METRO Insights - Issue 02 - October 2021

What makes the Trader customers special for you?
Trader customers are an economic factor and above all an impactful social link for the community. Their proximity to their customers makes it possible for them to provide convenience and comfort on daily basis. The pandemic has once again shown us how important they are. In many countries, these small trader shops play a crucial role in providing local products and services, sometimes even one step further by offering home deliveries to those in need of care, for example.

I have visited lots of them across different countries over the years. They are diverse in format, assortment or business hours, but all deserve full acknowledgement and admiration for their enduring hard work. Talking to them provides valuable insights into local trade and the industry as a whole. Thus we as METRO learn what we can do to empower them and make them more successful.

The Trader sector has recorded clear growth during the pandemic. What are the key learnings and plans for us to sustain the growth path in the future?
The value and importance of the independent shops has been clearly acknowledged during the pandemic and we at METRO have further enhanced our relationship with this customer group. It is now a solid foundation for us to build on. Going forward we will continue to optimise our assortment for Trader customers. Therefore, we have recently comprehensively revised our own brand Fine Life, long dedicated to the Traders. The focus is on designing a modern product range that is appealing and suitable for resell to the end consumers. For Trader customers, Fine Life offers a guaranteed margin across the range.

We are also expanding our delivery business for Traders. Our global online shop for this specific customer group is currently operating in 3 countries, namely Russia, Romania and Turkey while we operate on local solutions in other countries. In India, METRO last year launched a customer e-commerce app for local Kirana shops which has been generating fast growth. We will push the use of M-Shop for Trader customers in more countries.

What role does our sales team play?
A crucial role! Our sales team will continue to intensify contacts with Trader customers in order to be able to respond to their business needs at all times, especially in the period after the lockdown. To improve both the knowledge and the know-how for our franchise partners and their staff, we have also launched the Convenience Academy for the development of a structured programme of learning and expertise. We focus on thinking from the standpoint of the small shop owners to ensure we are supporting them to address their most important needs.

Our franchise networks for Traders keep expanding, mostly in Eastern Europe. What are the latest features and innovations to drive sustainable growth within and for this community?
For well over 10 years, our trader franchise network has been expanding continuously under its respective local brands. As of today, there are about 8,100 such franchise shops in 9 countries. They represent an important sales channel as well as a strategic growth driver for METRO. For example, in Romania our franchise La Doi Pasi now has over 1,500 shops, making it the largest community of entrepreneurs in the country. In Russia, our Fasol network runs nearly 2,000 shops and in Slovakia, the 600th Môjobchod franchise outlet just opened, making it the 3rd largest food chain in the local market.

While expansion is one crucial aspect, we also strive to inject innovative solutions and more convenience shopping character into the franchise partners in response to the evolving trends. We are currently building modern convenience formats including the neighbourhood format in Poland and a defined density format in Romania. Both formats are to be scaled across the countries including Czech Republic and Slovakia. In the upcoming months we will be able to show our franchise partners and their customers the new and modernised concept of our convenience propositions – introducing modern categories such as “food to go” and “food for later” adapted for the individual location and community of our partners’ shops.

These are just some examples. Stay tuned for more in the future…

Thank you for sharing all these insights with us, Rafa!

Interview conducted by Leiding Chen

City centres of the future: Diversity as a recipe for success?

Who is not familiar with this? Gaining first impressions on a city trip while strolling through the streets, pausing your shopping spree for a quick stop at the café around the corner, or toasting to the end of work with your colleagues in your favourite pub. A city centre without restaurants, bars and cafés would not be worth visiting – this is also found in our new study (Germany only) about #Innenstadtinitiative (City Centre Initiative) by METRO and is at the same time also a call on politicians to act now! In this study published in August, we joined forces with the Institute for Retail Research (IFH) to interview 250 restaurateurs in German city centres about the current challenges at their respective location and what plans they have for the future. The results are unequivocal.

Do our city centres have a future?
Not just since the COVID-19 pandemic have memories of busy shopping streets and full malls been fading. German city centres have long been experiencing an identity crisis. We shop more online and at the same time look for individual experiences. The effects are evident in the pedestrian zones: Falling visitor numbers, stores that are the same everywhere as well as vacant spaces and buildings make a city centre unattractive as a place for citizens and visitors to meet. This also has consequences for restaurateurs. Currently, around 60% of restaurateurs rate the situation as average to very bad. However, the sector is looking to the future with motivation. Planning is made more difficult by the search for suitable and qualified staff (71%) and dealings with the authorities (52%).

A holistic view
Studies show that the main motives for visiting downtown areas are the culinary experience, going out, and shopping. If you want to have lively and sustainable city centres, you need a symbiosis of retail, restaurateurs, and culture. Old structures must be re-designed, new concepts developed and innovative district and real estate projects implemented. The hospitality sector must be consistently taken into account. Politicians are called upon to create reliable structures for start-ups and to promote a lively city centre culture.

It’s the location that counts
Besides key industry problems such as the shortage of skilled workers, the allocation and development of locations are particularly crucial factors for the future of restaurants in city centres. Cleanliness and atmosphere (69%), number of potential customers in the catchment area (68%) as well as public transport connections (66%) and good accessibility for suppliers (63%) – the general conditions of the area play a significant role in the choice of a location. Here, policymakers are called upon to create diverse mobility concepts for visitors and to promote the urban ambience. This requires clean pedestrian zones, intact buildings and facades, sufficient green spaces and more liveliness in the city centres to give young and innovative projects, in particular, a chance in city centres. But attractive locations are often too expensive or are not even put on the market. In order to offer small businesses a chance, the allocation of rental locations must be simplified. Active policy promotion of targeted mixed use and repurposing on the part of tenants can remedy this situation. At the same time, concepts such as a municipal award platform for hospitality locations are an effective way to promote transparency in the local real estate market.

Now is the time to act
City centres are the reflection of a city's history, culture and way of life. As a hub, they are constantly exposed to the changing times. History shows that cities can reinvent themselves. Whereas, at the end of the 19th century, downtown areas were still mainly home to industry and crafts, metropolises were formed and local consumption boomed in the 1960s and 70s. But what do city centres look like in the 21st century?

The recipe for success is diversity, individuality and experience. Instead of monotonous cityscapes characterised by the same offerings in every city, inspiration and motivation are needed to create an experiential culture of distinctive places to meet. To achieve this goal, stakeholders from politics, business, municipalities and city administrations must work hand in hand. This can only be achieved through dialogue – and where better to exchange ideas than sitting together around a table with tasty food – at your favourite Italian restaurant perhaps?

Ivonne Julitta Bollow
Global Director Corporate Public Policy

Our Chicken Grows on Danube Fields

What do customers shopping at METRO expect? A product range that matches their needs. Because that is what we stand for – a professional assortment tailored to the needs of restaurateurs and independent traders. But a consistently good assortment does not mean consistently the same assortment. If changing demands on food became apparent even before the pandemic, COVID-19 acted like a particle accelerator on the food industry. Organic and regional products as well as meat alternatives are more in demand than ever – also among our customers. That is why we have already put 7 plant-based meat alternatives on the shelves under our own brand METRO Chef Veggie at the international level, 3 of which are plant-based alternatives for chicken specialties. “We are very proud of our alternative chicken range developed by our colleagues in Rotterdam. We were one of the first B2B players to launch such a veggie range under our own brand and the success of this range shows that we are on the right track,” says Jens Bresler, Head of Brand Management METRO Chef & Global Packaging. That is why we plan to extend our range of own-brand products with plant-based milk and fish alternatives in 2022. But how exactly does that work? How do we get new products from the drawing board to the shelf at METRO?

Plant-based chicken meat from METRO Chef: How is this product created?
“When it comes to product innovations in the field of meat alternatives, we are close to what is happening in the market, not least thanks to the METRO Innovation Hub NX-Food. We also regularly exchange ideas with local product category managers as well as chefs and restaurant owners from all METRO countries. Suppliers share their insights of the U.S. and Asian markets with us, and a look at competitors' assortments is of course also part of the process. This way, we quickly get a feel for the segment in which we can innovate with an own-brand product,” says Xiaoting Chen, explaining the start of product development for METRO’s own brands. Chen is responsible for meat alternatives at the Rotterdam Trading Office, which manages the international meat sourcing for the wholesale specialist METRO. What sounds exotic is actually the result of strategic considerations: The meat alternatives also form part of the meat assortment in the METRO stores. The idea is to underline that opting for alternative proteins does not mean reducing, but rather expanding the selection.

“Once we have decided which product should be added to our assortment, we check with various suppliers to see if their range already includes something that is of interest to us,” Chen explains the first step in product development. METRO's experts obtain product samples from the manufacturers in question, which are then prepared and tasted in blind tests in the company’s own "Taste Lab". Only suppliers who can present appropriate quality and hygiene certifications are eligible to be included in the shortlist. Even before the first tasting, the desired product already has a requirement profile that is coordinated with the individual METRO countries wanting to present the product on their shelves later. Based on this requirement profile, a committee consisting of colleagues from Sourcing, Quality Assurance, department heads for meat sales in the stores, customers and, most importantly, chefs, tests and evaluates the texture, consistency, appearance, smell and taste of the samples in uncooked and cooked condition. Professional chefs are closely involved in this process – after all, the goal is to create a product that meets their needs. It must therefore be convincing not only in its preparation, but also in taste and presentation. Products that clear this first hurdle are then put through their paces by METRO’s Quality Assurance team. Only if the products meet the wholesaler’s requirements in terms of quality standards, ingredients, nutritional values and packaging are they shortlisted. In the next step and based on the results from the product tests performed in step one, negotiations with potential suppliers begin: METRO's experts define exactly what changes need to be made to the product to get it onto the shelves under its own brand. Once the suppliers have adapted their product accordingly, it is once again presented to the tasting committee for blind tasting in the "Taste Lab". “If the product gets 100% approval from all participants, we have completed the elementary part of product development – and we have a new product,” Chen says.

Soy from the beautiful blue Danube
When a decision is made to select a particular supplier, METRO's Quality Assurance department begins another comprehensive put-to-the-test process. “Suppliers must meet certain requirements in terms of hygiene, quality, social and sustainability standards. As a matter of principle, we only collaborate with suppliers who are in line with our value system in this respect,” reports Chen's colleague Armando la Marca. He is the manager responsible for Quality Assurance at the Rotterdam Trading Office. “We look at GFSI (Global Food Safety Initiative) certification, we look at historical data, we look at audit results, and we check that all the ingredients in a product can be traced back to their point of origin so that we can guarantee full traceability. Sustainability requirements are as a rule non-negotiable. When selecting the right supplier for our own brand meat alternatives, for example, it was clear that soy as an ingredient could only come from a region where soy cultivation doesn’t cause deforestation. Our supplier for the plant-based chicken alternatives sources Danube soy from Europe,” explains la Marca. Once all the checks have been approved and the contract information has been filed, the supplier and its products are integrated into METRO’s MQuality system. In addition to ingredients and nutritional values also information on the producer, e.g., test and auditing results, as well as production and later also sales locations are recorded.

Packaging: attractive and sustainable
Meat and meat alternatives cannot be sold without packaging. In cooperation with designers, the team of packaging engineers led by Global Packaging Manager Jens Bresler starts planning the packaging for the new product. Here, too, METRO has clearly defined specifications: As not as possible, as much as necessary – and as sustainable as possible. Certain packaging materials such as EPS and PVC are excluded as a matter of principle. Bresler: “When developing the packaging for our own brand products, we want to create a positive customer experience and reduce the environmental impact throughout the entire life cycle. We ensure that, with minimal raw material consumption, we find the perfect match of minimum thickness of the bag and maximum filling quantity. This is how we guarantee shelf life, handling and product quality. And with the unique design of the METRO Chef Veggie products, we also create recognition value for our customers.”

Test, test and repeat

Once the product and packaging are finalized, it's off to initial production. After long weeks of testing, planning and negotiating, this is a big moment for the product developers. "It's always great when we can finally hold the product in our hands. But it is also the time of extra-tight controls: Packaging, product quality, traceability, laboratory analyses, label requirements – only when all points meet our own as well as all legal requirements can we finally release the product for the shelf and present it to our METRO customers,” says Quality Manager la Marca. 4 months are required on average from the moment METRO starts developing a new product to the moment the product can actually be purchased in the store or online. “But our work really starts there. To guarantee reliable quality, both product and producer have to undergo regular screenings, tests and laboratory examinations – some of them unannounced. In this way, we ensure that the quality of our products is right in every respect,” says quality expert Armando la Marca.

The family growing
A number of product developments are currently in the pipeline for the METRO Chef Veggie range. Bresler: “Our veggie range is growing in line with our customers’ needs. We are currently in the development phase of milk alternatives. Soon we will offer different varieties of oat, soy, almond, coconut and rice drinks. Our aim is to offer them as certified organic products, with no added sugar and in sustainable packaging.” In Hong Kong, a team of experts from the METRO Food Sourcing unit is also currently developing an alternative fish range for METRO Chef Veggie, fish from the field, so to speak. These products are to be introduced in 2022.

How regional food pays off for restaurateurs

"Great ... simply delicious, regional food," writes Lea in her web review – and gives her favorite restaurant the top rating. Compliments of good quality spread quickly on social media. And it's local food that is winning people over these days. Regional food even has a better image than organic products. This is the result of a recent survey conducted in 2021 that surprised even the makers of the study from Albstadt-Sigmaringen University.

Demand for regional products is growing – and restaurateurs can benefit from this.
Fresher, more aromatic, higher quality and more nutritious: That is how consumers rate regionally grown products according to the German statistics portal Statista. For them, "regional" means rich in flavour and concentrated vitamins from seasonal fruits and vegetables that – harvested when ripe – land on their plates as quickly as possible. Added to this is a reduced carbon footprint. Regionally sourced milk and meat, for example, have much shorter transport distances behind them. In addition, words have since long spread: If you buy local, you support the farmers in your neighborhood. METRO also contributes to this and promotes regional suppliers and products in various countries.

So restaurateurs who rely on regional products score points with their customers in many ways. And they are willing to dig deeper into their wallets for freshly harvested food. 61% of European consumers would be willing to pay more for a regional product. Of these, 65% would accept a price premium of over five percent. This is the result of a survey conducted in 17 countries. Good reasons to find out more about these regional foods.

What does "regional" actually mean for people
First of all, what does "regional" mean anyway? How do consumers actually perceive it? According to the dictionary, it means "characteristic of a particular region." But the answers vary greatly depending on who you ask. People in India may perceive the spice from hundreds of kilometers away as regional because it comes from the same state. In contrast, Italians may no longer consider mozzarella from a neighboring county to be regional.

To find out how consumers define a local product, we surveyed 6,700 participants from 23 countries. The result: sometimes "proximity" refers to the value-added stages in production, for example with the help of traditional recipes or processes, and sometimes it refers to the short distance to the place of origin or sale.

How local food amazes people

Regional cuisine can not only convince, but also amaze. Who would have thought, for example, that quinoa, a superfood from the Andes Mountains in South America, is now also being cultivated in the Rhineland? Or that ginger, which prefers a hot, humid climate, is now also growing in Franconia.
The migrated natural products are referred to as “local exotics.” They have made a current gastronomic trend possible: glocalisation, a combination of globalisation and localisation. Creative chefs combine local food with the sought-after, nowadays regional foods that originally came from far away. The local pumpkin, for example, is paired with Middle Eastern chickpeas to create a sophisticated salad – and thus becomes a seasonal specialty with international flair.

This opens up unimagined possibilities for restaurateurs: Those who refine the traditional with the exotic attract new, often younger target groups. All by itself, an unusual story emerges about where the ingredients come from, how they are produced or prepared. A story that looks good on the menu and is suitable for sharing. So there are different ways of presenting regional food.

Despite all this variety there is only one thing that will ensure people’s continued trust:
Most of all, consumers want transparency – at best, even the ability to trace the origin, path and processing of regional ingredients. When advertising regional food, it is important to avoid inaccurate or confusing claims as well as empty promises. You risk losing people’s trust if cherries are advertised as regional when they have already been transported over 500 kilometers.

Clear and transparent communication, on the other hand, is convincing in the long run. It gives customers the good and safe feeling that they have found the right place for food that meets their expectations.

Why regional products benefit all stakeholders
This is the only way to turn a trend into long-term benefits for everyone along the value chain: For producers, retailers and restaurateurs as well as for consumers.

We at METRO want to contribute to this. As one of the first signatories of the European “Code of Conduct”, our CEO Dr Steffen Greubel has underpinned METRO AG's commitment to building sustainable supply chains and reporting on them transparently. These words are built on actions: Among other things, we support producers of regional products locally – to the benefit of many traditional food products such as the Turkish Kapıdağ onion, honey from Austrian beekeepers, Smilian beans from Bulgaria, wine from the mountains of Moldova, and meat from Boškarin cattle, an old breed that was thus saved from extinction, to name a few examples.

Ambitious goals – such as switching to more regional products – cannot be achieved 100% right away. But by working together we can drive change more easily. That is why we focus on dialogue and cooperation with our customers and partners. A cooperation that secures the trust of consumers in the long term and from which all stakeholders benefit.