Vol. 1 No. 4
August 2007
Retailer Profile
In This Issue:
Schwarz Group CEO Klaus Gehrig
GMA/FPA Profile:
Michael Mendes
Diamond Foods Inc.
New
Sessions, Speakers
For MSM Conference
Retailer Sustainability Practices Available
Unsaleables Met Attracts Record Attendance
GMA/FPA Industry Affairs Group:
Troy J. Beeler
Manager
Sales & Sales Promotion
Jeanne Iglesias
Director
Supply Chain & Technology
Jill Johnson
Director
Industry Affairs &
Associate Membership
Brian Lynch
Director
Sales & Sales Promotion
Stephen A. Sibert
Senior Vice President
Industry Affairs
Pam Stegeman
Vice President
Supply Chain & Technology
Industry Affairs
Review Team:
Business Development Director &
Member Of Board
Planet Retail, London
President & CEO
Singley Associates
Schwarz Group CEO: To Launch Stores in the United States
Bulgaria, Czech Republic, Finland, Germany, Greece, Poland and Slovakia
CEO Klaus Gehrig |
Following our last month profile of Aldi, this month we take a look at its arch rival, Schwarz Group. Like Aldi, Schwarz is a secretive German discounter, fiercely resisting public scrutiny both of its employees and company. So far, it has restricted its operations to European countries. However, earlier this year, CEO Klaus Gehrig quietly announced that the group is seeking to launch Lidl stores in the United States “in the medium term.” |
Unlike many of its global counterparts, the news was not announced with any great fanfare. Instead Gehrig simply chose the local newspaper in the company’s home town of Heilbronn to break the news.
The 59 year old, who serves as CEO of Schwarz Group and as a general partner for the Schwarz Unternehmens-Treuhand (SUT) holding company, has seen the company thrive since 1976 when he joined the then-regional south German grocer. In 2000, Gehrig succeeded Dieter Schwarz as CEO, although Schwarz still remains active in the business. As well as taking the company outside of Europe, Gehrig is also set to change its image, which in recent years has faced criticism from many sides. He seeks to gradually reform the company to attract more staff and bring it into line with more modern standards of management.
Gehrig is a long-standing colleague of the company's former head Dieter Schwarz. Dieter was born in 1939, son of the company’s founder Josef Schwarz. Josef started his career with fruit and vegetable wholesaler Lidl in 1930, developing the company into a general food wholesaler and later expanding into cash and carries and grocery retailing. In 1977, Josef Schwarz died leaving Dieter to take over the running of the company. In 1973, it opened its first discount grocery store initially modeled on Aldi. However, it was not until Dieter took control that the format was aggressively expanded.
Due to legal reasons, the Lidl banner name could not initially be used, with Schwarz having to buy the right to use the name from a retired teacher Ludwig Lidl for one thousand German marks. Since Schwarz translates to “black” in German, it was felt that a store called Black Market would be inappropriate.
Similar to Aldi, Dieter Schwarz insisted on setting up two completely separate divisions – Lidl discount stores and Kaufland discount hypermarkets and superstores. Other shared characteristics were the creation of a non-profit foundation to secure its future independence. The Dieter Schwarz Foundation Ltd owns 99.9 per cent of the shares and 0.1 per cent of the voting rights, while the limited partnership Schwarz Trust owns 0.1 of the shares and 99.9 per cent of the voting rights. This arrangement enables Schwarz to retain control and protect the company from hostile takeover bids, either from outside or from within. Although the financial welfare of Schwarz’s two daughters, Regine and Monika, is secured, they are excluded from its operations: “The company has to be protected against the family, and the family against the company.”
Further, to avoid public insight and the legal obligations of a large company - particularly unionization - Dieter Schwarz divided the business into more than 600 registered companies in Germany alone, with the result that no official sales and profit figures are available.
Similar to Aldi’s founders, the Albrecht brothers, Dieter likes to play golf, but his dedication to work has prevented him from achieving a better handicap than just the license to play on public golf courses. Schwarz lives modestly in an inconspicuous house near the company’s headquarters in Heilbronn. Heilbronn is a wealthy, medium-sized town of 120,000 inhabitants just 30 miles north of the Swabian capital Stuttgart, home to Porsche and Mercedes Benz. Swabians are renowned for their diligence, and it comes as little surprise that the retailer was founded in an area that enjoyed significant prosperity after World War II.
Undeterred by the fact that Aldi was the undisputable number one in German discount retailing, Schwarz rapidly tried to catch up. However, with the realization that it would forever trail Aldi, it decided to expand abroad, entering foreign markets such as France in 1988, where it established a strong lead. With profits from its French operation believed to finance other European growth, Schwarz and Gehrig did not hesitate to enter new markets across Scandinavia, Western and Central Europe, leaving Aldi in its wake. In addition, it expanded its Kaufland hypermarket division across Central Europe, achieving market leadership in the Czech Republic, for example.
However, its incredible speed of growth has not been without detractors. For a long time, the Schwarz Group has been a focal point for critics of globalization and retailer power. In many countries, Schwarz Group has gone to great pains to avoid trade unions getting a foothold in its stores, with unionists accusing it of using “paramilitary” styles of management. Environmental groups such as Greenpeace and Attac blame it for pesticide pollution and price dumping at the expense of farmers.
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However, according to Gehrig, its embarrassing public image is about to change. The group is taking pains to stress that it is now adapting its management philosophy to more modern standards with the launch of a "project leadership culture" that covers both its Lidl and Kaufland divisions. Gehrig has acknowledged that a "cultural process of change" is necessary: "To be an attractive employer, we have to be more up to date in terms of working time, spare time and holiday issues." |
On its prospective U.S. plans, the move would not only add the world’s largest market to the company’s portfolio but would also mark its first step beyond the borders of Europe. Nevertheless, one of Lidl’s strengths in Europe has always been that it has greatly benefited from the homogeneous “one size fits all” assortment that it has adopted in every single market, sourced chiefly by its central buying office. The United States, however, could be quite different with the retailer having to develop totally different ranges to suit the market, therefore limiting synergies with the rest of its operations. Be that as it may, Gehrig seems undeterred by the challenges of the market: “We think the USA is a good market for us.”
Industry Affairs News
Sales and Sales
Promotion
Join Web Discussion on DataBar Coupon Rollout
Plan now to join the webinar discussion August 16 on the upcoming transition
to the GS1 DataBar as the new symbol for use on coupons.
The webinar is hosted by GMA, FMI and GS1.
Joint Industry Coupon Committee’s Co-Chairs Don King (associate director, retail marketing services for The Procter & Gamble Company) and Alan Williams (vice president, applications development for Ahold Information Services) will provide an overview of the new coupon coding and highlight steps to implementation.
On August 16, dial
toll-free number 1.877.864.7187 for the hour-long session
beginning at 11 a.m. (EDT). A questions and answer session will follow. Use participant code: *7466119*, and remember to
use the * before and after the participant code.
Contact:
Troy Beeler
New Sessions, Speakers Added to MSM Conference Lineup
 |
Two new breakout sessions and several new speakers have been added to the stellar lineup of programs for the annual Merchandising Sales and Marketing (MSM) Conference September 30-October 1 at The Broadmoor in Colorado Springs. Don Swann, vice president of operations and special projects, and Les Mann, vice president and general merchandise manager/food and consumables, both of Wal-Mart Canada Corp, join Duncan MacNaughton, executive vice president of merchandising and marketing for SUPERVALU Inc., as featured speakers. |
Mark Titlebaum, vice president and divisional merchandise manager for edible groceries for BJ’s Wholesale Club Inc., and Robin Michel, group vice president of merchandising and procurement for Roundy’s Supermarkets, also have been named MSM speakers.
A panel on crafting the business case for account management analytics features Del Monte Foods Vice President and CIO Marc Brown, General Mills Senior Director of Demand Chain Information Systems Sue Simonett, and Founder and Chief Executive of Vision Chain Shawn Dooley. The session, hosted by the GMA/FPA Information Systems Committee, charts how sales professionals are partnering with their internal IT peers to craft a roadmap for internal data management partnering to grow sales across the board.
Win Weber also leads a newly announced breakout session on restructuring to support a shopper-centric business model. Weber is founder, chairman and CEO of Winston Weber & Associates.
Stephen Vowles, senior vice president of marketing at Stop & Shop Companies, Inc., and Burt Palmer, team director of Unilever, will present the 2007 CPG Award-winning case study on the trading partner’s initiative to understand what shoppers seek – or don’t seek – when they shop for groceries.
Conference Co-Chairs are Denny Belcastro (vice president of customer development and industry affairs at Kraft Foods Inc.), Chip O’Hare (president and CEO of Johnson, O’Hare Company Inc.) and Tracy VanBibber (senior vice president, sales, The Dial Corporation).
Sign up to attend the MSM
conference today. Download the registration form and conference brochure
from the
conference Web site.
Contact:
Brian Lynch
or
Troy Beeler
Environmental
Sustainability
Mark Calendars Now for GMA’s Sustainability Summit
Plan to attend GMA/FPA’s first-ever Sustainability Summit, planned for
January 17-18 at The Ritz Carlton in Washington.
The
meeting is expected to draw industry leaders, academics, global and national
public policy makers to address one of the most pressing issues of our times
– environmental sustainability.
Contact:
Stephen Sibert and
Jill Johnson (Program);
Liz Cookson
(Logistics)
Retailer Sustainability Practices Available at GMA/FPA
To assist member companies in tracking and aligning with retailer
sustainability practices, GMA/FPA is offering an electronic compendium of
current retailer sustainability practices produced in cooperation with
Deloitte LLP. The compendium is an addition to the sustainability research
(Sustainability: Balancing Opportunity and Risk in the Consumer Products
Industry) released at the Executive Conference in June.
The electronic database
is searchable by various criteria and includes topics such as NGO
collaboration, packaging reduction and energy conservation. Contact Alexis
Larkin to obtain an electronic copy.
Contact:
Alexis Larkin
Technology and
Supply Chain
Participation Urged for GCI Global Scorecard Survey
September 30 is the deadline to participate in the Global Commerce
Initiative’s (GCI) global scorecard compliance survey for 2007. Companies
are asked to go to www.globalscorecard.net and click on the GCI compliance
survey logo.
Additionally, GCI will
host a Web cast training on scorecard data collection and its benchmarking
processes on September 4 at www.globalscorecard.net.
Time: 8 a.m. (EDT).
Contact:
Jeanne Iglesias
Sales and Sales Promotion
Unsaleables Conference Attracts Record Attendance
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The recent 2007 Joint Industry Unsaleables Conference in Las Vegas broke all records for attendance, according to Joint Industry Unsaleables Committee Co-Chairs ________________________________________(names and titles). Greg Smith, senior vice president of supply chain for ConAgra Foods Inc. was a keynoter, outlining his company’s approach to unsaleables reduction and its zero-loss |
initiative with trading partners. This policy covers donated, dumped, damaged, overstock and unsaleables products and hinges on instilling a collaborative, cross-functional approach with shared responsibility. Smith said the company uses scorecarding to drive collaborative actions, adding that it successfully launched its swell allowance or ARP program for unsaleables in November 2006.
A popular panel at the conference dealt with handling discontinued products on the industry's increasingly crowded retail shelves. Tom Breiten (director, supply chain development, Playtex Products Inc.), Stephen Kindler (vice president, inventory management, Rite Aid Corporation), Michael Murphy (supply chain team lead, reverse logistics and drug, SC Johnson & Sons Inc.) and Michael Papierniak (manager, merchandise disposition for Walgreen Co.) comprised the panel.
For complete transcripts
of these and other unsaleables conference presentations, go to the
conference Web site.
Contact:
Troy Beeler
GMA/FPA Personality Profile
GMA/FPA Personality Profile: Michael J. Mendes
 |
Current Position President and CEO of
Diamond Foods Inc., since 1997, taking the Diamond helm at age 33. Industry Leadership Previous chairman of GMA/FPA’s Chairman’s Advisory Council, and currently a member of the Industry Affairs Council. His company is active in the Logistics and the Sales and Marketing Committees. Mendes also serves on the board of The Wine Group.
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Career Highlights
Since he became President and CEO, Mendes has led Diamond to double in size and increased North American retail business by more than 400 percent. He led the launch of the Diamond culinary nut line, emerging as the market leader, and recently Diamond entered the snack category with the successful launch of the Emerald brand. Mendes also led a successful IPO of Diamond Foods in 2005. And – not to be sneezed at – Diamond’s 2007 Super Bowl commercial was rated No. 1 commercial by Advertising Age magazine.
Personal
“I am very fortunate to find myself in a position that I truly enjoy my profession, my colleagues, and the opportunity we have to grow and improve as a company. I spend a great deal of time and energy focused on Diamond, and I am quite passionate about trying to lead the organization to a high level of performance. I am fortunate that my wife has a very successful career and also has a deep commitment to her profession, so she is supportive of my somewhat obsessive passion for the business. We have a philosophy that rather than try to achieve a ‘work and life balance,’ we strive for a healthy integration of our professional and personal lives. We direct a large part of our free time and energy towards our daughter Blair, which is a great way to gain perspective on some of the pressure of the daily demands of the business.”
Education
M.B.A. from the Anderson
School of Management at UCLA.
First Job
“I started working on the family farm from an early age and worked summers through college. This early experience ingrained a sense of discipline and a work ethic that has served me well throughout my career.”
How’d You Reach Where You Are Today?
“As an undergraduate, I served as the university student-body president and had the opportunity to meet George Dukemejian, who was governor of California at the time. Upon graduation, this contact led to a position managing a program to promote California food products abroad. This position served as a good platform to introduce me to the concept of global markets prior to returning to UCLA to pursue my M .B.A.
“After graduating, I worked at the Dole Food Company and then joined Diamond, working in progressively challenging positions in the sales and marketing areas. During the first 10 years of my career, I worked in international sales and marketing, which required extensive travel throughout Europe, Asia and South America. This experience helped me gain an in-depth appreciation of the diverse cultural and economic factors that often create a critical dynamic that must be addressed in crafting profitable and sustainable business relationships in foreign markets. Developing an appreciation of cultural differences has also served me well in the United States, which has great diversity and many distinct consumer segments.
“I became CEO of Diamond at the age of 33, which is younger than usual for
the food industry, but particularly for Diamond. While this proved
challenging at times, overall it enabled me to gain critical leadership
skills and to better understand the process of developing a cohesive and
collaborative team environment. In particular, at the beginning of my tenure
as CEO, I sought to develop systemic processes for planning, developing and
training employees, and to create an individual goal program and reward
process that reinforces the collective action and behavior that drives
corporate performance. Many of these systems and programs remain in place
today.
“In 2005, we took the step to converting the company from a cooperative to a
public corporation. This transaction monetized the previous illiquid
ownership of the 2000 grower cooperative members who supplied raw material
to the company and raised more than $100 million to fund the future growth
of the company. Since the IPO, we have undertaken a significant yet focused
investment strategy in our consumer franchise to expand our retail
distribution and enhance the value of our brands. This strategy has been
critical to the profitable growth of our business. The company today is
growing rapidly and is well positioned to succeed in the future.
“During each key milestone, change was difficult and was often met with
apprehension or resistance. However, by focusing on the long-term business
fundamentals of profitable growth and product innovations with a sustainable
value proposition for consumers, the difficulty of facing these challenges
has been very rewarding.”
Booz Allen Publishes Plan to Revamp Sales Team
Booze Allen Hamilton has published an article outlining a five-step
plan for routinely revamping a company’s sales team. Entitled
Is
Your Sales Force Adaptable?, the authors note that retailer
consolidation, deregulation, globalization, new competitors’ tactics
and internal strategic shifts all combine to make it increasingly
difficult to maintain a high-performing sales force. The firm says
that companies that have embraced this five-step strategy reduce
head count by 10 to 20 percent while increasing yield by 10 to 15
percent.
Contact
Lisa Mitchell
AlixPartners Release Two Studies
Fred Crawford, managing director of AlixPartners LLP in New York,
oversaw the production of the detailed Brands Today: Popular not the
Same as Powerful – Which Brands Are Really Delivering for Producers,
Retailers and Owners. This survey of 5,000 U.S. consumers covers
many CPG industry brands and retailer brands. Get your copy at
www.alixpartners.com.
Also according to AlixPartners, $3 trillion in selling, general and administrative (SG&A) costs are slipping through the cracks of U.S. business today. In its 2007 SG&A Outsourcing Survey, AlixPartners asked senior financial executives in 34 blue-chip, mid-size companies (generally $10 billion and under in sales) across multiple industries about trends in outsourcing today. Survey results prove outsourcing no longer the exclusive practice of big companies. Of those companies surveyed, 47 percent say they are currently outsourcing, and 73 percent say they will continue to outsource or will begin outsourcing in the next year or two. Executive summary available at www.alixpartners.com.
Microsoft Advises CP Industry on “People-Ready
Business”
George Taylor, director of consumer goods, U.S. manufacturing
industries for Microsoft Corporation, says that the company is
making major investments in the consumer products industry. Part of
the firm’s CG industry solutions includes a recent article published
in Consumer Goods Technology magazine entitled
“Empowering People
Throughout the Consumer Goods Enterprise.” Featuring numerous
case studies, the article outlines ways to focus on the consumer
experience and customer service – or moving toward a “people-ready
business.”
Contact George Taylor
Sept. 30-
Oct. 2 Merchandising, Sales and Marketing Conference
The Broadmoor
Colorado Springs, Colorado
Contact: Brian Lynch
Oct. 30-31 Industry Affiars Council Dinner and Meeting
The Fairmont Hotel
Chicago, Illinois
Contact: Stephen Sibert or Diana Randazzo
Jan. 17-18
2008 Sustainability Summit
Contact: Stephen Sibert
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@ Copyright 2007 by GMA/FPA, 1350 I Street N.W. #300, Washington, D.C. 20005. All rights reserved. Some content and copyright for specific information are provided and owned by Planet Retail, a leading provider of grocery retail intelligence— www.planetretail.net.
GMA/FPA enables its member companies to address the public policy, scientific affairs, product safety and industry issues that impact their ability to create value with and for their customers by advancing their brands and products in a fashion that responsibly improves the quality of consumer lives.
