Schlecker is further strengthening its pole position in EU drug store retailing by buying its German competitor. By retaining the more upmarket Ihr Platz brand and focusing on a two-brand strategy, Schlecker is making the right move in Germany's tough and increasingly polarized retail environment.
Ihr Platz is currently trading from 700 outlets, mainly located in the northern regions of Germany, and has 7,000 employees. In 2005, the business went into administration and was rescued by its main creditor Goldman Sachs. After refocusing the business, a process that according to the Bank finished in September 2006, Goldman Sachs and investor Fortress are set to reap the rewards by selling the business to Germany's and Europe's market leader, the family controlled, discount operator Schlecker, for an undisclosed fee.
In 2000, Ihr Platz started to suffer from heavy sales declines, eventually culminating in the restructuring process and insolvency in June 2005. As part of the restructuring process, 80 loss-making outlets were closed, the supply chain was modernized and administrative costs slashed, while 700 jobs were lost. Goldman Sachs revamped Ihr Platz's store concept and focused ranges on health & wellness and beauty. By serving currently buoyant consumer trends, sales rose by over 20% in the revamped stores.
Schlecker is trading from a 14,000-strong store portfolio across Europe. Of these, 10,800 of these stores are located in Germany and a further 3,200 in other EU countries. This latest acquisition is another significant strengthening of Schlecker's already dominant position in German health & beauty retailing.
The Ihr Platz brand will be retained and positioned as an upmarket operation trading alongside Schlecker's discount stores. As retailing as a whole is characterized by a process of polarization, covering both strongly performing ends of the market makes eminent sense. As the undifferentiated middle market gets eroded, Schlecker will serve both ends of the evolving consumer base. This is a popular move with discount oriented retailers at the moment; only last year the DIY discount operator Praktiker bought the premium Max Bahr chain, following the same strategy.
Moreover, with its massive store portfolio Schlecker has reached market saturation in Germany, and building a second brand targeting the more upmarket consumer is the right strategy. Looking ahead, expected pharmacy market liberalization in Germany could open another growth opportunity; as such, the outlook for Schlecker is undoubtedly bright.
Source: Verdict Research