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Western Europe
Growth is likely to remain subdued in many western European countries in 2011. Public deficits and austerity programmes will continue to serve as a brake on growth this year. Most experts expect varying levels of economic development: the debt problems will keep the Greek economy in recession in 2011, Spain and Portugal are likely to see very little growth. weak growth of about 1 percent is forecast for Italy. Aside from Germany, the Scandinavian countries of denmark and Sweden as well as Switzerland are likely to continue their positive development.
In 2010, labour markets in most western European econ- omies also trailed the recovery on the German labour market. The gradual improvement on labour markets during the second half of 2010, however, is likely to continue in 2011, buttressing the retail industry as well.
Eastern Europe
Recovery in Eastern Europe is likely to continue in 2011 at varying rates. Although growth is expected to remain rela- tively weak in Bulgaria, hungary and Romania, these countries will likely improve their performance compared to previous years with growth rates of about 2 percent in 2011. At about 4 percent, growth rates in Turkey, Russia and Poland, in turn, will probably be twice as high as in the other regional econo- mies. According to our forecasts, average growth in Eastern Europe will be somewhat stronger than in 2010, and we project another increase for 2012 compared to 2011. while the regional economies will not return to the high growth rates of the pre-crisis years, just like Asia, Eastern Europe continues to boast strong economic potential. As a result, we expect the Eastern European economies to generate strong growth momentum over the medium term – thanks also to their continually high catch-up demand. Therefore, we also expect the retail industry to grow faster this year.
Asia/Africa
despite persistent risks, the Asian emerging markets will probably remain the world’s fastest-growing region in 2011 and 2012 – although their economic strength is likely to decline slightly. The growth momentum in the retail industry will also remain high. we project double-digit nominal growth for China, India, Pakistan and vietnam, but the situation in Japan is more difficult. Economic growth will weaken markedly there in 2011, negatively impacting the retail sector in the process. due to fundamental political changes, it is difficult to assess future developments in Egypt at the moment.
Building on our forecast for economic and retail develop- ment, the following section provides an overview of the resulting implications for individual sectors as well as the METRO GROUP sales divisions.
Future sector trends and development at
METRO GROUP
Metro Cash & Carry
The development of the self-service wholesale sector will continue to be impacted by the economic recovery in 2011 and 2012, the pace and intensity of which varies from region to region. Accordingly, we expect the divergent trends within the cash & carry segment to continue.
Market volume in Germany and western Europe will change only slightly in the next two years. Growth momentum is not expected to be produced by the hotel and restaurant trade, two of the main customer groups of the cash & carry segment. As a result of expected price increases, we anticipate growth in food items to lag slightly behind the overall inflation rate, whereas retail sales in nonfood items will remain stable. The Eastern European cash & carry segment is expected to continue to grow in the next two years, but at starkly varying speeds. while sales in the cash & carry segment will increase in most countries, we expect negative growth rates in Greece and hungary for at least the duration of 2011 as a result of the tense economic situation. The overall positive revenue trend in Eastern Europe will be fuelled by a strong rise in demand for both food and nonfood items. Price increases, in particular in food items, will also lead to an increase in revenue.
we expect the strong growth trend of the cash & carry seg- ment in Asia to continue unchanged for the next two years. The growth dynamic in the cash & carry segment will remain higher than in the modern food retail business. Some coun- tries of the region, for example India, continue to protect the traditional retail sector through restrictions on foreign com- panies’ entry into their attractive retail markets. This has two sets of implications: on the one hand, the customer base of the cash & carry segment, the traditional retailers, remains intact. On the other, cash & carry stores there are faced with little competition from other modern formats in the food retail business.
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Metro Cash & Carry will continue its international expansion course in 2011 and 2012, keeping its focus on the growth regions of Asia and Eastern Europe.
Real
Sales in the German food retail industry are expected to increase more in 2011 and 2012 than they did in 2010. This positive trend will be primarily stimulated by hikes in food prices, which, in turn, result from increasing com- modity prices. due to ongoing intense competition espe- cially on the part of discount stores, however, it is not cer- tain that higher purchase prices can be completely passed on to consumers by the food retail industry. The shift in demand towards low-price private-label products is likely to continue unchanged as a result of the overall rise in the price level.
The Eastern European food retail industry will continue to grow in the next two years. In addition to food price increases, an ongoing rise in consumer demand will posi- tively impact retail industry development as the recovery from the financial and economic crisis picks up speed. A rejuvenated expansion of the modern food retail sector will also fuel growth. we expect the large-area hypermarkets to remain the growth drivers and to further extend their market share.
Real will continue to pursue and further refine its successful strategy of the past years. In Germany, the focus in 2011 and 2012 will be on the continuation of Real’s successful repos- itioning. This includes the development of promising new formats such as “Real drive” or the online shop. Internation- ally, Real will continue its systematic expansion in order to profit from the boom in large-area hypermarkets in Eastern Europe.
Media Markt and Saturn
The regionally divergent development in consumer elec- tronics retailing will continue in 2011 and 2012. This is because developments in this industry are more susceptible to changes in macroeconomic parameters.
The German Federal Association for Information Technol- ogy, Telecommunications and New Media (BITKOM) antici- pates the market to decline in western Europe in 2011. In Germany, the largest western European market, experts expect the retail industry to develop more favourably than in most other countries in the region. For this reason, 2011
sales in the German market will only fall slightly below those of 2010. In the area of consumer electronics, demand for flat-screen televisions will continue to remain high. All in all, however, demand in Germany and western Europe will drop in 2011 before sales pick up again in 2012 when major sporting events are expected to boost demand. Con- sumer interest in information technology products contin- ues to remain high. The sector trade association BITKOM, for example, projects record sales in computers in Ger- many in 2011. The Internet will continue to grow in impor- tance as a sales channel and increase its market share. In light of this development, only providers that do not solely rely on stationary sales or only on Internet sales, but com- bine both sales channels to operate as multichannel pro- viders will benefit from this trend. Media Markt and Saturn are already operating as multichannel providers in Austria and the Netherlands. In 2011, this sales channel will be expanded to Germany.
Consumer electronics retailing in Eastern Europe will con- tinue to grow at varying rates over the next two years. Stim- ulated by the rapid recovery from the financial and economic crisis, demand for electrical and electronic equipment in Russia and Turkey will pick up in 2011 and 2012. we expect sector sales in Russia to exceed those of pre-crisis levels by 2012 at the latest. In contrast to this positive trend, countries that remain affected by the economic crisis, for example, Greece and hungary, can expect customers’ reluctance to spend money to persist. due to continued strong demand for basic electrical and electronic equipment, the region of Eastern Europe also holds enormous potential for growth beyond 2012.
The Chinese market for electrical and electronic products is the third-largest market worldwide behind the USA and Japan. According to the European Information Technology Observatory (EITO), the Chinese market will see double-digit growth rates in 2011 and 2012 and will position itself behind the USA as the second-largest market as early as 2012. Media Markt and Saturn will continue their growth course and gain additional market share over the next two years. The unrelentingly high pace of expansion in all growth mar- kets will significantly contribute to the expansion of each sales brand’s market position.
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Galeria Kaufhof
The positive consumer climate in Germany and the compar- ably high propensity to buy will positively impact the devel- opment of the department store and clothing sector in 2011. The continuation of this trend in 2012 will depend on how stable consumer demand remains.
Even though the final phase of consolidation in the department store sector has yet to be completed, the sector will continue to gradually eliminate overcapacity. In this respect, we expect the department store sector to continue to lag behind retail trends in 2011 and 2012 as well. Galeria Kaufhof is clearly pos- itioned as a concept and system leader in the market. On this basis, we expect the sales division to continue to develop more favourably than the comparable competition and its market share to increase. Positioning Galeria Kaufhof as a multi- channel provider will also contribute to this development.