldi and Lidl, will increase the competition in the grocery channel enormously. The existing density of grocery stores makes Germany somehow special – there are 339 hypermarkets, discounters and supermarkets per one million consumers in Germany, compared to 113 in the UK. However, the challenge to succeeding in Germany lies with the extreme price sensitivity and competitive nature of the retail and foodservice landscape here. German consumers have long held a reputation for being extremely price-conscious when it comes to food – a reputation backed up by the fact that discount retailers command the German grocery retail market.

With a population of over 81 million price-conscious and quality-demanding inhabitants, German grocery retailing was already one of the most competitive and challenging channels in the world and now, grocery retailers are also having to adapt to demographic shifts, modern lifestyles and changing values. Furthermore, changes in eating habits and consumption behaviour, particularly the continuous volume decline of food products, add challenges to the margins of grocery retailers and food manufacturers. In this regard, all major grocery retailers are currently investing heavily in modernising and refurbishing their outlets so as to be able to meet new consumer demand for convenience, premium, fresh and regional produce, as well as integration between their offline and online operations.

In a recent NACS Convenience Matter Podcast, Jeff Lenard from NACS talked with Roy Strassburger, a Texas based Convenience Veteran, about global trends in our industry and Roy pointed out that the “C-Store experience is more important than the C-Store banner".

He has a good point which may be especially applicable to Germany. In German cities where consumers can find a grocery buying option every 500m and in the German countryside where consumers drive a maximum of 5 minutes to the next supermarket, the grocery retail brand at the forecourt shop may not be the “killer” differentiator it is in markets like the UK?

In Germany, by contrast, perhaps the offer may be a more important part of the winning formula than the shop brand? Looking at the development of the 47,000 “Bäckereien” (bakery shops) in Germany into successful “Snackeries” might be a consideration for the German gas stations, as they offer a highly professional day-part related foodvenience solution.

Foodservice brands may also not have quite the power they have in the UK. Co-branded locations with fast food giants such as McDonalds and Burger King is well known to the German gas station market and has been happening for over 25 years. The co-location model and the back-to-back solution (one building, but two separate units) is much more common than the clip-in execution to date. However, the German consumers are already familiar with the clip-in idea as Autobahn Tank&Rast has successfully executed that model.

Migrolino looks like it has the winning formula for SOCAR and Shell in Switzerland as its convenience dedicated format is well known to Swiss consumers; from railway stations to high streets to airports. Migrolino fulfils the needs of the on-the-run customer - products for immediate consumption, as well as high-quality and fresh top-up shopping, it’s a local store within the daily routine for Swiss commuters.

Migrolino
A perfect match: Swiss home based grocery giants foodvenience banner and forecourts

Last man standing – Austria’s forecourts in the countryside

In Austria we find much change too. The “Greissler” (local grocery store) is gone, the post office closed, and the tavern has disappeared from the streets of typical small settlements like St. Stefan in Austria and it is a similar story in many rural communities there. What remains is the gas station. And it has often become a substitute for the tavern, a last place of conviviality, because at the petrol station at least, something is going on. One comes to refuel, the other for a car wash, the third is not fuelling up their car, but fuelling themselves with beer. The gas station has become an informal place to gather, where everyone is welcome, in every mood and any clothes.

At the end of 2017, there were 2,685 petrol stations in Austria. Almost exactly half in the hands of the major companies (Eni, BP, Shell, OMV and Jet), with the rest mostly divvied-up between small chains. Only 359 are so-called “white” gas stations: individual businesses, like the one in St. Stefan.

BP is partnering with REWE using their Merkur Inside banner at larger sites, Jet already has a longstanding relationship with REWE in Austria by using their Supermarket brand Billa in a convenience format called “Billa Stop & Shop” and Shell is currently converting their Spar C-Stores into “Billa unterwegs” and changing their shop business to REWE as well. Lekkerland is still the leading wholesaler in the forecourt market serving market leaders OMV and ENI, amongst many other clients.

One important fact to know is that Austrian grocery retail density is even higher than in Germany (460 stores per 1mn people) and therefore the OMV strategy to focus on foodservice instead of convenience grocery items could be a reasonable differentiator in the away from home market.

Every year new unmanned sites are added and around a quarter of all petrol stations in Austria are already unstaffed. Knowing that the number of unmanned sites is nearer 70% in Germany’s northern neighbour Denmark opens your eyes to the direction the industry is heading too:

Foodvenience “cathedrals” for the rising number of on-the-move consumers on the one side and fully automated frictionless fuelling points on the opposite.

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Christian WarningChristian Warning Sales and marketing expert

Christian is the founder and managing director of The Retail Marketeers, a Hamburg based agency. Christian is Insight Representative for German Speaking markets. He is a very experienced former senior retailer with wide and senior connections and is also the go-to commentator and analyst on this exciting, changing and growing market. He worked for 13 years for Shell in different management functions, including heading Shell’s billion dollar non-fuels retail business in Germany in his early thirties.

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