Migros boss is ready to repel boarders

Scherrer says Migros is ready for a fair fight Keystone

The outgoing boss of Switzerland’s largest retail group is confident that Migros can fend off the challenge from cut-price German discounters Aldi and Lidl.

In an interview with swissinfo, Anton Scherrer says Migros has no plans to change its strategy, and denies that further cost-cutting would be at the expense of employees.

Scherrer, who retires as president of the general management team this year, was speaking after he presented the group’s annual results in Zurich.

2004 was one of the best years ever for Migros, with profit, revenue and market share all up – in marked contrast to the picture at main rival Coop.

However, observers say the real battle is only just beginning, as Aldi and Lidl – which have taken the German market by storm – gear up to invade Switzerland.

swissinfo: You have a good year behind you, but now the competition is heating up. Are you getting out at the right time?

Anton Scherrer: They are coming at a good time for us. We are profitable and well prepared for this type of challenge. Naturally, we take such competition seriously, but I think we are well placed to fend it off.

swissinfo: Who will be your main competitor in future – Coop or the discounters?

A.S.: We will have to see how things develop. Our main current competitor in Switzerland is large, solid and plays a significant role in this market. As for us, we have a clear supermarket user strategy, and this will continue in the future environment. There are now new competitors on the way, and we are obviously planning some market-level measures in response. But we are not changing our strategy because of them.

swissinfo: How much further will prices now have to drop – and how far can you afford to drop them?

A.S.: That always depends on the environment, including our options when it comes to supply of goods. As far as Swiss agriculture is concerned, we have a basic principle, which is that price decreases are also passed on [to suppliers]. If necessary, supposing a fight breaks out in certain product areas, they will also have to participate in this fight.

swissinfo: Will you be able to cut costs without doing so at the expense of your staff, in the shape of job cuts and salary reductions?

A.S.: That is a recurring question. A smart entrepreneur doesn’t push salaries down – that is not a forward-looking approach. If you do that, your people will abandon you sooner or later. The right approach is to manage the margins. If they get narrower, then you must decide what your next step will be, and you must choose the options that deliver increased efficiency. And, of course, you must try to continue to grow.

swissinfo: You also have plans to expand abroad. At the moment, though, many Swiss prefer to shop in neighbouring countries, because of price differences. Why would French, Germans or Italians want to shop at Migros?

A.S.: We know that many already like to do so. We are in demand, as we see from our experience with our first stores just across the border [from Geneva and Basel]. However, the preconditions must be right, and we do still have some handicaps, for instance high customs duties. But these will disappear with time, and I am convinced that this strategy is the right one. How fast we continue will depend largely on progress in market liberalisation.

swissinfo: A key element of your strategy is the idea of “everything under one roof”. But two things are still absent – alcohol and tobacco. Will that change?

A.S.: That is not currently an issue. In some larger branches or centres, there are other tenants who sell tobacco or alcohol, but we are not currently planning to sell them ourselves. I would not exclude it for the future, but more as a [possible reaction] to customer demand, and that is not currently the case. Of course, it depends who you ask. My son, for instance, cannot understand why we don’t sell them, but when I talk to mothers whose children are approaching smoking age, then the answer tends to be: please keep Migros the way it is.

swissinfo: You have already made some efforts to restructure Migros. Do you think it will remain a cooperative in the current sense?

A.S.: That is also not a current issue – Migros will remain a federation. However, we will see to what extent it needs further structural changes. We have already made some changes; we had two mergers in the last year or so, and there were others before that. We have also introduced corporate governance measures and made considerable progress in that direction, but the process is not yet over.

swissinfo–interview: Chris Lewis in Zurich

Key facts

Migros, a national federation of regional cooperatives, dominates the Swiss retail scene along with market number two Coop.
Its 2004 results clearly demonstrated its growing lead over Coop, but the bigger threat could now come from German discount stores.
A recent study showed that even discounted articles at Migros cost up to 74% more than at Aldi.

In brief

Scherrer says Migros is ready for the coming price war, but warns that cuts will also be “passed on” to suppliers – though hopefully not to employees.

The group is also looking for growth opportunities, including expansion into neighbouring markets.

Scherrer says any future decision to sell tobacco or alcohol would have to be based on genuine demand.