METRO

ROMANIA
How to improve
Promotion?
 Why METRO Group?

METRO Group – one of the most important

international retailing companies

 METRO AG 2005
 Agenda

International & Local Retail Market

Metro Overview
Metro Analysis – SWOT & PEST
Promotion; improvements
Recommendations
Conclusions

 METRO AG 2005
 Internationalization of Retailing

Retailers are rapidly expanding internationally in order to:

Gain competitive advantage

Increase sales & profits
Improve overall firm performance
Take advantage of cost savings
Learning by doing
Further enhance home-country operations

 METRO AG 2005
 World retail evolution

 METRO AG 2005
 Grocery Retail Market Sizes 2007e
Top 10 Eastern European Markets Top 10 Global Markets

Country Grocery Retail Country Grocery Retail

Market Market
(€bn) (US$bn)

1. Russia 140.53 1. USA 785.85

2. China 450.14
2. Turkey 50.59
3. Japan 394.45
3. Poland 35.93
4. France 278.33
4. Romania 18.07
5. United Kingdom 249.20
5. Czech Republic 11.98
6. India 249.11
6. Hungary 11.50
7. Germany 192.92
7. Ukraine 10.74
8. Russia 188.02
8. Bulgaria 6.43
9. Italy 165.64
9. Serbia 6.31 10. Spain 130.51
10. Slovakia 5.07 34. Romania 24.23
Source: IGD Datacentre estimates

 METRO AG 2005
 Central Europe (CE) - TOP 10 Retailers
Retail Banner Sales (EUR mn)e
0 5,000 10,000 15,000 20,000 25,000

8,243
Schwarz Group
20,780
10,147
Metro Group
17,537
7,397
Tesco
13,513
5,828
Carrefour
13,146
5,088
Rewe Group
11,817
2007 2013
2,726
Mercator
5,630
3,095
Ahold
5,582
2,459
Maxima
5,460
2,579
5,189
4,007
CBA
4,997

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 METRO AG 2005
 Estimated Retail Market Evolution
2007 2013

Traditional Traditional
channels Channels
72% 59%

Hypermarkets
Hyperm arkets and
and Cash & Carry Superstores
Cas h & Carry
Superstores 8.6% 21.5%
10.9%
10.3%

Supermarkets
Superm arkets Forecourt and and
Forecourt and and Discount
Convenience Neighbourhood
Convenience Discount Neighbourhoo Stores Stores Stores
Stores Stores d Stores 0.3% 4.7% 5.2%
0.5% 2.5% 3.3%

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 METRO AG 2005
 Top 10 Retailers 2006 in Romania
Retailer Net Net % Change Grocery Retail No. of Sales Area
Grocery Grocery Grocery Sales Market Stores (sqm)
Sales Sales 2006 v 2005 Share*(%)
2006 2005
(€m) (€m)

Metro* 1,511 1,244 +21.46 0.49% 31 223,000

Rewe* 1,050 780 +34.7 3.57% 65 153,600
Carrefour 451 150 +301 2.68% 7 61,000
Lidl & Schwarz 210 30 +600 1.25% 14 42,000

CBA 202 187 +8.0 1.20% 455 43,100

Cora-Louis 185 177 +4.5 1.10% 24 46,000
Delhaize
Artima 78.2 57.5 +36 0.46% 19 15,200
Intermarché 72 40 +80 0. 43% 8 20,000
Tengelmann 71 29 +145 0. 42% 35 43,750
Delhaize 70 58 +21 0.42% 19 17,060
Source: IGD Datacentre. Data is for grocery formats only. Sales are net. Grocery Retail Market Shares excludes cash & carry operations.

 METRO AG 2005
 METRO ROMANIA Company Overview

Background
Pioneered by Dr. Otto Beisheim, first C&C store in
Germany in 1964
The Metro C&C Model
Self-service wholesaler (C&C) — targeting small business
owners rather than individual consumers and households
Exporting the C&C Concept
Often the first foreign C&C wholesaler to enter the market
In 2005, Metro C&C - 43 new wholesale stores, a record for the
company
Metro C&C initially expanded from Germany to Austria in 1971
In Romania since 1996
10
1997 - Metro took over Makro
 METRO AG 2005
 METRO Romania - Characteristics

Logistic platform (3 temp. zones) of 9,500 sqm

Distribution center
1-st company with Bulk Break Cross Docking
2-nd company in Eastern Europe – high tech platform for vegetables &
fruits
2007 sales – 5,306,017,000 RON ( ~ 67 Euro/person/year)
17,500 products
852,021 clients

 METRO AG 2005
 P.E.S.T Analysis

Political

Foreign investment is encouraged; in practice, retailers face a number of

challenges.

Foreign companies are allowed to own land and buildings

Laws encouraging the foreign investment

Flat tax of 16%

Difficulties with deductibles and VAT reimbursement

 METRO AG 2005
 P.E.S.T. Analysis

Economic

Installing an outlet: Capex €15m-€25m.

Real estate prices in Romania (especially in Bucharest) - skyrocketed

The number of hypermarkets and superstores – still very low.

Investments planned over the next 5 years by Carrefour, Auchan, Metro

(Real), Kaufland and Spar - impact the Romanian retail landscape.

Local retailers - expansion (Artima)

Increase of inflation & exchange rates

Estimated economic growth

 METRO AG 2005
 P.E.S.T. Analysis
Social

Decreasing population growth rate

Aging population

Working career attitude

Lack of highly trained/skilled personnel

In terms of opening hours, there are no fixed regulations

15% of customers still shopped in traditional stores for basic groceries

(ACNielsen data)

Since EU membership - foreign investment boom and sharp reduction

in small shops and street vendors.

 METRO AG 2005
 P.E.S.T. Analysis

Technological

IT technology available
High quality/innovative equipments available
HACCP – good safety quality assurance regulation accord to EU

 METRO AG 2005
 S.W.O.T Analysis

Strengths - Weaknesses

Strenghts
Local and international good image
First entry – 10 years ago
Dinamic expansion
Import increase
Productivity increase
Fidelity programms
Top quality suppliers
Weaknesses
Distribution-delay of deliveries
High personnel flow
Different purchasing terms
Cost increase
Decreased no of clients
Decrease of some suppliers‘
production capacity

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 METRO AG 2005
 S.W.O.T Analysis

Opportunities - Threats

Threats

Opportunities Agressive competition of new entries

Increase of retail market and Market segmentation among other
competitors
population consumption
Decrease of traditional suppliers‘
Geographical position and locations production
allover the country (23 sites)
Decrease of number of clients due to
Increase of IT quality new entries
(data base, surveillance systems, etc) Exchange fluctuation – inflation
Price increase
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 METRO AG 2005
 Promotional activity expansion

Why? How?

Aggressive competition Advertising

Crowded markets Sales promotion
Consumers’ saturation with Public relation
promotional excess Trademark
Trademark Promotional Events
Short terms results Sales force
Demanding distribution

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 METRO AG 2005
 Influence of promotion on product life cycle

Products in decline – decrease the sales

Products at maturity – momentary sales increase

Products in growing phase – increase the sales

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 METRO AG 2005
 Promotional Strategies

Direct demand stimulation – immediate sales – for traditional products

Creation of favorable purchasing climate – needs time for future sales

(conferences, symposia, adverts for public, etc)

Sales stimulation – for seasonal products ( Easter, Christmas, etc)

Selective promotion for a market segment ( for specialists, IT, technical

products)

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Extensive promotion – for several markets (diversified promotion)
 METRO AG 2005
 Metro - Promotional Strategies

1. Focused strategy on generic competition using differentiation

( specific segment or geographic markets)

3. Leader price strategy - price reduction for big amounts and

fidelity discounts

3. Functional promotional strategy – create the demand through a

sustained advert and promotional sales

 METRO AG 2005
 Metro Top High Quality Suppliers

Procter&Gamble, Nestle, Henkel, Reckitt Benkisser, Tonelli,

British American Tobacco, Danone, Aldis, Campofrio, Cris-Tim,
Delta, Tnuva, Hochland, Scandia, Mats Romania, Lemarco, Arpis,
Dr. Oetker, Prodlacta, Titan, Defne, Jacobs, Kraft Foods,
European Drinks, Pepsi, Bauducco, Irina Shrotter, Siltex,
Romana, L’Oreal, Londa, Daewoo, Sony, Canon, LG, Kodak,
Bosch, Whirlpool, Electrolux etc.

 METRO AG 2005
 Promotional Activities - Tactics

Client oriented – specific group of clients

Better negotiation startegies with suppliers
Better prices
Adverts on sales ‘ place
Promotion of own products (ARO, Metro Quality, etc)

 METRO AG 2005
 Communication channels

Metro Post
Website
Direct letters to clients
Indoor
Outdoor (ex. “Metro – The partner of professionals”)
Magazines
Telemarketing
SMS
Clients as consultants

 METRO AG 2005
 Factors influencing promotion

Promotion is the most expensive component of marketing strategy

Promotion should be done according to:

» Company objectives
» Clients purchasing habits
» Advertising pannel
» Finacial resources

 METRO AG 2005
 How to improve promotion?

Telemarketing (40 new clients/day)

Direct truck sales promotion
Easter/Christmas present packages
Exhibitions and fares participations
Customer Panel
Metro Post Catalogue improved
Gift certificates
Matro bags for free

 METRO AG 2005
 Shaping the future of Metro retailing today

Thank you!

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 METRO AG 2005