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From 79 to 100 billion euro in 2020
German papers Manager Magazin and Lebensmittel Zeitung have published interviews with Klaus Gehrig, remarkable considering Schwarz Gruppe’s traditionally closed nature. The group is known for its Lidle discounter stores, but also for its compact hypermarkets under the Kaufland brand.
Schwarz currently manages a 79 billion euro turnover worldwide, but it wants to reach 100 billion euro in 2020. Its successful discount formula Lidl will spearhead this ambitious plan at first. The formula is active in 28 European countries, even in smaller European markets like Malta or Latvia.
Lidl will also open its very first American stores in 2018, which is a new market with huge growth potential provided it can replicate its success from the United Kingdom.
10,000 Lidl stores
Expansion is vital for Schwarz’ growth ambitions, but it will also have to manage its current store network and organization. “We want to increase Lidl’s strength in the current markets, expand it into new markets and reorganize Kaufland”, Gehrig explained the company’s three priorities. “The entire Schwarz Gruppe will also adapt its entire corporate culture.”
Lidl stores smaller than 1,000 sqm will also be transformed into larger stores in the existing markets. Larger and more modern is the motto but Lidl also wishes to invest several billions euro into the modernization of its current store network. Alongside these investments, Schwarz will also increase the number of Lidl stores in every market. It expects to open its 10,000th store this year.
Lidl expands, Kaufland reorganizes
Schwarz Gruppe has made no secret of its intentions to bring Lidl to American shores. “We want to come to the American shores step by step. It is a major opportunity for us”, Sven Seidel, Lidl’s director, said in Manager Magazin. Schwarz will allegedly invest 180 million euro to launch in Virginia and then expand to some 100 stores at first.
Schwarz will not expand Kaufland, although it will remain active in its current 7 markets. After the fall of the Berlin Wall in 1989, Schwarz introduced its price-aggressive hypermarket formula in the former DDR and then expanded to 6 countries in Central and Southeast Europe. Mainly the product range of its 640 German Kaufland stores will be downsized and its costs will be brought back to reality. That should help bring profitability up.
Schwarz needs to increase efficiency
Kaufland will be reorganized, with an increased focus on the different regions as Schwarz’ hypermarket formula experiences a lot of competition from other German supermarket organizations that have a closer connection to their customers because of their localized structure. It is this strategy that Schwarz Gruppe now wants to mimic with Kaufland.
The Schwarz Gruppe will also adjust Lidl and Kaufland’s strategies to better fit each other. Unnecessary double management positions will be cut to increase efficiency. “We have to organize the company in such a way that we can optimize the synergies”, Gehrig told Lebensmittel Zeitung although he did make one exception: the purchase divisions.
