METRO CASH &

CARRY

I B C A S E FAC T S ~ G RO U P 5
A K | M A N A L I | M A N I N D E R | M AYA N K
METRO GROUP
Pioneered by Dr Otto Beisheim;
Germanys largest trade and retail group METRO Groups
Businesses

Major international player and plans for substantial Real/Extra (everyday retail
international expansion hypermarket and
supermarket)

Metro AG (holding company of Metro group) - one of

the 20 largest companies on Germanys Stock Kaufhof (up-market
Exchange (1996) department store chain)

Media Market/Saturn
2005 sales amounted to 55.7 billion (Europes leading
electronics retail chain)

Employed over 250,000 people Metro C&C

(50% worked outside Germany)
 METRO CASH & CARRY
1964: First C&C store opened in Germany
Expansion of stocks breadth
and depth; emphasis on
assortments, commercial
equipment, goods to maintain
small businesses
Expanded to new customer
groups-caterers,
convenience stores; need
for new assortments,
machinery and equipment to
support new customers
Consumer goods wholesalers
accounted for 240 billion of total
606 billion German wholesale
544 stores under the
market; retail market traditional
Metro and Makro
stores amounted to only 92
brand names in 30
billion; only segment to decline
countries
between 1995-2005

Early Late Early

Mid 2005
1990s 2003 2006
1960s 1970s 1980s

Fresh meat and fish added; Supply to Metro C&C sales of 28

introduction of computer commercial billion accounting for
aided merchandise customers across 50.4% of Metro Groups
management systems; wide range of consolidated sales and
emphasized customer niches operating in 30 countries
service
THE METRO C & C MODEL
Suitable for customers with
unpredictable demands,
lacking physical storage Enrolment only for
facilities, lacking financial valid business
resources for bulk registrations one
purchases or who preferred or two cards
buying small quantities but issued for Targeted business
on a frequent basis (saving transactions customers and
storage and inventory costs)
institutions at small
Regular surveys and medium sized
Self-service wholesalers conducted by enterprises (SMEs)
selling wide range of Open for up to 16 customer like hotels,
food and non-food hours in a day to consultants for restaurants, bars,
goods for immediate accommodate potential needs cafes etc.
cash sales customer work
schedules No advertising
except direct
mailings to
existing customers
 STORE FORMATS

2,500-4,000 sqm; 10,000-16,000 sqm;

90% range comprehensive range
concentrated on ECO Classic up to 50,000 food and
non food products;
PROCUREMENT
perishable food
for hotel and present in western
catering Europe
businesses Junior
Metro Group Buying (MGB), a metro subsidiary served as
7,000-9,000 sqm; Eastern the groups central purchasing entity
Europe and Asia
Had the strategic potential to control negotiations and cooperation with
domestic and foreign suppliers given its combined purchasing volume

90% stock sourced locally except in some cases the proportion fell between
60%-80%

Metros distribution infrastructure developed an efficient supply chain to bridge the

gap between urban demand and rural supply

Investment in cold storage facilities for longevity of fresh food and reduce wastage

Required careful coordination between producers, farmers, agricultural cooperatives, manufacturers,

traders, retailers and SMEs
LEVERAGING THE C&C CONCEPT
In 2006,expanded By 2005, 4%
Often the first to 26 countries revenues from
foreign C&C with strong outside Eastern &
wholesaler to Expansion intra-
In 1971,Metro market-entry Western Europe;
enter the market country:
expanded to skills in emerging Profits: 800mn
in any country cluster(China)
Austria. In 1990s, markets euros(25bn in sales)
/spiral (Russia) /
spread outside outpost (India) For global
Europe approach expansion,
Fostering local
relationships, In 1997,acquired Cultural regional
Metro opened 43 Makro and set up proximity: Russia structure
stores in 2005 Makro stores in (easy), India introduced in
countries not (dynamic, but high 2006
Country-screening expansion speed
competing with
Makro stores sold Metro. multistep- Country
and BE).
to Metro, which feasibility studies management teams
gained their for market entry with cultural
international and city by city diversities. Motto:
expertise and investment plans Cool head, warm
experience heart, working hands
 CHINA Market Entry Challenges
1. Central Govt. policy to enter into JV with local
partner; 60/40 JV with JinJiang group, a SEO with 1. Out-of-stock units, supplier issues, logistics &
nationwide presence and good ties with the Govt. transportation problems, retailer errors
2. Stable relationships enabled Metro to own 90% in JV 2. Culture-gap between Metros German model and
by 2001 Chinese expectations and spirit of
3. However JV not sufficient for MS, each new urban entrepreneurship
market required fresh and long-winded negotiations 3. High competition from local and foreign chains
owing to existing political network of appointed 4. High land prices and space crunch affecting
officials and their personal alliances margins and store openings; innovative stores in
4. Decentralized Govt. spending meant Metro had to basements, parking lots
showcase local benefits for officials to curry favor and 5. Hiring and job-hopping issues
source perishable goods 6. Larger inter-provincial distances and taste
5. Tie-ups with local farmers (instead of preferences calling for large assortment of goods
aggregators)under aegis of MOC 7. Slower BE than in Europe
Timeline
 RUSSIA Market Entry Challenges
1. Entry on invitation of Moscow mayor Yuri
1. Large scale of operations and lack of transport
Luzhkov who held the credit of transforming the
infrastructure
economy and making Russia investor-friendly
2. High cost of logistics, double of that of Italy
2. Support from mayor owing to prospective gains
3. Unavailability of land as land leased to real estate
from taxable income and improving supply
by the mayor
chain,reduce black-market activities and
4. Demographic challenges, population on the wane
restructure local distribution systems.
with a projected decrease of 50% by 2050
3. Metro invested 11-14mn euros per store with BE
5. Eventual WTO accession would increase
in 2-3 years
competition by opening up retail to FDI
4. Approached cities with 1mn population first for
6. Metro confident of leading MS owing to lack of
higher margins and favorable price positioning
store and market format differentiation by local
with grand store openings
competitors
5. Participated in transformation of Russias
distribution system.
Timeline
INDIA Market Entry Bangalore
1. In 2005, Indian national level foreign investment
Market
promotion board gave its approval to Metro C & C to 1. It opened its first store on the outskirts of
start business in urban areas Bangalore in 2003
2. This allowed metro to source product locally i.e from
2. It was classified as the junior stores with 6300
agricultural cooperative, producers and manufacturers
3. National secretariat for industrial assistance extended sqm in area with around 50 sections for 17000
its approval confirming that company can supply to products including furniture, clothing,
distributors, wholesalers and retailers having valid trade households appliance
license. 3. Prices were set 30-45% less than the
4. It considered locating stores in Delhi or Mumbai-Pune- government set MRP
Nagpur-Ahmedabad belt. Other cities like Bangalore,
4. Later the second store was opened in the
Hyderabad and Chennai were climate was conducive
5. Political situation in Chennai was unstable whereas similar location
Bangalore seems promising 5. Metro invested 35 million in two centers,
6. Metro intended to set up farmer operated grading, goods were purchased locally keeping with
sorting and packing centers near the growing areas to metro worldwide practices
enhance hygine,quality and shelf life
7. Metro would transport fresh products in cooler vans to
the distribution centers. This support would enhance
the export potential of fresh products
8. Due to limited coordination between the center and
the state various policies were analyzed

Indian Wholesale
Each Center goods were Suppliers were Metro set up
employed 300 Worked with packed in bulk unable to fulfill 9000 sqm
local staff, 200 500-600 forcing business the demand for warehouse
worked at suppliers customers to buy metro outside
headquarters more than they customers Bangalore
needed
INDIA Challenges Opportunity
1. Metro was greeted by picketers and a
storm of vocal protests
2. SJM(Swadeshi jagran manch) agitated
against privatization, liberalization and
accused metro of indulging in predatory
pricing to wipe out competition
3. Fear of the past-SJm protested against the
US seed giant Cargill and hampered the
its sale of genetically modified seeds. Also
they targeted KFC leading to closer of its
Indian operations
4. Local traders also protested against metro
releasing half page ads in local newspapers
comparing metro to a modern day east
India company
5. Opposition to metro was also spread
through local language press creating a
situation that was difficult to control
6. Metro Defended its status as a wholesaler
in Indian courts which lead to loss of
substantial amount of time and effort
7. In the end Metro was forced to make
detracted from the model i.e. imposing
minimum quantity purchased
requirements in the stores, which was not
mandatory anywhere else
1. Almost no international competition was
their in India
2. International companies accounted for
only 1% of grocery market unlike china
where it was 23%
3. In 2003 Indian organized retailing was
expected to jump from 3 billion to 6
billion
4. In India 98% of market was served by
traditional formats whereas in brazil it
was 55%
5. Strong growth, urban migration, rising
living standards, westernization of urban
practices and habits
6. 34% increase in consumer spending from
2001 to 2005
7. Food business was expected to boost to
5.8 billion along the golden quadrilateral
as thousands of restaurants were
expected to come up in this area
8. FDI in India was also on the rise reaching
5 billion in 2005
INDIA APMC Competition

1. Agricultural produce marketing 1. Indian government allowed FDI upto 51%

committee act required farmers to sell
their produce in government owned yards
called mandis
2. Its purpose was to protect farmers form
the powerful moneylenders and landlords
3. APMC was enable to protect the
exploitation
4. Food rooted as the mandi gates and
information did not flow across the
mandis leading to inefficient pricing
5. 26% rural households were in dept
6. It increased to further 50% in sates like
Andhra Pradesh
7. 10 million farmers ended up losing their
land
8. Union had an impact on the earnings
9. 14000 farmers committed suicide
in retail ventures
2. It was further expected that FdI rules will
be relaxed to enable multiband retails
such as walmard and tesco to enter India
3. Local retailers acted aggressively to
compete with foreign players through
some backward integration
4. Bharti Telecom entered into an alliance
with walmart and bought extensive
agriculture land in north India
5. Birlas and Munjals had pledged a billion
dollar to agriculture and retail
6. Reliance had also stated extensive
investments in each stage of agriculture
supply chain bypassing the middlemen
hence reducing the pricing by 25%
7. Reliance also planned to set up high tech
temperature controlled warehouse across
the country at a cost of 760000 each
8. Reliance also planned to set up nearly
1000 rural business hubs across India to
function like mandis but reliance as the
sole buyer
BANGALORE AND BEYOND
THANK
YOU