Announcing the decision to promote then-CFO Olaf Koch to the position of chief executive back in 2011, wholesaler Metro said that the appointment symbolised a 'timely transfer to a new generation', adding that Koch had already demonstrated 'that he is driving the changes required for the company’s long-term success'.
Fast forward to the present day, and Koch has not just repositioned Metro, he has fundamentally transformed it, streamlining the business around its core wholesale operation.
Job Done
While there are those that would question Koch's decision to depart the business at the end of this year, amidst the backdrop of a global pandemic, many would also agree that the former Hugo Boss and Mercedes executive has completed his mission, and that the time is right to pass on the mantle.
As he put it himself, announcing his departure late last week, his time with Metro has been “an intensive but rewarding marathon”; a fitting summation of what has been a metamorphic few years for the world's biggest wholesale operator.
The Metro Group that Koch took over was a somewhat bloated beast, boasting the Galeria Kaufhof department store business – a stalwart of German retail – as well as a comprehensive electronics arm (Media Markt/Saturn) and the Real hypermarket chain. It was certainly a baptism of fire – in the first quarter after he took over, Metro posted a net loss of €81 million.
“When I took over as CEO of Metro, we had department stores, we had a large international hypermarket presence, we had consumer electronics, and we had our core business, which is wholesale,” Koch told ESM in 2018. “At that time, we were suffering, and when we reviewed the reasons why, it was clear that our point of differentiation wasn’t clear.
“It was foggy, it was driven by KPIs, and it was driven by a central management system that was very remote from the day-to-day shop floor discussion we needed to have with our customers. That’s when we started to dismantle the conglomerate."
Transformation Strategy
With the sale of the Kaufhof business to Canada's Hudson's Bay Company in September 2015, Koch's transformation programme was underway – the sale helped reduce the company's net debt by €2.85 billion. At the same time, the acquisition of gourmet delivery service Classic Fine Foods proved a useful add-on to a wholesale operation that would become the group's primary focus in the years that followed.
"You need to give your customers an offering that is extremely compelling," Koch told ESM in 2015. "We have made changes, and we are seeing significantly better developments already in terms of footfall, frequency, and loyalty.”
The year 2017 saw Metro spin off its Media Markt/Saturn operations into a separate company, Ceconomy AG, which in one fell swoop cut the group's retail sales by around 20%.
At the time, however, analysts suggested that while the demerger was a positive step, it would not solve the group's retail challenges, with its flagging Real hypermarket business proving a longstanding thorn in its side.
By the following year, Koch announced that Real, too, was up for sale, a process that was finally completed this past June, cementing the CEO's reputation as a great dealmaker.
"We are a wholesale group, so when you discuss the various different elements of the group, Real is well down the list," Koch said in 2018. “We believe it needs a new ownership structure that can give it the attention it deserves. There is a significant value creation opportunity that can be captured, but we believe it needs full dedication and capital focus.”
In the past couple of years, Metro has invested heavily in a digital transformation unit, Metro-NOM, saw off a takeover challenge by activist investor Daniel Křetínský, navigated through a challenging negotiation process with a number of trade unions, entered a myriad of new markets, including Myanmar, and managed to traverse relatively unharmed through the COVID-19 pandemic.
According to its recent Q3 report, while April sales were 26.4% lower, like-for-like sales in June were only marginally down on the previous year.
Looking Ahead
In spite of sporadic bumps in the road – the performance of Metro's Russia business remains a pressure point – Metro is now a slim, trim wholesale organisation, ready to be led into the future by a new, go-getting chief executive.
“The portfolio will not remain unchanged for eternity – it will continue to evolve,” Koch recently told this magazine. “Of course, it will remain wholesale-focused – we are going to remain on a singular path."
As to who is willing to step into Koch's shoes and lead the cash and carry giant down this path remains to be seen.
© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
