Herve Streifer, senior vice-president of Global Procurement Food, Metro AG, is responsible for sourcing food products for Metro on a global level.
Metro is a leading international food wholesaler and operates in more than 30 countries. The store network comprises a total of 624 stores in 21 countries, of which 524 offer out-of-store (OOS) delivery and 89 dedicated depots.
In 12 countries, Metro runs only the delivery business by its delivery companies (Food Service Distribution, FSD).
HoReCa and traders are the core customer groups of Metro. The HoReCa section includes hotels, restaurants, and catering companies, as well as bars, cafes, and canteen operators. The traders’ section includes small grocery stores and kiosks.
The group is headed by Metro AG, which acts as the central management holding company. It handles group management tasks and bundles central management and administrative functions for Metro.
In 2022, Metro unveiled its sCore strategy, whereby the group planned to become the maestro of multichannel, with stores, FSD and online complementing each other and interlinking seamlessly.
Metro is aiming to achieve sales of more than €40 billion by the end of the decade. It aims to increase its share of own-brand sales to 35% while seeking to double its sales force and have ‘strategic customers’ (namely professional businesses) account for 80% of its sales.
Recently, the wholesaler attributed the consistent implementation of its sCore strategy for positive sales growth in the fourth quarter of its financial year.
Herve Streifer speaks to ESM about the implications of Metro’s sCore wholesale strategy for food procurement and assortment, including the focus on specific customer target groups (CTG), the streamlining of its product portfolio, and the reinforced role of own-brands and common sourcing.
Why did you launch the sCore wholesale strategy in 2022? What was the main motivation?
The main motivation is to come back to what Metro is good at, which is being a wholesaler. We wanted to go back to our roots and focus on the professional customer, namely from the HoReCa and trader segment.
Also, as the market is evolving, Metro has evolved. We have our roots in cash-and-carry, but we have added the delivery service and the online marketplace, and thus we are well on track to become a true multichannel wholesaler.
When you look at the wholesale market, it is extremely fragmented, and we have a low market share. However, looking at the market potential, we are sure that if we use our unique multichannel business model well, we have huge potential to increase the market share in every country we are in.
What has surprised you the most about the strategy so far, and how it has worked?
In the past, we had a different strategy for each country, which could serve different customers with different goals. Now the company has moved into a unique and common strategy, with consequent execution across all countries and all channels.
Looking at the numbers that we have achieved since the end of 2021, it shows that the colleagues in the countries have already done a tremendous job with regard to core KPIs, like increasing delivery or digital sales share.
In food sourcing, specifically, common sourcing has been growing constantly over the last [few] years, with a common sourcing share for ultra-fresh fish, meat, and fruits and vegetables – through our international trading offices, or ITOs – increasing from 18% in 2021 to 24% by July 2024, and an overall common sourcing share of all Metro sourcing, which increased from 7.8% to 12% in the same period.
For me, it is great to see all countries of the group moving in the same direction and delivering such strong results in a relatively short time frame. Everyone has jumped on the new strategy, however, we have covered only one third of the journey yet, and we have still a way to go. We plan for 2030 to see the full achievement of that, but the progress is very significant.
Any organisation can have the best strategy in the world, but there are always going to be external factors that get in the way. What do you think have been the main challenges so far?
From a global food procurement standpoint, we launched the strategy right after Covid, when the supply chains were completely affected because of the pandemic. That was quite challenging back then, particularly in terms of the availability of the goods. Working with some of our suppliers was not always straightforward at that time because they also had to make a choice. Accordingly, it was difficult to meet all customer needs with limited supply or a disrupted supply chain, from a logistics point of view, and with significant price increases.
However, suppliers also have had their issues in terms of cost increases, e.g. the cost of people or the cost of energy. So, they also needed to streamline their efforts, and many of them focused their production on their key products. This was a great opportunity for us, as it fitted in with the assortment optimisation we are doing.
What are the implications of the wholesale strategy for food procurement?
One key aspect is that we are focusing even stronger on own-brands. Own-brands enhance customer loyalty and give value for money to the customer when they can see how much they can save. However, focusing on own-brands has consequences for the assortment because own-brands need space to exist. So, you need to make some choices in your assortments by pushing your own brand and probably delisting some B-, C-, D-brands.
At Metro, this is happening on a country-by-country basis because you have different category power and different market structure regarding the brand positioning in the countries. Every country has to look on the assortment composition and market relevance based on their CTG strategy, which determines both the in-store and FSD assortments, and then need to make choices. If a brand is relevant for your customers, you need to have it in your assortment, and in some categories, there is a limited role for own-brand to play. The overarching guidelines are always the relevancy, efficiency and stability as key wholesale principles.
Another focus of the sCore strategy is to push ultra-fresh goods like fish, meat, and fruit and vegetables, which play a very strong role for our restaurant customers, as ‘centre of the plate’. We have so-called international trading offices – ITOs – managing the joint procurement of those ultra-fresh goods, all being own-brands, and we see today a double-digit growth in ultra-fresh [products], which is a big part of our food procurement.
Finally, Everyday Low Price – EDLP – and Buy More, Pay Less – BMPL – are the key pricing models within sCore that guarantee customers stable low prices, especially for volume purchases. It requires a more streamlined assortment, to further enhance the reliability and stability of our pricing and stock, for customers’ purchasing and increasing efficiency.
On what customer target groups do you really hope to make an impact?
For each country, we recommend a maximum of six CTGs [customer target groups]. Based on these CTGs, you define the core assortment per category, which has to be relevant for the whole country, down to the local level. Moreover, we accommodate regional characteristics, as well as hospitality or trader profiles. It is a segment strategy – the approach is local.
Will AI have any influence on the sCore strategy, going forward?
It’s a valid question because I had the chance to go to the CGF [Consumer Goods Forum] conference in Chicago, and there was a lot of discussion around AI and how it changes the trade sector.
At Metro, there are already AI components in place and running, even though we are not a high-tech company. For example, sometimes you can lose efficiency by doing too many administration tasks. AI can simplify these tasks and make things go faster.
Also, looking from a global food procurement angle, AI will support us. If I have a discussion with a brand supplier, it will take me hours to track any data, but AI is able to generate and provide relevant data accurately within a few seconds – and there is much to gain from a supplier point of view as well.
Overall, I do not see AI as a threat for the sCore strategy, but I see it as a booster. I think AI will make us definitely more agile, and it is part of the IT investment discussion we are now having.
Is there anything that you would like to add?
As a result of the sCore strategy, today we know what customer we want to serve and the articles that address their needs, and customers really appreciate this choice. When they go to Metro, they know where they are going, they know what to expect, and we see our volumes growing.
However, when you talk to a supplier about changing the assortment strategy, they naturally feel concerned because they think they might be out. That is fair enough. However, suppliers should not be afraid of us reinforcing category management for B2B wholesale because there will still be a place for them.
They have to make a choice, but what can be better for a supplier than the perspective to grow volume? So, many suppliers were sceptical at first, but they are now supporting this approach because they have seen volume growth and they are ultimately happy.
