Insights – FSD specialists

Julius Osthues, Vice President FSD Portfolio Management at METRO AG, is responsible for the integration and steering of the "FSD specialists" - small and medium-sized companies that METRO has acquired over the past years to expand and complement its FSD (Food Service Distribution) operations. Given the importance of FSD as a growth driver for METRO's sCore strategy, Julius is a true expert to share key insights about those companies, their profiles in comparison with METRO's own delivery service and what synergy can be drawn between two units to benefit each other.

What role do the FSD specialists play in our delivery strategy?

METRO has ambitious plans as part of our sCore strategy to raise the FSD sales share to 33% by 2030. To achieve this goal, we need to generate growth in both delivery business by METRO wholesale operations and our FSD specialists. I believe there is a big opportunity for METRO as the B2B food wholesale landscape is still very fragmented. The FSD specialist companies serve a different customer base who usually doesn’t buy at METRO wholesale stores or delivery service, particularly when it comes to the organized Horeca and fine dining segments. With our FSD portfolio approach, we aim to grow our market shares across all customer segments and thus further play our part in the market’s consolidation.

Which customer segments are the FSD specialists targeting?

We segment the Horeca landscape into casual dining, fine dining, and organized customers. The FSD specialists usually focus on one of these customer clusters. The Classic Find Foods companies, R Express, JHB, and our latest acquisition, Caterite, mainly focus on the more premium customer segments. For example, R Express delivers every 3-star Michelin restaurant in Germany. On the other hand, Pro à Pro in France and Spain primarily serve organized Horeca such as caterers, commercial chains, or hotel chains. In this segment we often are committed to contractual partnership for periods of up to 3 years. For instance, the largest customer of METRO around the world is a contract caterer served by Pro à Pro in France. Elsewhere in Portugal Aviludo serves customers in the casual Horeca sector, which is also the focus customer group of METRO’s own delivery operations around the world.

Why did METRO buy these companies in particular – what are the specific selection criteria?

Obviously, the first and most important criterion is the strategic fit, meaning we look for FSD specialists catering to Horeca customers in our target segments. In practice, we have several markets identified that we see as attractive due to their growth potential and our competitive positioning. These markets are regularly screened, and available acquisition targets are reviewed based on their business model, financial profile, and synergy potentials, among other technical criteria, to assess the overall fit. Based on this, we will always consider if an acquisition is the right choice to help achieve our objectives and accelerate our sCore strategy progress. However, organic growth clearly remains the priority to expand our FSD sales share at METRO.

Compared to METRO’s own delivery operations, how do these specialists distinguish in their operations? and what can we learn from them?

The biggest distinction between METRO delivery and the FSD specialists is their heritage. While METRO is currently transforming to become a multichannel wholesaler from a store-based operator, to a multichannel, the FSD companies have always been pure- delivery players. Both heritages have much to learn from each other’s strengths and can benefit from increased collaboration. While the FSD companies are often very entrepreneurial and pragmatic, METRO operations are more structured in their processes and systems. Our ambition is always to draw the best out of both worlds. It is important to go the extra mile for our customers while ensuring our businesses run efficiently and profitably. In addition, JHB, Aviludo and Caterite have vertical capabilities, e.g. processing of meat, fish or vegetable products, as an important unique selling point in the market. JHB, for example, generates 50% of its sales from its own production and processing of fish and meat. This enables us to offer something unique to our customers, differentiating us from competitors and enhance customer loyalty. JHB for instance often works together with customers such as hotel chains to develop tailored products. Given METRO’s business scale, and in particular its expertise in the fresh assortment, I see vertical integration as one of the biggest opportunities for us, and we can learn from the FSD companies how to succeed with it.

And in which way do these companies benefit from being part of METRO?

The biggest and most obvious synergies are in sourcing. Combining our procurement volumes across different businesses and collaborating on negotiations is a significant lever to generate synergies. Here, the METRO trading offices that manage the global sourcing of meat, fish, fruits & vegetables for all subsidiaries play an important role. One example is the collaboration between JHB with the Rotterdam Trading Office (RTO) specialized in meat imports. JHB shifted a volume of 1,300 tons of meat from external suppliers to RTO in FY 23/24, for which they now benefit from significant better buying terms.

Moreover, we push for sourcing synergies between METRO local companies and the respective FSD specialists that operate in the same countries. For example, Aviludo and Makro Portugal collaborate in joint negotiations on overlapping SKUs and substituted articles, resulting in significant cost savings benefiting both entities.

Looking ahead, what are your plans – are there more synergies to be leveraged?

One big focus is to find ways to increase the METRO own brand share in our FSD portfolio. Because pushing own brands is a key priority for MERTRO – and there is a lot of potential also with our FSD specialists. Additionally, we seek to push the share of sourcing volumes that go through joint procurement channels, for example the trading offices. Also, across the administrative functions, the degree of integration of FSD companies with METRO will further advance in areas such as IT and finance. For example, every FSD company comes with their own legacy IT infrastructure - there is value in harmonizing the IT landscape to make processes more efficient and benefit from lower licensing fees. Moreover, we can further empower our FSD companies also by financing upfront investments. Finally, there is a large community across METRO to support and inspire each other. If you encounter an issue in our daily operations, you can pick up the phone and call six other people who work in the same function and may already have the solution for your scenario.