Swiss retail market consolidates

Denner, best known for its sales of alcohol and cigarettes, is now mostly in the hands of Migros Keystone

Switzerland's largest retailer, Migros, has purchased a majority stake in the country's third largest food chain, Denner.

At a news conference on Friday, Migros announced it would take over 70 per cent of the discount chain’s shares, at an undisclosed price.

The other 30 per cent will be retained by Gaydoul Holding, owned by the family of Denner CEO, Philippe Gaydoul.

Gaydoul will remain operative head of the retailer for at least another three years, ensuring, according to a statement, that Denner retains its identity. The companies also said all of Denner’s 3,500 employees would keep their jobs.

Both companies said the deal would secure the long-term future of the discount chain at a time of increased competitiveness since the arrival of foreign retailers in the Swiss market, such as Germany’s Aldi, and France’s Carrefour.

“As a successful food discounter and goods retailer, [Denner] perfectly complements Migros,” said Migros head, Herbert Bolliger.

“This merger is a very promising Swiss answer to the increasingly fierce competition from abroad.”

The companies said Denner was not big enough to compete on price with the foreign competition.

They said Denner, as a subsidiary of the Migros group, would now be able to profit from better purchasing conditions, passing the benefits on to consumers in the form of lower prices.

Win-win situation

Marco Strittmatter, retail analyst at the Zurich Cantonal Bank agreed, telling swissinfo it was a win-win situation for both companies, and would not affect Swiss consumers in the near future.

“Denner will remain Denner, Migros will remain Migros,” Strittmatter said. “But Aldi and Lidl will have more difficulty getting into the Swiss market than they would have had without the deal.”

Strittmatter believes there is still plenty of room for growth at the discount end of the market, which makes the buyout an extremely good one for Migros.

“Discount stores only account for around four or five per cent of retail sales in Switzerland, whereas the figure is about 40 per cent in Germany.”

The largest Swiss trade union, Unia, welcomed the fact that Denner was not sold to a foreign company, saying working conditions at non-Swiss retailers could not compare with those offered by Migros.

But Unia, along with another union, Syna, called on Migros to live up to its promise not to lay off workers.

The unions said they feared Migros could integrate a significant part of Denner’s supply chain and close two of Denner’s warehouses, which would lead to job losses.

swissinfo with agencies

Key facts

The two giants, Migros and Coop, dominate the Swiss retail industry with 30 per cent market share.
For the food and drinks sector alone – excluding independent distributors – their market share jumps to 70 per cent.
The retail sector generates SFr75 billion of added value, or 16 per cent of GDP.
Retailers employ more than 800,000 people, who earn an average of SFr49,000 a year.
The percentage of women, part-time workers and trainees in the retail sector is very high.