March 7, 2007
Hans-Joachim Körber

Ipek Cem recently met with Dr. Joachim Körber, Chairman and C.E.O. of the Metro Group to discuss the latest trends in retailing and food safety as well as to evaluate the relations between Turkey and Europe.

Ipek Cem: Our guest today is Dr. Hans-Joachim Körber. He is the Chairman and CEO of the Metro Group. Welcome to Global Leaders.

 

Hans-Joachim Körber: Thank you.

 

Ipek Cem: Basically, the retail industry is one of the most dynamic and very high impact industries in the world, and it is also highly competitive. I want to start with some of the new trends in the retail sector. What are some of the trends you are following globally? What are some of the new findings that you are getting from your research about consumer preferences?

 

Hans-Joachim Körber: First of all, I mean, retail business starts to be international. This is the trend of the last fifteen years. On the other side there is not a global business. So if you take the twenty biggest retailers of the world, their market share is 13%. So it is a long way to be a global business. That's why we talk about an “international” business. And we have also a trend in technology, so we will see a big change in the retail industry over the next ten years, and it's based on radio frequency. And of course internationalisation means also a higher exchange of products. So if we are in a country like Turkey, of course, we import also products out of Turkey, we import products out of Russia, out of China, because we are doing business in these countries.

 

Ipek Cem: I was reading in some of your speeches, the concept of “organised retail”, which is actually the business which you are in, versus what you have mentioned which now has the larger proportion which is probably local, smaller chains and outlets. The trend that I am seeing is large global companies getting more organised, becoming more international. At the same time do you see any local companies arising from either emerging markets, or developed markets, new outlets that are challenging the top five ten large corporations?

 

Hans-Joachim Körber: Well, I mean, if you take a mature country like Germany, you have big retailers, you have small retailers, you have franchise concepts, you have new concepts. So I think the retail industry is one of the few industries where you have big and small companies serving customers. I think what is most important is that you find your niche, that you find your competence… not try to serve everybody. Try to find your customers and serve them as best you can, and then you can exist even with big companies.

 

Ipek Cem: When you became Chairman and CEO of Metro, it wasn't as international a group as it is right now. And when we look at the numbers, when we look at the trends, we see that global stores are now a large portion of your growth. How do you see this trend growing? Which specific markets are your biggest winners?

 

Hans-Joachim Körber: Now when I took over, our foreign share was 5%. Last year, we already published the figures, the turnover figures, it was 56. So in a decade, we moved from a national retailer to an international retailer. So what was the driving force? I think the driving force was the fall of the Iron Curtain, because in Eastern Europe there was no modern mass distribution at all. There was a state owned distribution system which broke down, and this was a huge opportunity for retailers like Metro, but also for others, so we started Poland, Czech Republic, Hungary… and all of these markets were closed before the fall of the Iron Curtain. So we moved east, and it's still …

 

Ipek Cem: …moving east.

 

Hans-Joachim Körber: Yes, still our biggest growth potential is Eastern Europe. We started Russia in 2001. China opened up in the middle of the 90s. Vietnam opened up at the beginning of this year. India is still a closed market. So the growth potential is east, and it's now China, it's now India, we are going to Pakistan, but we also remember was the fall of the Iron Curtain, because this was the starting point.

 

Ipek Cem: Now you have been active in Turkey since the 90s, and we know that you are growing in Turkey. You are also very active as a group, and individually you are on the Investment Advisory Board of the Turkish Government. So I want to ask you: since your first presence in Turkey compared to now, the developments in Turkey. How do you see the investment environment progressing?

 

Hans-Joachim Körber: I am personally been involved in Turkey since the late 80s. We opened our first Cash & Carry store in Istanbul in 1990, and it was a very difficult country. High inflation; every three, four years, a currency crisis. So we were not very happy with our investment in the 90s. It changed totally with the new Government, with the reforms, with the discussion about the accession to the EU. Today we have a very investor friendly environment. We have a more or less stable currency, and we have a prosperous economy, and we are benefiting from it. So today, Turkey is one of our investment priorities, and it's still not an easy country, but it's a young population. It's increasing demand. It's a developing economy, and today we feel very comfortable that we stayed in Turkey.

 

Ipek Cem: When you compare Turkey to some of the other emerging Europe countries, which have already gained accession to the EU, what are some of the investment attributes that could be improved in Turkey?

 

Hans-Joachim Körber: Actually if you are looking to Turkey, availability of real estate is an issue. Real estate is extremely expensive if I compare to Eastern Europe. Licensing, in our business, is still an issue. So it takes quite a while, if you have a plot, to create a store, to get the licenses. It is getting better, but it still takes a lot of time.

 

Ipek Cem: How are training of local personnel for your stores? Do you have, like, international guidelines you follow? Is it difficult to find the qualified labour?

 

Hans-Joachim Körber: No. I mean our policy is that we hire local people. So our country manager in our Cash & Carry business is a Turkish manager. Most of the staff are Turkish people. So we have international training centres: one is in Paris; one is in Dusseldorf; one is in Moscow: one is in Shang Hai. So we train our people so they are part of an international company that can make careers. I think we have 10 Turkish managers are serving now internationally in our group, and we have very qualified, very motivated, very dedicated people.

 

Ipek Cem: 2006 was a very good year for your group. The results were just announced. And one of the developments that caught my eye was the fact that, in Germany, you acquired 85 Wal-Mart stores, and as we all know Wal-Mart is the world leader in your industry. And I thought that it was kind of interesting that in your turf, Germany, you made this acquisition. How did this come about?

 

Hans-Joachim Körber: I think that most of the international retailers started internationalisation somewhere in the mid 90s. So, if you see Wal-Mart up to 1995, it was a pure American player with one participation in Mexico. So then they start internationalisation, and one of the target countries was Germany. And they failed. So if I am proud about something, then it's our international culture. So we have learned to adapt our concepts to the local needs. If we are in Turkey: we have to serve Turkish customers. If we are in Russia: we have to serve Russian customers. And if you fail in adapting your concepts to the local needs, then you have a problem. So Wal-Mart started in 96, in Germany, and they never came on their feet. So finally, I mean, we took it over.

 

Ipek Cem: Germans are known to be very “picky” consumers, comparing prices and being very thrifty. Is that one of the reasons, do you think?

 

Hans-Joachim Körber: Yes and no. I think if you go into a country, and what you have to know in Germany, if you see the food retail business, 43% is done today by discounters. So Germans are very focused on prices. They know the prices. If you want to have a success hers, I mean, you have to deliver what Germans expect. Otherwise you can't be successful. On the other side being successful in this environment gives us a great push in the internationalisation. So we have very lean systems. We are very cost conscious. So if we, in other countries, meet with other, and compete with other international retailers, we have an advantage, because we have the leanest, most cost conscious systems in place.

 

Ipek Cem: I know that periodically you are doing a consumer preferences report, particularly focusing on EU countries. And in the report you find about different preferences of consumers, and they all have cultural differences. Do you envision that you will, enlarge this report to include such countries like Turkey and other markets? Because I think it would be very interesting to see the differences.

 

Hans-Joachim Körber: Yes, I mean, it was a survey we started in seven countries, and it was published in October. So we try to find out what are the differences in consumer habits in different countries. So, we can enlarge it to Turkey, maybe next time we include Turkey. And there were some surprising results. A lot of commonalities between the different countries, but for example surprising for us is: if you ask Germans whether they are satisfied with their circumstances, 69%, the highest scoring in Europe answer “yes”. If you ask them whether this is also for their future, whether they look optimistic in their future, the lowest scoring in Europe – 9%.So the Germans are well off with their circumstances, living circumstances, but they are pessimistic about their future.

 

Ipek Cem: Interesting.

 

Hans-Joachim Körber: It is really interesting. On the other side, the UK, they are much more optimistic, because I think they have learned their lesson that there is not one job in your life. That you have to change jobs. So I think it boils down to the problem that the Germans have to learn to live with change.

 

Ipek Cem: Yes. And talking about change, we know about your support for the Turkish accession. And you have visited Turkey on many occasions, and most recently it was in October. Your visit coincided with the visit of Chancellor Merkel in Turkey. Right now, Germany at the helm of the European Presidency. What do you feel about Chancellor Merkel's support for Turkey's full membership in the EU?

 

Hans-Joachim Körber: I mean, as a Chancellor, and she has made it quite clear she is supporting it, because it is based on the decisions EU made in the 60s.

 

Ipek Cem: Yes, we know that.

 

Hans-Joachim Körber: So I think it is nothing new. It is based on the decisions and you, Turkey met the Copenhagen criteria. And therefore I think it is an on-going process. As the leader of the Christian Democratic Party in Germany, she has a slightly different view on it. I mean we are strong supporters. And if you see how much Turkey has changed over the last 3, 4, 5 years, I think, and they continue with their reforms, I think they deserve to be a full member of the EU. On the other side, I think, what is a little bit difficult for Turkish people, because they are so emotional, is that they have to respect that there are different views on it. So if you take all the elections about the EU accession, it was never above 60%, which on the other side means that 40% of the population were against it. So there will never be a unanimous vote about the accession of Turkey: so Turkey has to fight, and they have to look for supporters, and my recommendation is that we always have to find ways that Europeans learn more about Turkey, because most of the people have not an idea about Turkey. And that's a problem also with Eastern Europe. I mean if you today see Ukraine: if you today see Russia… and I'm travelling a lot in these countries… people don't know. So the disadvantage of the Iron Curtain is that, take Eastern Europe, is that there was no education… nearly no education on Eastern Europe. So people don't know, and the same, I think, is also with Turkey. Germans have only the minor Turkish population in mind which lives in Germany. So I think Turkey is a divided country. Turkey itself is a divided country. Half of the population is living in Western Europe. If you see Istanbul; if you see Ankara, if you see Izmir, the other half has a long way to go. The same with the Turkish population here. We have 2.3 – 2.4 million Turks living in Germany one half is fully integrated. We have 64,000 Turkish enterprises in Germany, and the other half is still not speaking German. It is not integrated. That's why I think both your Chancellor, and our Chancellor pushed and tried to find ways how we can integrate this other half of Turks. Because they are image building????? So I am quite optimistic, because it's a way we have to go together. It's not a decision now, it's a way.

 

Ipek Cem: Basically, I am taking from this that you are optimistic, but at the same time you feel there is more progress to be worked on, from both sides.

 

Hans-Joachim Körber: Yes, I think Turkey is making progress, there's no doubt about it, and also here, one of the problems in Western Europe today is that we don't have a feeling for speed. For speed of change. Because, we are a very undynamic, we are a very stable society. So if you look today how fast Turkey has changed, if you look today to China, if you look to India, how fast they are catching up. Our problem, the Western European problem is: we are looking at the problem in a static manner but I mean, you know, living in Turkey, how much Turkey has changed. So, I think, if you look 10 years down the road, we will see a totally different Turkey. And maybe one day the political environment in the Middle East will also be different. Maybe one day the EU is happy about having Turkey as a member.

 

Ipek Cem: Well, I think so. Going back to your note about China, I know you are very bullish about China and so are many other people. But it is also a very competitive market place. How long have you been in China? And what are your personal ideas on why China is and will be successful? If your personal observations are in that way.

 

Hans-Joachim Körber: No, I think first of all, we started China in 1996. We opened the first store in 96, and I am 3,4,5 times a year in China since the early 90s. So what I saw, and what I experience is a very fast, dynamic development. And whenever somebody complains about China, saying they are doing this, property rights, environmental issues, you can see that China is changing so fast so they tackle their problems. So if you look today, and retail business is depending on people, if you look around the world, you can't ignore that in China 1.3 billion people are living. In India it is 1.1. so, and also, it was one of the themes of Davos. It is a shift of power from the West to the East. So the growth will take place in Asia in this century, and therefore if you want to grow your business, you have to be in these countries. So it is not easy because it is highly competitive. The Chinese is one of the oldest trading nations of the world. But if you have the right concept, you have the right adaptation, you can make it there.

 

Ipek Cem: New technologies. We roughly touched upon it earlier, but this radio frequency identification. And I was very interested to read about your “future store”. I believe it is operational, but it's kind of a lab where you can yest some of the technologies. I was also reading that some of these tehnologies, for them to be adopted, it will take ten or fifteen years. What are some of the developments we can look forward to? Are we going to have intelligent fridges any time soon, that will tell us, “Your milk is missing.” And send the signal to the supermarket?

 

Hans-Joachim Körber: Yes, I mean where we are. First of all, you mentioned our “future store”. It is a sytore in which we put our new technology. So what is “radio frequency”? Today, if you see a product, the product is identified by a bar-code. So tomorrow it will be a chip. So the difference is that wherever the product lies in the trolley, it sends a signal. So ideally, in ten years from now on, you as a customer pass a scanner, and everything is scanned in a second wherever it lies in your trolley. You don't have to pack it out, and pack it in. That's the future. So maybe it takes 15 years, but in the next ten to fifteen years, because a lot of research is going into it. The prices will come down, because it's not the technology, it's the price for the chip. Actually the price is somewhere around something between 20 and 30 cents. And it's obvious….

 

Ipek Cem: Per chip.

 

Hans-Joachim Körber: Per chip, yes. It's obvious that you can't put it on a yoghurt. Yes, I mean. But it's clear you can put it on a pallet, you can put it on a carton, already, so a lot of the logistic is already organised by radio frequency. Also from the security side, if you see the tickets for the World Championship, in Germany, it has an RFID (radio frequency identification) chip.

 

Ipek Cem: So this is a technology that is going to be adopted industry wide?

 

Hans-Joachim Körber: Yes. I think what we are actually doing is, we are looking for a worldwide standard because this is a unique opportunity to come to a worldwide standard. It is not only fast moving consumer goods, it's the pharmaceutical industry, it's even the army, because they try to organise all their logistics, so this is basically what will change the world. Now coming to your refrigerator, I mean, every refrigerator in ten to fifteen years will have a small PC. This PC can scan the products which are in, and you get a signal: “OK yogurt in chapter is overdue”, or you can even send a signal to your supermarket, or you can ask your PC what you have to order. You get all the list. So this is all that will happen. Today we are laughing a little bit about it.

 

Ipek Cem: Yes.

 

Hans-Joachim Körber: But we should remind us where we were 15 years ago with mobile phoning.

 

Ipek Cem: Nowhere.

 

Hans-Joachim Körber: Yes. You see how fast we are moving, so the technology is already there. We are still looking to bring the prices down. And then automatically, I mean it's an issue of data protection, we take care of it, it's a debate we have now with the people who take care of data protection. But I believe that this will be a technology which will change the retail landscape, because what is retailing? Retailing is a lot about supply chain management. And if you know at every stage of the supply chain where the products are, then it makes our life much easier to serve our customers better.

 

Ipek Cem: Consumers are also very aware, now, about quality in terms of freshness of product, in terms of ecological background of products, in terms of not contaminating the environment. There is now many more issues that industries face, and this awareness clearly leads to more work that needs to be done by corporations. What kinds of trends are you seeing in terms of this? There is a trend about going back to nature and this ecological consciousness. Are you seeing that it's impacting your business also?

 

Hans-Joachim Körber: Yes, I mean, because it always starts with the consumer. And what we actually see is that the consumers are conscious about environmental issues, about health care, about sustainability, about international sourcing, about child labour. So as a big international retailer, we have to be in the front of this developments, and the key here is credibility. If you are a really big company, you are doing business in 30 countries, tomorrow in 32, 33, 34 countries, and we have to make sure that nothing harms our image. And therefore we have to work very hard on food safety. We have to work very hard on sustainability – if you see today that Wal-Mart is initiating a lot of reforms around sustainability. I mean it was unthinkable around 2, 3 years ago. So I think there is a worldwide trend, and it is driven by consumer conscience, it is also driven by the warming discussions we have actually...

 

Ipek Cem: Global warming?

 

Hans-Joachim Körber: Yes, global warming. People are becoming more and more scared about it, yes, and looks like we get also change in the mindset of consumers.

 

Ipek Cem: When we look at the Turkish market place, I heard that you are also going to go into consumer electronics. Are you going to bring over that business over to Turkey as well?

 

Hans-Joachim Körber: Yes, that's true.

 

Ipek Cem: This is going to be in 2007?

 

Hans-Joachim Körber: I think we will open the first store at the end of this year. I mean we have to know with Media Markt and Saturn, we are European market leader. So we are now in 12 countries. Being the biggest, and looking at Turkey as a country with a high potential, a very young population. Very attractive for this kind of product. Therefore we decided a year ago that we analyse the Turkish market. The outcome is not surprising. So now we are moving into Turkey.

 

Ipek Cem: You are going to be opening a presence in Pakistan, this year. And that's, an important market. Do you have other countries, other new countries planned for 2007-2008 that we might want to know about?

 

Hans-Joachim Körber: I mean, you know that we are a listed company, so far Pakistan, and we have to also remind ourselves of the fact that Pakistan is a country with 160 million people. So being in China, being in India, being in Pakistan, being in Vietnam, it's a big challenge for our company. Of course we are analysing all the other Asian states, but sofar Pakistan is our priority.

 

Ipek Cem: And when we look at the world today, we see that local conflicts, or military conflicts, they are also challenging. Middle East and the near in geographies. As a CEO, as a Chairman, I'm sure you're keeping abreast of political and economic developments. What are some of the economic or political issues that are worrying you in the world today, in terms of how they impact business and peace?

 

Hans-Joachim Körber: I think the most what worries me is the Iraq war, because it looks like it ends in disaster. It is destabilising the whole region. And the other point is this was also one of the main themes of Davos… is resources. I mean it is energy, it is water, sustainability. These are the key words. And I mean as developed countries, we will face more challenges coming from Asia. If you see, I mean, how fast India, and how fast China are moving, I mean, it will be a challenge. It will be a challenge for all Western countries. And then what we have not to ignore… it's not a Turkish problem, it's a problem of Western Europe. It's the demographics. We are getting elder and elder. So, I mean, just one figure: for a stable population we need a reproduction rate of 2.1 – that means that every woman should have 2.1 children.. In Germany actually we are down to 1.3. In Spain and Italy it's even down to 1.2 … So we are shrinking populations. The same we are facing in Russia. Life expectations of a Russian man is 58

 

Ipek Cem: As a result of some of the Davos meetings, as well, but in the world today more and more business and political leaders, as you mentioned, are recognising global warming as a real threat as opposed to, some writing or some political view. Is it possible to take a kind of cooperation between countries in the business sector, and the political and business sector and make moves that are consistent with different countries? For example, within the EU, how does the business community view this problem?

 

Hans-Joachim Körber: I think that the commission, the EU commission, already had a lot of initiatives around it. But what we have to realise is that it is a worldwide problem. So whatever we do in Europe, is not helping when China, for example, or the U.S. don't sign the Kyoto Protocol. What you actually see – this was a surprise for me, because 40% of the worldwide energy is consumed by the Americans. Yes, but they have 2% of the population of the worldwide population. So just to show you the thought I believe that businesses can help a lot. But of course business also rely on frameworks, and frameworks are set by politicians. So I think Davos is a good platform of exchange of thoughts between business leaders and politicians, and of course business leaders can help a lot, but, I mean, how we should convince the Chinese Government? I mean this has to be done by the politicians, yes. What I realise is that it is more and more on the forefront of everybody. I mean there's also a joking side to it. I mean, why Greenland is called Greenland? Because it was green sometime ago. So, I mean we had this before, but I think we should take care of it, and all the initiatives especially done by the EU I think will help.

 

Ipek Cem: You have been at the helm of the Metro Group for some time, and we expect you to stay there until 2009, and perhaps further. What are your own plans about your leadership for the Metro and your involvement with the group?

 

Hans-Joachim Körber: First of all, I enjoy very much my job, because when I started we had a foreign share of 5% and now we're up to 56. We created an international culture. If you today see our management teams, they are more than 50% non-Germans. So for example in Russia, or a country where the country manager is an Italian. In China it's a French. So I think we still have a lot to do. They have to develop our business further, we are number 3 in the world, turnover wise. I think we will challenge number 2 which is Carrefour. And if I stay healthy and successful, maybe I will continue.

 

Ipek Cem: And on this note I would like to thank you very much for this interview.

 

Hans-Joachim Körber: Thank you.

 

This transcript was typed from a transcription unit recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, NTV networks and Ipek Cem cannot vouch for its accuracy.