Rewe Remakes Brand Image
By Winfried Konrad

The Rewe Group rebranded 3,000 stores with the new Rewe store banner in 2006.

Retail giant is recasting its store brand image with new Rewe store brand product line and new premium Rewe Exklusiv line.

The company called it “the big bang.” For customers and suppliers it was no less than a big change. When German Rewe group renamed about 3,000 German supermarkets just overnight the company’s message was not only that it wanted to streamline and strengthen its retail brand image but also improve and expand its private label range throughout Europe. And this was just the beginning.

After several shake-ups, in 2006 the company’s retail arm was undergoing the largest restructuring in Rewe’s 80 years old history. The group’s EUR 11.46 billion sales retail business received a new uniform appearance. With the exception of retail brand Standa, the Minimal, HL, Stüssgen and Otto Mess store names vanished from the German market. However, the company kept names of its Penny discount stores, Toom hypermarket chain, Toom home improvement centers, ProMarkt home electronics stores, Fegro/Selgros cash-and-carry outlets, and Rewe Grossverbraucher-Service (GVS), the bulk customer service.

The launch of Rewe’s namesake brand 2006 in Rewe supermarkets and toom hypermarkets together with the new name Rewe for 3,000 stores mirrored a significant change in the company’s PL policy.

Today more than 200 products carry the bright red Rewe logo, ranging from coffee, cheese, chilled pasta and cold cut on self-service shelves to dairy products, jelly, juice, and desserts. By the end of this year the company wants to increase the number of private label products to 300 in its Rewe stores that either will be added to the PL range or replace an item out of the 40 existing private label products–about 100 per cent more compared to last year.

New Premium PL

Rewe introduced its new organic food line, Naturgut, in Penny stores earlier this year.

Generally, with each PL product of the Rewe line the company wants to achieve the same quality level that is determined by the leading branded product in the concerning category - only for 20 per cent below the branded product’s retail price. And the company has even more in its PL pipeline: During the first quarter 2008 Rewe will be launching the up-market private label line “Rewe Exklusiv,” spokeswoman Astrid Ohletz told PLI. One of the first new premium PL products will be coffee in various flavors. This October already “Rewe Bio” will be replacing the retailers organic food range “Füllhorn.” PLI also learned that “Rewe Fair Trade” is due to be added to the own-label premium range.
Currently, private label sales account for 17 per cent of overall sales in Rewe markets. The management’s new target is to increase the PL share to 25 to 30 per cent.

“In the long term we want to massively increase the share of Rewe products that is currently at 17 per cent,” says Rewe CEO Alain Caparros.

The first categories where Rewe has started to relaunch its various PL lines are dairy products and jelly, pasta, and hot drinks, followed by cold drinks, particular bakery products and coffee pads. Additionally, the company wants to strengthen its position as the second largest discounter in terms of organic food sales. Early this year, Rewe has launched the organic line “Naturgut” in its Penny stores.

Rewe’s redesigned packaging for its store brand jelly and filter coffee enables these product to compete with the top national brands in their respective categories.

With the new Rewe label the supermarket chain is replacing step-by-step previous private labels such as Erlenhof, Salto, Casani, Kimono, Weidegold, and others. Ever since the uniform Rewe sales brand was introduced, the retailer managed to increase customer traffic by six per cent and turnover by nearly five per cent. The most visible change of recently launched private label products is the design. With the new Rewe logo, products have acquired a more modern and fresh image; nifty packaging and colorful containers meet consumers’ zeitgeist. If not for the Rewe logo, products could hardly be told from branded products. But design is just one aspect of major changes that also have affected fillings and quality criteria.

Rewe has no plans to change its low priced PL line ja! although the company has started to relaunch the package design of ja! products. The frugal image of the 300 ja! products is meant to signal to consumers that these products are available at a discount price level.

PL Quality Standards

Earlier this year Rewe managers met with suppliers to discuss new quality standards and the integration of Rewe’s new policy on residues. In a move to further decrease potential residues in fruits and vegetables, the company requires as a compulsory standard that residues may no longer exceed a cap set at 70 per cent of the legal upper limits. The so-called acute reference dosage also may not be exceeded in fruits and vegetables.

Rewe was the first retailer that sold fruits and vegetables that adhere to the stringent QS standards. Since the test seal was rolled out at Rewe and Penny stores last October, the number of products bearing the seal has risen continually. Today, also fresh meat and poultry products display the QS seal. Private label suppliers collaborate according to International Food Standard (IFS) rules. Part of the quality control system is EurepGap, the standard for good agricultural practices that has become the international standard at producer level.

The retailer has agreements with private label suppliers to make sure that any use of genetically modified food ingredients must be expressly approved in writing. However, the retailer has never given any such approval to date, “and none is foreseen for the future,” according to a company spokesman.

The group praises itself for improving working conditions at facilities of its Asian suppliers and making an effort to ensure that its partners from Asian markets observe basic social and environmental standards. The import of non-food products from Asia, including home improvement products, electrical appliances and apparel, is handled by the purchasing co-operative EuroGroup Far East.

PL Organic Products

Organic and natural food had been added to Rewe’s product range as early as 1988 making “Füllhorn” the oldest organic PL line in Germany. It includes more than 300 products such as frozen vegetables, pizzas, and french fries, ice cream, salty snacks, and convenience products such as fresh pasta. Customers can also find natural fish and seafood from organic aquaculture at the fish counter in Rewe’s hypermarket chain toom.

Under the store name “Vierlinden” Rewe opened the first two supermarkets in Dusseldorf and Cologne that exclusively sell organic products–more than 7,000 in each store. In 1993 Rewe introduced the first fair-trade products. The range comprises coffee, tea, chocolate, orange juice and at times organic wines with the Transfair seal.

About 2000 Penny stores offer the second-largest selection of organic products found at German discount stores. Up to 90 products are offered under the private label “Naturgut”–a three-fold increase since the brand’s introduction in January. Penny has placed organic and natural food items next to conventional counterparts. According to the company this helps to direct customers’ attention toward organic food. Retail prices for “Naturgut” products will be at discount level, but above the prices for comparable conventional private-label products. During the weeks following the launch, two kilos of organic potatoes, for instance, retailed for EUR 1.99, one kilo of organic carrots for EUR 0.79, ten eggs for EUR 2.29, one kilo organic lentils for EUR 1.19 euros, and 500ml natural olive oil for EUR 4.39.

Rewe Group Facts

In 2006, Rewe group’s overall net sales of EUR 43.4 billion came from food retailing, specialist stores, and travel divisions. 2,400 Rewe stores in Western Europe (excluding Germany) contributed EUR 8.3 billion. Sales in Eastern European countries grew organically by almost 18 per cent to EUR 3.8 billion. The group’s growth strategy includes international expansion mainly in Eastern Europe. The company wants international operations to contribute more than 50 per cent to overall sales by 2015.

Last year the group joined forces with European partners to form Coopernic. The aim of this “European Alliance of Independent Trading Companies” that also includes Colruyt (Belgium), Conad (Italy), Coop (Switzerland), and Leclerc (France) is to widen each member’s potential product range and to benefit from lower purchasing prices. Coopernic combines negotiations with multinational brand-name product manufacturers in the food and non-food areas and works to procure private label products jointly. The five alliance partners, headquartered in Brussels, represent a total of 17,500 stores in 17 European countries achieving combined annual sales of EUR 95 billion.

Group sales during the first quarter 2007 increased four per cent compared to the same period last year and outpaced the industry’s growth rate. The company management is consistently pursuing its expansion plans in Germany and abroad with a record investment of 1.2 billion euros. Under the international supermarket format Billa, the 2,118 supermarkets in Austria and nine further European countries generated sales of EUR 6.7 billion last year, 5.9 per cent more than a year earlier. Rewe Austria continues to be number 1 in Austria. In Italy, turnover rose to more than EUR 1 billion. The driving force behind turnover also came from supermarkets in Eastern Europe with their well above-average growth rates. The 314 supermarkets boosted sales by 15.7 percent to EUR 1.5 billion.

Rewe Grossverbraucherservice (commercial wholesale customers service) achieved a significant sales boost of 19.4 percent. Following the takeover of Stöver-Frischdienst, Rewe Grossverbraucherservice is market leader in Germany with EUR 811 million in sales. As a result of the takeover, the Rewe Grossverbraucherservice expanded its customer portfolio to include snack bars, petrol stations and restaurant chains. Together with the international food service activities of the transGourmet joint venture and the cash-and-carry activities of Fegro/Selgros (joint venture with Otto Group, Hamburg), Rewe is market leader in Europe with sales of EUR 5.5 billion.

Penny has set itself the goal of being the most innovative discounter. The discount store chain pioneered the idea of equipping its outlets with automatic baking machines five years ago. Penny was the first to introduce fresh meats off normal self-service store shelves. With the rollout of its “Fresh meets cheap” concept in 2006, the discounter has again managed a reversal. Penny responded to health conscious consumers with a focus on promoting the fruit-and-vegetable section, which is now located right near store entrances. Similar to modern supermarkets, Penny covers vegetable products with a refrigerated veil of chilled air to keep freshness and product quality. Product layout and clear price tags are meant to make shopping easier also for elderly customers. The product range has also changed: the retailer now offers products in basic, medium, and premium quality.

Rewe has not only applied the German Corporate Governance Code and the rules of the German Federal Stock Corporation Act but also implemented an anti-corruption system. Key components of the new anti-corruption system at REWE Group are the internal code of conduct for all managers and employees and the appointment of an Anti-Corruption Officer.

This year alone the opening of more than 550 new stores is planned in Europe, of which 300 are in Germany. The date for the launch of Penny stores in Turkey is yet unknown.