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Rewe boss warns against expensive groceries

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Lionel Souque is a friend of clear words – even when it comes to rising food prices. “It’s total nonsense to believe that we can pass everything on to the last person,” said the head of the retail and tourism group Rewe on Tuesday in Cologne. “Who is going to pay for that?” asks the Frenchman, referring to the concerns of many Germans who, given rising energy and food prices, have less and less money to live on.

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These are unfamiliar tones in an industry that has been preparing consumers for weeks for ever new waves of food price increases. Aldi raised the prices for numerous products again on Monday, for the third time in four weeks.

Dairy products and crisps in particular are becoming more expensive

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Butter, yoghurt, milk, crisps and coffee in particular have become more expensive. Edeka and Lidl have also increased their prices. Despite rising raw material and energy prices, Souque does not believe that this is automatic: Above all, he does not want to accept the price expectations of the large multinational listed companies without a fight. Not every claim is justified, says the CEO.

The price negotiations are tough. The buyers on the Rewe side want to know from the suppliers what they have done to keep costs down. Have you contractually secured comparatively low prices for energy and raw materials in the long term, or are you buying in the short term at the currently poor conditions?

Rewe itself is reducing its energy costs by investing in an offshore wind farm in the North Sea and setting energy prices with the operators for ten years. Since 2008, the stores have only been working with green electricity anyway.

Despite tough negotiations with suppliers, Rewe has also raised prices for dairy products, coffee and pasta. However, the increases have been lower than actually necessary, says Souque – at the expense of its own profit margin. A three-digit million amount was waived in order to limit the price surcharges. “We earned enough last year,” admits the Rewe boss.

Group sales from continuing operations increased by 2.5 percent to EUR 76.5 billion in 2021. In the supermarket business in Germany, sales – excluding the income from independent retailers – increased by 0.9 percent to 26.7 billion euros, the discount subsidiary Penny remained at the previous year’s level with sales of eight billion euros in Germany.

The group posted significant gains in profits. Operating earnings before interest, taxes, depreciation and amortization grew by 22 percent to 1.49 billion euros, the bottom line was 756 million euros in the cash register – an increase of 82 percent.

Rewe compares itself with Aldi

Souque doesn’t believe that concerns about expensive groceries are driving people to the discounters. The Rewe supermarkets are now selling 800 products from the cheap line “Ja” at discounter level. The competitors from Cologne always keep an eye on Aldi’s pricing policy, even for branded items. The claim: “Everyone can buy just as cheaply from Rewe as from Aldi,” says Souque.

The Frenchman has no understanding for hamster purchases. “If everyone buys sensibly, there is enough there,” he emphasizes – and expressly includes the largely sold-out sunflower oil. The CEO reports that there are no bottlenecks in France, Poland or Spain.

Even before Russia attacked Ukraine, Rewe had withdrawn from the stores. In 2020, the group sold its 32 stores in Ukraine, and the following year its 161 stores in Russia. They wanted to withdraw from the politically and economically difficult countries, reports Souque and is now happy about this step: “In retrospect, you have to say that those were damn good decisions, even with a bit of luck.”

The travel business is recovering

So far, the tourism business has not been affected by the war, emphasizes Sören Hartmann, head of the group’s travel division (DER, Jahn Reisen, ITS).

Although there was a certain reluctance to make bookings in the first week of the war, last week bookings were again 30 percent higher than the corresponding period from the pre-corona year 2019. After two years of heavy losses, Hartmann expects to be in the black this year and that summer business will return to 80 percent of a normal summer.

Because of the rising prices for fuel, the manager expects that travelers could face a kerosene surcharge again. On medium-haul routes, customers would probably accept a surcharge of 50 euros. If you want to avoid this, you shouldn’t wait too long: “If you book quickly, you can still get away with the old kerosene prices.”

Source: Tagesspiegel

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