Can Rewe Group continue its scale of sales growth?

German-based retailer Rewe Group passed the €50bn (£41.5bn) sales threshold for the first time last year. Total sales reached €50.91bn (£45.9bn) in the 2009 financial year - 2.7% up on the previous year. The number of stores increased 5% over the same period.

Rewe’s sales clearly outperformed the overall market, with national retail sales contracting 2.4% in 2009 and grocery retail sales falling 1.8%, according to latest official estimates.

Internationally, the full-assortment division reported sales of €8.88bn (£7.3bn), up 4.2%. This business area consists of Austria-based Billa, with operations in Austria, Italy and several Central and Eastern European markets. Rewe’s B2B arm (mainly cash and carries, wholesale, etc) saw sales decrease 6.2% to €5.84bn (£4.85bn), while its travel division saw turnover decline 5.2% to €4.16bn (£3.45bn).

Rewe remained on a solid growth path during 2009, a trend that is continuing. A major concern is that no clear growth targets for 2010 and beyond have been revealed. Uncertainty, especially over Central and Eastern European markets, remains. Rewe’s Penny discount division expected to face harder times in Germany, due to its relatively weak position, while abroad it will face increasing competition from discounters.

Internationally, qualitative expansion is high on the agenda at Billa in Austria, which still has its hands full integrating the Adeg stores. In Central and Eastern European markets, Rewe is preparing to benefit “optimally” from the economic recovery. As for Penny, the integration of Plus in the Czech Republic and Germany has still to be digested.

Rewe’s caution derives from three factors: a number of acquisitions will have to be digested; cartel authorities in Germany and Austria have become more vigilant and are seemingly poised to counteract major mergers and acquisitions; and the instability of many Central and Eastern European markets and currencies has impeded Rewe’s long-time source of fast and steady sales growth.

Further growth is expected to come from an improved private label offering and longer opening hours. Some 60 Rewe pilot stores now have their doors open until midnight. A new Rewe City outlet at Cologne airport is open 24/7, 365 days a year, a first for the regulated German grocery retail sector and a sign that Rewe will be looking for subtle changes to drive its business, rather than the large-scale acquisitions it has resorted to in the past.

Greg Hodge is research director of Planet Retail.