Currently, a climate of change is prevailing in the German food trade. The market has been stirred up through mergers and takeovers.

The German discounters seem to be looking for new strategies. The market leaders Aldi and Lidl are facing a new competitor. The takeover of controlling interest of the discounter Plus through Edeka marks the beginning of the creation of the third largest low-cost supplier on the German market. Tengelmann Group, which is still holding a minority interest of the discounter Plus, is merging in the discount segment with Edeka and its subsidiary Netto. With a network of 4,000 branches and a turnover of approximately € 11 billion, this is going to be the third-largest discounter after Aldi and Lidl.

This development clearly shows that in the future supermarkets are going to try to gain ground in the segment of discounters. In the long-run with this merger, Edeka and Tengelmann are trying to secure a stable market share, especially in the face of an almost reached limit on the branch network and an almost exhausted potential for growth in this market, which is not going to allow for any big changes of the market share of market leaders.

The new ‘market giant’ is surely going to increase competition on the market and the discounters are going to reflect on their core competencies and present a growing variety of offers and try to distinguish themselves via price.

However, distinct changes are not only taking place in the segment of discounters. Supermarkets are also changing their strategic directions. More and more, supermarkets are trying to distance themselves from their discounter competition, in order to counteract the 42% market share discounters now own in the German food trade. Supermarkets are also rethinking their core competencies and emulate the strategies of discounters a little less. The supply of non-food goods and low-cost products is currently distinctly reduced, while the offers of the fresh market, organic foods and convenience assortments have increased strongly.

Supermarkets want to offer products of a higher value and quality, which are more expensive, though. They would like to absorb the falling sales volume caused by the growth of discounters through generating above average margins. In addition it has become visible that after years of aggressive growth strategies the consumer is taking center stage again. Even though there appears to be no end to cheap prices, there are more and more consumers now who pay attention especially to quality when shopping and who are willing to pay a higher price, correlating to the quality of the product.

Is a renaissance of the supermarket becoming apparent?

It seems like supermarkets are increasingly remembering their core competencies. And they seem to want to try and offer products of a higher quality within the food trade, which are satisfying the wants of consumers. This is supposed to more clearly distinguish them from discounters, which, more or less, play an important role when it comes to satisfying consumer needs. At the same time this is supposed to create more competitiveness. A consequent pursuit of this strategy accounts for a growing polarization of the market and creates a better balance of the forces on the market itself.

Medium term it is to be expected that the market is heading for a better economic equilibrium, as supermarkets and discounters and their segment positioning are more distinguishable from each other. Supermarkets are going to position themselves increasingly in the premium segment and premium economy segment of the market, while discounters are going to expand their position in the economy segment.

The long-term development of the market depends greatly on the reaction of discounters on this development and so it remains to be seen, if supermarkets and discounters are going to find back to their core business through this renaissance and if they are going to be able to operate strengthened on the market.