METRO Insights - Issue 03 - March 2022

Digital transformation at METRO is picking up speed. Are there any first successes you can tell us about? There sure are. The digital business accounts for about 5% of METRO’s total sales – with strong growth ambitions. This means that the times when we merely talked about digital innovations are long gone: We have fully made our way into daily business. Every day, thousands of customers shop via our online channels and digital is one of the 3 pillars of our multichannel business model and thus a key element of METRO’s growth programme “sCore”.

METRO operates in many countries. How do you manage to get everyone on board when it comes to digital?

We manage the marketplace business across Europe from a dedicated entity created for this specific purpose – using a highly standardised software structure for all regions. In each country there is also a Head of Digital who strongly advocates this topic within the country. Together, they form a cross-country community with a matrix organisation and functionally managed from the headquarters. Customer acquisition and customer contact are 2 examples of digital areas in which we collaborate very closely with the different country organisations. At the same time, we are building a European, cross-national logistics network. In view of this rapid development, however, one thing is particularly important to us: the possibilities offered by digital transformation must reach the minds of every single employee, across all corporate functions and national borders. This is a challenge and an important part of our goal to make METRO an even more digital and data-driven overall organisation.

METRO is continuously creating jobs in the digital field. How do you attract new talents?

Everyone knows METRO. And our digital organisation is growing so fast that it does not have to hide behind aggressively growing start-ups. Hence, we can offer an attractive workplace. However, it is not only important to attract employees, but also to retain them. To do this, you have to give them leeway and thereby ensure that they can develop ownership. At the same time, we also expect every new employee to be a change agent to a certain extent, and to build bridges.

METRO MARKETS – 1 of the 3 entities in METRO’s digital world – has been online for 2 years. How is the marketplace developing?

We have come a long way in a short space of time and now offer more than 600,000 articles – thereby also demonstrating the relevance of our longtail offering. Today, we sell a large number of new brands via METRO MARKETS in Germany from product categories which we did not yet feature in the classic business and which we are continuously expanding. For example, the share of sales from third-party retailers has risen to 40 – 50 % in a brief period of time. At the current growth rate, we will handle a 3-digit significantly growing gross merchandising volume (GMV) via our platform this year.

So, what types of products are new on METRO MARKETS?

Basically, METRO MARKETS offers all types of equipment needed to run a HoReCa business – from kitchen equipment to furnishings for the dining area all the way to articles for the takeout business. In a METRO store, we do not have sufficient space and it only makes economic sense to present products that sell relatively fast. Online, however, we have a much wider range of products. For example, while we offer only the top 20 napkins in our stores, marketplace customers can select from more than 300 napkin products online.

What plans do you have for the marketplace beyond Germany’s borders?

We already went live in Spain and will roll out METRO MARKETS in 2 more countries, Italy and Portugal, in 2022. Our goal is to ambitiously drive the international expansion of our online marketplace with the core of our strategy being a European platform – including an European fulfilment network for the efficient logistics operations so that we can eventually cover the whole of Europe with our product offer.

At a facility several hundred kilometres away from any coastline, parrotfish meet redfish and herrings meet shrimp. In the Hessian district town of Groß-Gerau, a tranquil community located between the cities of Mainz and Darmstadt, you can find a biodiversity of fish delicacies and seafood that has yet to find its match. This is where the heart of the European fresh fish trade pulsates. With commitment and passion, METRO employees handle more than one hundred tonnes of seafood here every day, or about 10,000 tonnes annually. In addition to fish also fresh meat and special fresh food items such as liquid egg are shipped from this logistics hub in all directions to retailers, bulk buyers, restaurants, and hotels. The transhipment centre is unique not only in terms of the quantities of goods handled. METRO also by far exceeds the legal requirements in terms of managing the quality of these sensitive foods. The METRO Communications team was allowed to take a look around the ultra-fresh platform.

Inside the 5,000-square-meter facility where the thermometer never climbs above 2 degrees Celsius, we looked for the answer to the question: Why do so many restaurateurs throughout Germany place their trust in Europe's largest fresh fish trader?

Three success factors for quality

It is still dark outside, but the METRO platform for ultra-fresh fish is already bustling at 5 o'clock in the morning. But what does ‘ultra-fresh’ actually mean? Compared with frozen products or refrigerated foods such as yoghurt or salami, the correct temperature range for handling fresh fish is rather narrow and low: 0 to 2 degrees Celsius. Ensuring a seamless cold chain therefore requires a great logistical effort, demanding hygiene standards, thorough quality controls and people with a lot of experience.

“Our most important success factors are cooling, time and fresh products”, explains Jens Becker, Deputy Operations Manager of the Ultra-fresh Platform Groß-Gerau operated by METRO’s subsidiary METRO LOGISTICS Germany GmbH. Success factor 1: cooling; success factor 2: time. So, what does the journey of fish look like – from catch to plate? Let's take the example of the Loup de Mer or sea bass. Grilled and fragrant with hazelnut butter, it is served to a connoisseur in a restaurant. 72 hours back, it was still swimming in the Atlantic. After being caught at dawn off the Atlantic coast it was bought by METRO at one of the fish auctions in Concarneau, Brittany. At METRO’s Concarneau Trading Office, the experts for fish sourcing operate directly at the source. They preferably buy from petits bateaux, i.e., fishermen with small boats. These cannot stay on the water for more than a day, which ensures social standards and the most careful and sustainable fishing methods possible. After the auction, the sea bass is transported in a specially equipped truck to the ultra-fresh platform in Groß-Gerau where it arrives at around 8 o’clock the next morning but does not stay for long: “Everything that comes in today also goes out again today,” says Jens Becker.

Although there is no sea breeze in Groß-Gerau, our sea bass never sits on dry land. Throughout the entire supply chain, the approximately 300 different fish species and around 1,400 fish products are stored under or on melting ice water. This prevents the fish from drying out, on the one hand, and preserves the protective layer on the other. “This protective layer contains bacteria that produce metabolic products. The melting water has a kind of washing effect,” Becker explains. The fish boxes are provided with holes so that the ice water can run off.

The specialists behind the METRO platform

In addition to an unbroken cold chain, thorough checks ensure quality success factor number 3: freshness. Dr Gabriel Hanne, Head of Quality Assurance at METRO Germany, is very familiar with METRO's high quality requirements. “In the fresh fish segment, we are Number 1 in Europe, not only in terms of volume, but also in terms of quality,” says Hanne. METRO has particularly high requirements for this. The demanding standards “are checked once a year to make sure they are up to date and in addition also if something has happened at a supplier,” continues quality expert Gabriel Hanne.

Specially trained employees conduct the multi-stage quality assurance (QA) testing procedure on site in Groß-Gerau. The 15-member team is responsible for incoming goods, traceability, and quality inspection. Many of them have already been with the company for years and decades.

So how exactly does METRO ensure that fish and seafood arriving at the transhipment facility are really fresh? Quality checking at the ultra-fresh platform starts as soon as the goods are received. First, the METRO LOGISTICS employees verify whether the refrigeration regulations have been complied with in the transport vehicle. The goods are accepted conditionally so that the supplier does not have to wait for the entire inspection process to be completed and can transport goods to other customers. METRO employees scan the labels on the crates and use a traceability database to verify whether the information about the origin is credible. Jens Becker: “At every point in the trade chain, it must be immediately identifiable when and where the fish was caught, by whom and how.” With the METRO app PROTRACE, METRO's professional customers and even their customers in the restaurants can seamlessly trace where the fish comes from that ends up on their plate.

Tested to the heart and gills

Once the formal part of the inspections is complete, the sensory inspection follows — an intensive quality check that METRO prescribes which goes over and above the legal requirements. In a particularly brightly lit room, quality inspector Jousef Chaib is holding one of the delivered sea bass. “Jousef knows every fish, and every fish knows Jousef,” Jens Becker says of the expert who has been working in Groß-Gerau for more than 25 years already. The computer system has previously determined from which box the fish to be inspected is to come – this guarantees a broad coverage of random samples. The perch in the quality inspector's hand remains stiff without sagging. A good sign: “The more stress-free and gently a fish is caught, the more pronounced the rigor mortis. And the more pronounced the rigor, the longer it stays fresh,” explains expert Becker.

Jousef Chaib uses all his senses for the next check. Jens Becker: “Our specialists can tell if the fish is fresh by using their nose, ears, eyes and touch.” Red gills, for example, indicate freshness. While Chaib checks the sea bass for gill crabs, the colleague next to him puts cod fillets on a light table to ensure that they are not infested with nematodes, small parasites. The result: everything is perfect.

Every week, random samples are taken to a laboratory where additional tests are carried out – for example, to check whether the legal limits for heavy metals, medicines and other additives have been complied with.

“Freshly tested to the heart and gills”, as Becker says, our sea bass now proceeds to picking. It is then transported overnight to the METRO store. By 5 a.m. at the latest, all orders have been delivered – including the sea bass. “For us, nobody calls it a day until all work has been completed and every conceivable problem has been solved,” says Becker. It helps that in the well-coordinated team every move, every step is perfectly orchestrated.

Another working day comes to an end at the METRO ultra-fresh platform. By 8 p.m. at the latest, everything is sparkling clean, and no trace is left of the hundred tonnes of delicacies from the sea that have been processed. A brief period of rest – until the heart of Europe's fish trade specialist awakens to new life at 5 a.m. the next morning.

The Food Service Distribution (FSD) business is a proven growth driver for METRO with a total of €4.2 billion in sales in financial year 2020/21. The delivery of food and co. saves the professional gastronomy industry time, and bundled delivery routes are more environmentally friendly than individual journeys to and from the market. However, gastronomes are not only supplied from currently 671 METRO stores and 66 depots worldwide but also from meanwhile 5 specialised FSD companies that belong to METRO – who generated about ¼ of the sales in the FSD business in the previous financial year. Time for a look behind the scenes: Who are our FSD companies?

The Specialists

The finest truffles, unique meat, fish and seafood specialities, exquisite patisserie and culinary delicacies with rarity value. Rungis Express is the German gourmet food specialist under the METRO umbrella. The company, headquartered in Meckenheim, sources exquisite specialities from 80 countries worldwide for delivery to restaurants and hotels in Germany, Austria and Switzerland. The company's history began in 1978 at the market halls in Paris where selected specialities were purchased and brought to restaurateurs in Germany as quickly as possible. Today, the company employs around 700 people and delivers to over 3,000 professional customers from the HoReCa sector (hotels, restaurants, catering). It has been part of METRO since 2016. Kai D. Schneider, CEO Rungis express GmbH: “At RUNGIS express, our heart beats for uncompromising quality, first-class products and the best possible service! With our feelers on the market and our ear to the customer, we sense the trends that move the industry and fulfil even the most individual customer needs – because their success is our daily incentive! The last few months have been tough for all of us, but we have made the best possible use of the time. The result: a bundle of exciting new projects that will open up new markets and drive our business forward.”

The Daring

Also, at the highest culinary level, Classic Fine Foods (CFF) supplies over 12,000 HoReCa customers in the UK, Asia and the United Arab Emirates. The Hong Kong-based company, which was founded in 2000 and has been part of the METRO family since 2015, has around 1,000 employees. In addition to exquisite delicacies, CFF's product portfolio also includes absolute “novel food”. For example, plant-based meat and fish alternatives that star chefs and high-end restaurants are increasingly integrating into their menus. In CFF's own “Taste Lab” in Singapore, CFF head chef Jose Luis Del Amo supports the fine food specialist's customers in creating new, delicious dishes with innovative products such as TiNDLE. Christophe Barret, CEO Classic Fine Foods: “We want to become the partner of choice for the best alternative protein brands, and to be recognized as a trailblazer, introducing breakthrough innovations to our customers. We currently distribute 11 plant-based brands and we look with interest towards fermentation and cultivated meat technology. A growing number of Food Service operators are integrating sustainable products into their menus and we expect alternative proteins to account for about 10% of our business by 2025.”

The Tourist Hotel Experts

“Keep it cool” is the motto of Pro a Pro Spain (formerly Davigel España), an expert in supplying tourist hotels and restaurants on the Balearic and Canary Islands and the most paradisiacal places of the Spanish coast. Most of the products Pro a Pro Spain delivers to its main customer group are frozen – a logistical feat, especially during the hot summer months. The company only joined the METRO portfolio in 2020 but looks back on a long and successful company history. Founded in 1988, today over 90 employees work for the highly specialised FSD company and its approximately 4,000 professional customers. Josep Guap, CEO Pro a Pro Spain: “We are pleased to serve our customers with strong intimacy and advising chefs into their kitchen operations. We have an innovative portfolio of added value products, most of them with high degree of elaboration, that become a real solution for kitchen efficiency and customer satisfaction, by increasing offer quality and variety, with full control of cost and waste. We are especially strong in serving hotel chains since we are the unique supplier to deliver all touristic areas with the same high level of service.”

The Experienced

From one holiday region to the next. Among the destinations we long for, the beaches of Portugal rank high. The South-European country is home to the FSD experts of Aviludo, a company founded in 1984. The supplier for independent restaurants and hotels, which has been part of METRO since 2021, has been continuously expanding its network in the country on the Atlantic for more than 3 decades. The Portuguese market leader employs over 900 people and reliably supplies more than 13,000 professional customers from the independent hotel and restaurant industry to institutions, wholesalers, butchers and retail. Rui Mendonça, CEO of Aviludo: “Our vision since day 1 is to be the reference partner for all professionals in the food sector. With 9 facilities from south to north of the country, we assure service and proximity to our customer with 138 sales reps supported with 140 delivery routes on a daily basis. We manage more than 3,500 products, selected through a rigorous evaluation, including 2 own brands (ULI and BESTFOOD). Since 2005, we have additionally specialised in fresh meat processing. We are proud of our people, united through a customer centric mindset and committed to be the best solution provider to all our customers.”

The Generalists

With around 2,400 employees and more than 40,000 customers, the French company Pro à Pro is the largest FSD specialist under the METRO umbrella – and the leading food delivery company in France. With its focus on catering for health care and educational institutions as well as company canteens, Pro à Pro is more broadly positioned than the other FSD companies in the METRO family. Founded in 2001, the company with headquarters near Toulouse was acquired by METRO in 2017. The company's strength is efficient logistics. 22 logistics warehouses are spread throughout France, 5 of them on the French islands of Martinique, Guadeloupe, Guyana, La Reunion and Mayotte. Over 535 drivers make an average of more than 1.5 million deliveries a year. Guillaume Deruyter, Executive Vice President of METRO AG and CEO Pro à Pro ad interim: “Delivering flawless customer service has always been our motto and remained a daily obsession throughout the pandemic in order to provide the best solutions in a challenging context. As 2022 begins, we’re accelerating the strategic transformation we initiated a few years ago, continuously striving to enhance our customer’s experience and optimizing our route to market. By meeting tomorrow’s consumer challenges and remaining faithful to our core values, we believe we will further strengthen our position as a leading and preferred food service partner.”

Growing with FSD

Food Service Distribution to professional customers is a key driver of METRO's growth strategy. For restaurateurs, who are now increasingly struggling with labour shortage due to lockdowns and restrictions, delivery saves time and allows them to continue to operate their kitchens to a high standard. “Our FSD businesses are completely different in their set-up. From absolutely unique gourmet ranges for high-end restaurants to supplying large community facilities. This means different challenges, but also valuable diversification. We intend to further expand our portfolio in this respect, because we believe that food service distribution is not only an important lever of our growth strategy, but also determines the future of the relationship with our professional customers,” says Michael Poggenpohl, Vice President FSD Portfolio Management METRO AG. “‘Time is money’ is and will remain the dominant mindset in the gastronomy industry, which is suffering from a shortage of skilled workers. As a partner to our customers, we will find ways to support them so that they can continue to run their businesses with passion.”

METRO's growth strategy

FSD impact assessment

“Doing wholesale right” is the key to our growth strategy “sCore”. Conversely, it also means growing responsibly. To this end, we are pushing our efforts in the areas of climate protection, reduction of plastic and food waste as well as an increasingly sustainable assortment. We were asked whether there was a conflict of objectives between more climate protection and a greater focus on food service distribution. The answer is “no”. We have even calculated this concretely. In an impact assessment, we compared the economic, ecological, and social effects of our growing Food Service Distribution (FSD) business with the bricks-and-mortar business in our stores. The sustainability balance showed that, compared to our conventional store business, FSD generates additional positive effects on customers, society, and the environment in the amount of EUR 68 per EUR 1,000 of sales volume – with an upward trend. How is this possible? Delivering merchandise directly to our customers in vehicles equipped for this purpose not only saves them valuable time, but it also means that transport routes are efficiently combined, and cold chains are not interrupted. In one delivery tour, for example, we can cater to 15 hotels and restaurants in the city district of Berlin-Mitte. Hence, the owners of these 15 hotels and restaurants do not have to send their staff to shop at the wholesale store – resulting in fewer cars on the roads, less exhaust fumes and safer cold chains which in turn also reduces food waste. The businesses in question thus have more time to focus on the essential: time for new creations, time for cooking, time for their guests!

This is what we will achieve with “sCore”: Not only do we focus on our core competencies, but we also enable our customers to concentrate on what matters in their business. However, growth in the twenties of the 21st century is only possible if it is sustainable. With this in mind, we are also doing everything we can to ensure that our product range becomes increasingly sustainable. Our claim is that our customers do not have to ask themselves when shopping, be it online or in our stores, whether a product is sustainable or not – because we have already done this job for them. In this respect, we are working hard on this claim. As part of our Health & Nutrition Strategy, we reformulate products so that they are healthier thanks to less salt and sugar, no trans fatty acids and additives. We list plant-based alternatives alongside conventional products to show the growing choice available. And we engage with our suppliers to help them reduce their respective environmental footprint, because it is a fact that a large part of a grocer’s carbon emissions originates from the upstream supply chain. For us, this is not a blank check, but a call to take responsibility. Only together can we meet the challenges that lie ahead. In the field of food waste, we are therefore engaging with more than 30 of our suppliers as part of the 10x20x30 Initiative to identify, and then eliminate, the production-side reasons for food waste. With regard to greenhouse gas emissions, in 2019 we became the first German trade company to commit to reducing the so-called scope 3 emissions in the upstream supply chain by 15% by 2030 as part of the recognition of our climate protection target by the Science Based Target Initiative (SBTi). To achieve this, we are cooperating with the CDP Supply Chain Programme Climate. In 2020 alone, 120 of our suppliers measured their greenhouse gas emissions for the first time as part of this programme – an eye-opening, but also an empowering process for many of them because with that realization also comes the chance to sustainably change processes for the better. For this engagement with our suppliers, we were officially included in the CDP Supplier Engagement Leaderboard 2021 in February based on the climate assessment of the Carbon Disclosure Project (CDP) for the year 2021. With our commitment to address climate change also through engaging our suppliers, we have qualified as a Supplier Engagement Leader.