BREXILE: Musn’t grumble?

 

I never thought that a cryptocurrency ad would make me chuckle - but this one from Coinbase raised a wry smile. 

As part of the Brexile process, I’m making a list of reasons I’m glad to be jumping ship - to keep me going when I get second, third and fourth thoughts. These range from seeing my favourite local curry house being torn down unceremoniously to pretentious restaurants charging £6 for a couple of pieces of non-descript bread to no beer on tap at the local. 

I’ll just play this gem next time I start to get the staying pangs - 2 minutes of squalid, crumbling, bleak, rat- and rubbish-strewn Brexit Island, all to a jolly Oliver!-style song-and-dance number.

Everything is fine. Yeah.   

RETROWURST: Edeka August 2007

 

The subject of this month’s Retrowurst is Edeka - the German Coop. Back in 2007, it was already over 100 years old and thriving. The supermarket had recently introduced a new corporate identity with “blackboard visuals” - focussing on the handmade/local element of their freshness and food strength.

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Whenever retail successes are discussed, in Germany as elsewhere, most of the talk centres on the discounters, such as Aldi or Kik, or on the new kids on the block (or stores in the mall, or sites on the Web.) But, just as the centenarian Marks & Spencer continues to be one of the UK’s retail success stories, Germany’s “old lady” of the grocery world, Edeka, has likewise enjoyed similar success here over the last few years.

 

Edeka’s story is an interesting exercise in making a very old concept relevant for today, not by throwing everything away and replacing with a hip new idea, but by looking at the original concept and seeing what, within this, is both relevant to today’s customers and offers a point of difference to the competition.

 

Edeka, which is either 100 or 109 years old this year, depending on how you look at it, is the German “Co-Op”. Edeka can trace its roots back to 1898 when Fritz Borrmann founded the “Einkaufsgenossenschaft der Kolonialwarenhändler in Halleschen Torberzirk zu Berlin”, of which “E.d.K” or Edeka” as you would speak it is the abbreviation. As an aside, I have noticed quite a few brand names in German are actually abbreviations of this type. As everyone knows, German is a language full of words that go on for sentences if not paragraphs, so it is useful to talk about a KiTa rather than a Kindertagesstätte (Kindergarten), about KiBa, which is a mixture of cherry (Kirsch) and banana juice, or to address someone as HaPe, who is normally saddled with the name Hans-Peter.

 

In 1907, Borrmann and his co-op partners formed the “Verband deutscher Kaufmännischer Genossenschaftler” or German Co-operative Society under the motto “Gemeinsam sind wir stark (Together we are strong).”

 

One hundred years later, Edeka is the number one grocery/food retailer in Germany, ahead of Aldi and Lidl. Edeka has a 26% share, ahead of next competitors Rewe at 18% and Aldi at 17%. There are over 10,000 stores in Germany and turnover is €37.2 bn. The growth and success of Edeka in recent years coincided with the appointment of Alfons Frenk as CEO of Edeka AG in 2003. Herr Frenk is an ambitious man with a tough background behind him. As one of six children growing up in a poor family in post-war Germany, Frenk knew shortages and hardship from an early age, resulting in an obsessive drive never to squander resources and to watch every pfennig. Herr Frenk is not content with Edeka’s number 1 position: he wants to reach a market share of 30% and to expand at a rate of opening 200 new Edeka stores per year. Part of his strategy is acquisition: Edeka has recently bought Spar and the discounter chain Netto.

 

While other retailers see diversification into non-food areas and expansion outside Germany as the way forward, Frenk’s strategy is exactly the opposite. Edeka has set its focus on fresh food and on Germany, withdrawing Edeka’s interests outside of the home market. This focus, combined with very keen attention to costs has meant an increase in profits of +60% since Frenk was appointed. Although it is tempting to make comparisons with a figure like Ingvar Kamprad, one must remember that Alfons Frenk is the head of a very different organisation to an IKEA or an Aldi. Edeka is a co-operative and its CEO does not have ultimate power.

 

Edeka has an extremely complicated organisational structure with regional co-operatives and societies. The store managers are mostly self-employed and the whole system has something rather mediaeval about it, akin to the feudal system with its regional barons. It was something of a revolution that Frenk managed to centralise Edeka’s computer system and his main challenge is to get the various factions working together to combine their strength and to improve overall efficiency.

 

Edeka’s heterogeneity is reflected in the different names it uses for its outlets, dependent on type, size and region. Under the “E” Edeka branding are “nah & gut”, “active markt”, “neukauf”, “center” and “C&C Großmarkt” (the Cash & Carry). In addition, a number of other retail chains such as Spar and Netto now belong to Edeka.

 

For the last two years, Edeka has been running an image campaign focusing on the main consumer benefit or point of difference for a heterogeneous, co-operative with local focus: “Freshness”, particularly in the areas of fruit, vegetables, meat and dairy produce. The staff and their specialist knowledge are key differentiating factors for Edeka and, although fresh food only represents 25% of the turnover, the margins are highest in this area. The tagline “Wir lieben Lebensmittel”, (“We love food groceries”) and the key visual of the blackboard stand for the specialist knowledge and passion of the staff and for the “handmade” and “local” feel that Edeka has:

 

 

 

 

But, while Edeka are single-minded in their brand communication, in retail one cannot ignore the competition. To compete with Aldi, Edeka have their own shop-in-shop “Gut und Günstig” where basic packaged groceries are offered at Aldi-like prices. The trick here, say Edeka, is to offer exactly the same deal where the public know the price to the nearest cent, such as milk, but to allow a few cents more on products that are not daily basics, such as mustard

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Edeka goes from strength to strength. In 2024, it was the 6th biggest supermarket in Europe, and turnover has more than doubled since the €37.2 bn quoted in the article to €75.3 bn.

The brand has a clever balance in its communication - advertising that gets noticed - sometimes cheeky, even provocative. A good example here is the brand throwing its political weight around in its anti-AfD advertising and action. I’m generally not a huge fan of brands and politics, but somehow Edeka gets away with it, in my view. 

Maybe that’s because of the solid consistency of the blackboard/Wir lieben Lebensmittel approach - definitely still going strong. And still looking fresh.