After Aldi disaster! Danish Coop next victim of proximity discounters?

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Amsterdam, April 20, 2024

Will the European proximity discount trend hit the Netherlands too?

It all started rather innocently.

Prof. Dr. Laurens Sloot from EFMI invited me to speak at his Entrepreneurs Congres on April 16, 2024.

EFMI is the leading Dutch FMCG retail business school.

There would be 160 supermarket entrepreneurs in the theater. From all major Dutch Supermarket brands: Albert Heijn, Jumbo, Plus, Coop and Spar.

Laurens wanted me to share the supermarket trends that I encountered during my work asa retail consultant all over Europe.

So far so good.

I just thought I could have a nice chat about a trend. And I started preparing my story. As usual, always too late, so I started preparing in the last week before the conference.

Drama in Denmark.

But then a dramatic development happened in Danish retail that week in April 2024.

That week Denmark's second largest FMCG retailer, the Danish Coop, was dragged away from the gates of hell by Denmark's largest oil company: OK.

That's as if Sainsbury's in the UK was about to collapse and be saved by BP. Or as if Rewe in Germany was about to collapse and rescued by Aral.

Coop was brought to its knees by the power of the proximity discounters. With local discounter Rema 1000 as its biggest opponent.

What a coincidence! The trend of proximity discounters was exactly what I wanted to share with the supermarket-owners at the EFMI conference.

That suddenly turned out to be very topical.

The theme of the conference was: “In search of a healthy revenue model.”

Making revenue models healthy is our core business. We do that for retailers all over Europe. Sometimes we help them with avoiding disaster, and sometimes we help them take big new steps to realise full potential.

The proximity discounter is a very healthy business model in many European countries. Also for self-employed entrepreneurs.

Goodbye neighborhood supermarket. Welcome proximity discounter.

As I said, I wanted to share the trend of proximity discounters at the congress.

First what I mean by proximity discounters.

I don't mean large discounters on the edge of the city with a huge catchment area. But I am talking about proximity discounters that have small catchment areas. They are close by.

So don't look at the formula of the store itself, or the size of those stores, but at their small catchment areas.

The proximity discounters.

Let's look at some examples.

Proximity discounter Biedronka in Poland.

You probably know the success story of discount chain Biedronka in Poland. Part of the Portuguese Jeronimo Martin, in which Ahold Delhaize also has an interest.

Biedronka has more than 3,500 stores in Poland. That's a lot of stores.

But you might say: Poland is also a big country.

What would that mean in Dutch perspective?

With some 40 million inhabitants in Poland, Biedronka has a catchment area of approximately 11,000 inhabitants per store.

With such small catchment areas we would have 1,600 Biedronka stores in the Netherlands.

Well, that would make Biedrinka always very close-by. That is why Biedronka is a real proximity discounter.

The conventional reflex in the retail sector always was that as stores became closer-by and are smaller, they would inevitably have to become more expensive stores.

Well, that paradigm is going out the window with proximity discounters like Biedronka.

Biedronka starts franchising.

Just a little side line:

What I told the room full of supermarket entrepreneurs is that Biedronka is now also working with independent entrepreneurs, with franchisees.

Biedronka would like to introduce franchises to avoid Sunday closures.

Because in Poland, only shops are allowed to be open on Sundays if the owner is actually present in the shop. Hence Biedronka's interest in franchising.

But now back to the main story line:

You want yet another example of proximity discounters? In another country?

Proximity discounter BIM.

The story of Turkey is interesting. Where proximity discount chain BIM alone has around 10,500 stores.

With 85 million inhabitants, this means 1 BIM per 8,000 inhabitants.

With such a small catchment area there would be approximately 2,200 BIM stores in the Netherlands.

There is no chain in the Netherlands that has so many stores.

Albert Heijn, the largest chain of Holland, reports 1,268 stores in the Netherlands in 2023. Lidl 440. Aldi about 500.

But you may think: that is a nice story, but Poland and Turkey are very poor countries. Nit surprising that discounting is taking off there.

OK. You have a point there.

Proximity discounters in Denmark.

Let's take a country that is just as rich as the Netherlands.

Or perhaps richer.

Let's look at Denmark.

We in the Netherlands have a GDP per capita of 61,770 US dollars.

Denmark has a GDP per capita of US$71,402.

That means Denmark is 15% richer than the Netherlands.

You might expect that those wealthy Danes would prefer luxurious, overflowing full-service supermarkets so that they can spend all their plentiful Danish Kronor without inhibition.

Not so.

The luxury supermarket chain Irma was closed down last year. The full-service supermarket Brugsen is in trouble. Both from Coop.

The hypermarkets Bilka, F?tex and Coop's Kvickly are suffering from the international hypermarket disease. They are no longer the powerful rulers they used to be.

Instead, Denmark has steadily become a proximity discounter country.

Denmark has about 3,100 supermarkets.

Of these, about 1,600 are proximity discounters.

This means that about 52% of Danish supermarkets are proximity discounters.

With a combined market share of approximately 50% in monetary terms.

And in volume?

If you would take the price difference into account, the discounters in Denmark might have a 60% market share in volume. Correct?

These 1,600 Danish discounters serve approximately 3,700 residents per discounter out of 5.9 million Danes.

With that catchment area there would be around 4,800 discounters in the Netherlands.

Oops! That's almost as many as we have supermarkets in the whole of the Netherlands...!

Aldi first victim.

I recently described here on Linkedin how Aldi was pushed out of Denmark last year.

Look at https://www.dhirubhai.net/pulse/amazing-discount-lessons-from-last-weeks-trip-denmark-eysink-smeets-ix1be/?trackingId=s6NOl4ek0Mq6QJ2skOVdew==

In 1977 Aldi came to Denmark. And in 2023 Aldi has stopped operating in Denmark.

Aldi has not been squeezed out by beautiful full-service supermarkets or overflowing hypermarkets, which may have offered an abundance of choice that hard discounter Aldi could not match.

But Aldi has mainly been bullied out by those Scandinavian-style proximity discounters.

By the most vicious one in particular: that damn Norwegian Rema 1000.

The same Rema-1000 has also taken over those 240 Danish stores from Aldi.

This means that they are closely monitored by Denmark's monopoly commission, because their market share could well reach 40%.

That would be larger than the current market leader Salling. Bigger than Coop too.

Rema 1000 is a franchise organization.

Another side-step for my audience at the conference, who were all franchisees of the main Dutch chains, a theater full of supermarket-owners.

Rema 1000 is a franchise organization.

That has always been the case at Rema 1000.

Not, as with Biedronka, as a trick to avoid Sunday closures. That is not an issue in Denmark.

Back to the main story-line:

Lidl bullied out of Norway.

It was not the first time that Rema 1000 has bullied a large German discounter and forced them to retreat.

Rema 1000 had already done that once in their home country Norway. Lidl was bullied out in 2008. After only being active in Norway for 4 years.

And who did those Germans from Lidl sell their Norwegian stores to?

You guessed it right: it was Rema 1000.

Rema 1000 disturbed Danish peace.

The arrival of Rema 1000 in Denmark in 1994 has significantly changed the Danish market.

Due to their success, the two major Danish retail parties, Coop and Salling, have also fully focused on proximity discounters.

Coop with Fakta, which has recently been converted to 365 Discount.

And Salling with Netto.

But were these Companies playing chess on too many boards?

After six months of tough negotiations, the originally cooperative OK oil-and energy-company has de facto taken over the cooperative retailer Coop Denmark.

For Coop in particular, playing chess on multiple boards actually turned out to be impossible.

Something we see more often.

We know the hard way that discounters are the most powerful in a mono-culture.

When they don't have to compete for attention with full-service-supermarket-colleagues or hypermarket-colleagues in their same company. Discounters don't florish inl the delaying misery of synergy, shared services, conflicts in corporate culture, etc.

Coop had been going from strategy to strategy over the years. That process has been going on for years, till April 12, 2024. After six months of negotiations, half of Coop was taken over by the cooperative oil company OK. Saved in the nick of time.

That shows how destructive proximity discounters can ultimately be.

Coop schaakte op te veel borden tegelijk.

The arrival of Rema 1000 in Denmark in 1994 has significantly changed the Danish market.

The two major Danish retail parties, Coop and Salling, have also fully focused on proximity discounters.

Coop with Fakta, which has recently been converted to 365 Discount.

And Salling with Netto. Which -indeed- you also find in Germany and Poland.

But are these companies playing chess on too many boards?

For Coop in particular? Is playing chess on multiple boards a real challenge?

We know the hard way that discounters are the most powerful in a mono-culture.

When they don't have to compete for attention with full-service-supermarket-colleagues or hypermarket-colleagues in their same company. Discounters don't florish inl the delaying misery of synergy, shared services, conflicts in corporate culture, etc.

Coop had been going from strategy to strategy over the years. Untill April 12, 2024. After six months of negotiations, half of Coop was taken over by the cooperative oil company OK. Saved in the nick of time.

That shows how destructive proximity discounters can ultimately be.

What makes Danish proximity discounters successful?

So what makes a successful Danish proximity discounter?

How can we identify the different types of Danish supermarkets?

For this we use the metaphor of the tomato-ketchup-bugs.

In other words: on how many legs, does the tomato ketchup category run? How many SKUs of ketchups does each formats operate with?

We first went to the Danish Lidl. There we find 4 sku's of tomato ketchup. So the Danish Lidl tomato ketchup animal has 4 legs.

(Spoiler alert: those 4 SKUs from Lidl Denmark are twice as much as the 2 SKUs of tomato ketchup from Lidl Netherlands.)

Then to the aforementioned Rema 1000. There we find 6 SKUs of ketchup.

Then to ABC Lavpris, a seemingly very successful Vomar-like entrepreneur with 15 stores in Jutland. Affiliated with Dagrofa I guess, a kind of Superunie. ABC does it with 7 sku's of tomato ketchup.

Then we drove to Netto, part of the Salling group, the former Dansk Supermarked. Netto makes do with 8 sku's of ketchup.

On to 365Discount, the discount chain of the Danish Coop. They do it with 8 sku's of ketchup.

Onwards to Kvickly, the hypermarket chain of the Danish Coop. Kvickly has 16 SKUs of tomato ketchup on its shelves.

And please note: I only count tomato ketchup in each of those stores, not curry ketchup, jalape?o ketchup or other variants.

Let's go to Brugsen, Coop's third format. Their full-service supermarket chain has 17 SKUs of tomato ketchup on the shelf.

Then to F?tex, the city hypermarket chain of Salling Group. F?tex carries 21 SKUs of tomato ketchup.

That seems like a lot of fun, those 21 SKUs.

But every time we analyze customer data, we see that less than half of the SKUs of those 20+ large animals do not rotate or hardly rotate at all.

Good.

The Danish NoCompromise playing field.

Then of course we would also like to know how those Danish chains score on price.

We can plot that easily.

Last year we built an AI tool that makes this clear. That is the Eysink Smeets NoCompromise Plotter.

It works very simply: we scrape reviews from the internet and plot them on our NoCompromise playing field.

Where the perceived Value goes from low to high on the horizontal axis. And on the vertical axis the perceived Price goes from high to low.

If you want to know exactly how the NoCompromise model works, watch this video on YouTube:

https://www.youtube.com/watch?v=Ik99HN0Dg_0

If you look at our Danish NoCompromise Plotter, you will see a clear connection between the number of legs and the position on the NoCompromise field. The 6- to 8-legged ones are the winners. They are located in the NoCompromise corner of the playing field.

There is a fascinating player in the best position: ABC Lavpris. I visited the Billund store and visited their competitors too. ABC had much more traffic and fuller baskets too. Impressive! Could they break out of their regional circle and do like Sklavenitis did in Greece?

As we have known for a long time: the NoCompromise players in the green area at the bottom right are always the most powerful formulas, the category killers.

Simply because they do not require any compromise from the consumer; they deliver High Value at Low Price. The ultimate Value for Money players.

We see from Aldi and the Coop in Denmark how completely the Danish market is turning upside down.

What about the Netherlands?

Does the trend of Denmark also apply here?

To answer that question, we also identified the tomato ketchup-like species in the Netherlands.

We walked into Aldi Heerhugowaard. That turns out to be a two-legged one: 2 sku's of tomato ketchup on their shelf.

Lidl Heerhugowaard? Also a 2-legged one: 2 sku's tomato ketchup. Half of what I found in the Danish Lidl.

Nettorama in Bussum shows 5 SKUs of tomato ketchup.

Boni Apeldoorn led 6.

Ekoplaza Heerhugowaard: also six. But of a completely different kind than what we encountered with the others, of course.

Dirk Apeldoorn does it with 7 SKUs of tomato ketchup.

Vomar Heerhugowaard with 9.

Boons market Uddel: 12 sku's tomato ketchup.

Plus Rijssenhout: 17 sku's of tomato ketchup.

Deka Heerhugowaard: 18 sku's tomato ketchup.

Albert Heijn Heerhugowaard: 21 sku's tomato ketchup.

And finally Jumbo Leusden: it has 23 tomato ketchups.

And again, for the record, we're only counting tomato ketchups, not curry ketchups, jalape?o ketchups, and the like.

The Dutch NoCompromise playing field.

Then of course we also want to know how those Dutch chains score on price.

We grab our Eysink Smeets NoCompromise Plotter once again.

As I explained: with this AI tool we scrape reviews from the internet and plot them on our NoCompromise playing field.

It also turns out that the successful NoCompromise players play with 5 to 9 SKUs of tomato ketchup.

Also look at how little extra in Value most players in the orange top right segment bring.

Will the Danish story also apply here?

Well, to summarize: what do we think of this international proximity discounter trend?

What is happening in Denmark, could that also happen in the Netherlands?

Could those 6- to 8-legged ketchup players also be the most powerful players here in the Netherlands? As they are in many other countries?

Or are they actually already?

Aren't Boni, Nettorama, Dirk, Vomar already the strongest growers? We know that too, don't we?

Are they capable of completely turning the market upside down? Like in Denmark? Or do they still have too few stores for that?

Will the 18- to 23-legged animals persist in their policy?

What we often observe as the standard reflex in many 18-legged chains is that they would rather grow into a 24-legged one than look the other way and go from an 18-legged one to an 8- or 10-legged one. cut back.

As I observed in Germany with a Rewe entrepreneur, who had recently proudly added his 13th(!) brand of pasta, with the full(!) range of all 13 brands on the shelf.

So is the NoCompromise proximity discounter also suitable for Dutch consumers?

Will this indeed also control the future of the Netherlands? Are we indeed going to follow Denmark, which looks so much like us?

What do you think? Please let us know! Fill in the comments!

I would also like to link with you on LinkedIn.

https://nl.linkedin.com/in/hanseysinksmeets

Voor dit artikel in het Nederlands:

https://www.dhirubhai.net/pulse/na-aldi-ramp-deense-coop-volgende-slachtoffer-van-hans-eysink-smeets-67g8e/?trackingId=9McJqqHVTFCtE1jGepCkUw%3D%3D