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  • Author: Anne-Marie Kelly, Marketing Fellow Germany, Bord Bia – The Irish Food Board

    The Real Deal: The Sale of German Hypermarket Real and the Potential Impact on Irish Exports

    The sale of Germany’s largest supermarket, Real may come as a shock to Irish food and drink exporters. With a range spanning over 80,000 products per store, Real has been a consistent support of homegrown Irish food and drink producers over the years. This Food Alert will provide you with everything you need to know regarding the deal, the stand out contribution Real has made to the growth of Irish exports and the impact it will have going forward.

     

    Following an agreement made in late February, Metro Group has signed a deal to sell hypermarket, Real to a consortium consisting of SCP Group and investment firm X-Bricks. The large-scale operator has 276 stores and around 34,000 employees across the country (Klug, 2020).

     

     

    Reasons for Metro Group to sell Real

     

    Lack of Profitability

    Real was not profitable for Metro Group. "We lost over € 250 million in cash at Real last year", Olaf Koch of Metro Group explained at the Metro Annual General Meeting on 14 February 2020. Only four Real locations were managing the cost-intensive market hall concept and this began to raise the question as to what extent it could operate profitably in the long term (Klug, 2020).

     

    Failure to Modernise

    The hypermarket experiences a backlog in investment which meant modernisation implementations came too late. An example of their modernisation strategy can be seeing just 20km outside of Düsseldorf in their Krefeld location (see image). The market hall, which opened in 2016, boasts a strong focus on fresh and an exciting shopping experience (Klug, 2020).

     

     

    Large store format

    In 2006, Metro acquired Walmart’s 85 stores in Germany at a cost of $1 billion, which inevitable was used by the Real chain (Schaefer, 2006). As a result, the average store area size was approximately 6500 square meters and stocked close to 80,000 products on its shelves (Real Unternehmen, 2020). This is considerably larger than closest competitor, Kaufland which manages with an average of 4200 sqm (Klug, 2020).

     

     

     

    Real has been a key customer of Irish beef, importing over 5,000 tonnes each year, accounting for approximately one quarter of Irish beef exported to Germany (Finnerty, 2016). The retailer was such a big fan of Irish beef, in 2016 they launched a national promotional campaign and selected ‘premium Irish beef as a key area of focus for its TV campaign’ (Finnerty, 2016). As well as beef, Real enabled the export of Irish lamb, Kerrygold products (including butter, spreads, yoghurts and cheese), Irish cream liqueur and Irish speciality cheese from producers such as Cashel Blue, The Little Milk Company and Cahills.

     

    Looking forward

    In March 2020, it was announced that the new owners are looking to operate only a small number of Real stores- a core of approx. 50 and for a limited period of time (24 months). The remaining locations will be sold to other retailers including Edeka (53 stores) and Kaufland (88 stores) and a further 30 stores will be closed completely (Klug, 2020).

     

     

    Real’s strong presence of Irish homegrown produce will surely be missed, however, there are more opportunities for Irish producers on the horizon. The announcement that Lidl Ireland will export approximately €14 million worth of Irish beef to its 3,200 stores across Germany is a very positive development (Keaveny, 2020). Similarly, Irish slow cooked meat producer, Ribworld won an €800,000 contract to supply all 1920 Aldi stores in Southern Germany (Morahan, 2019).

     

    Germany will continue to be a strong export market for Ireland, with the German consumer trusting in our premium grass-fed Irish meat and dairy products. As our homebased relationship to the discounters such as Lidl Ireland and Aldi Ireland continues to develop, their commitment to the Irish food industry and ability to provide opportunities in other international markets is a game changer. 

     

     

     

    References

    manager magazin. 2019. Edeka: Übernahme Von Real-Märkten An Edeka Genau Prüfen - Manager Magazin. [online] Available at: <https://www.manager-magazin.de/unternehmen/artikel/edeka-uebernahme-von-real-maerkten-an-edeka-genau-pruefen-a-1298284.html> [Accessed 29 April 2020].

    Finnerty, C., 2016. Irish ‘Wholesome And Juicy’ Beef A Hit In German Steakhouses. [online] Agriland.ie. Available at: <https://www.agriland.ie/farming-news/irish-wholesome-and-juicy-beef-a-hit-in-german-steakhouses/> [Accessed 29 April 2020].

    Heimrath, L., 2016. Bildergalerie: Markthalle Krefeld Von Real. [online] lebensmittelzeitung.net. Available at: <https://www.lebensmittelzeitung.net/storechecks/Neues-Real-Konzept-in-Krefeld-1015> [Accessed 29 April 2020].

    Bordbia.ie. 2015. Irish Beef Is The REAL Deal In Germany, Bord Bia. [online] Available at: <https://www.bordbia.ie/industry/news/press-releases/irish-beef-is-the-real-deal-in-germany-bord-bia/> [Accessed 29 April 2020].

    Keaveny, M., 2020. Lidl Announces €14M Irish Beef Export Deal. [online] independent. Available at: <https://www.independent.ie/business/farming/agri-business/agri-food/lidl-announces-14m-irish-beef-export-deal-39145341.html> [Accessed 29 April 2020].

    Klug, D., 2020. Großflächen-Deal: Die 9 Wichtigsten Fakten Zum Real-Verkauf. [online] lebensmittelzeitung.net. Available at: <https://www.lebensmittelzeitung.net/handel/Grossflaechen-Deal-Die-9-wichtigsten-Fakten-zum-Real-Verkauf--144303> [Accessed 29 April 2020].releases/irish-beef-is-the-real-deal-in-germany-bord-bia/> [Accessed 29 April 2020].

    Klug, D., 2020. Real-Standorte: Edeka Und Kaufland Einigen Sich Mit SCP. [online] lebensmittelzeitung.net. Available at: <https://www.lebensmittelzeitung.net/handel/Real-Standorte-Edeka-und-Kaufland-einigen-sich-mit-SCP-145580> [Accessed 29 April 2020].

    Morahan, G., 2019. Tipperary Slow Cooked Meat Supplier Wins German Aldi Contract. [online] Extra.ie. Available at: <https://extra.ie/2019/12/12/business/irish/tipperary-meat-supplier-aldi-germany> [Accessed 29 April 2020].

    2019. Real Nachhaltigkeit. [online] Available at: <https://www.youtube.com/watch?v=2mTGmWunPW8&t=58s> [Accessed 29 April 2020].

    Schaefer, L., 2006. World's Biggest Retailer Wal-Mart Closes Up Shop In Germany | DW | 28.07.2006. [online] DW.COM. Available at: <https://www.dw.com/en/worlds-biggest-retailer-wal-mart-closes-up-shop-in-germany/a-2112746> [Accessed 29 April 2020].

    Real.de. 2020. Unternehmen. [online] Available at: <https://www.real.de/unternehmen/> [Accessed 29 April 2020].