Rossmann succession

Drugstore Empire Changes the Guard

5588504 (2259) Deutschland, Berlin, 10.04.2007: Filiale von Rossmann. Kundin beim Kauf von Haarshampoo. Branch of Rossmann [ Rechtehinweis: Verwendung weltweit, usage worldwide ]
What will happen at Rossmann as the company expands?
  • Why it matters

    Why it matters

    Raoul Rossmann, second son of Dirk Rossmann, founder of the Rossman cut-price drugstore chain is in the process of taking over management duties; he says he’s well aware that not every family business empire undergoes an easy succession process.

  • Facts

    Facts

    Dirk Rossmann opened the first store in the Rossmann drugstore chain in 1972.

    Rossmann has 3,400 outlets and employs more than 47,000 people in its operations in Germany and abroad.

    Hong Kong’s Hutchison Whampoa has a 40 percent stake in Rossmann.

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    Audio

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Toothpaste, deodorant, shampoo, razors – when they run out of everyday toiletries, shoppers rush out to Rossmann, the family-owned drugstore chain that started out small in 1972.

Now, it’s become Germany’s second-largest company in the sector and founder Dirk Rossmann is about to hand the reins to one of his two sons, Raoul.

With 2,000 shop fronts in Germany plus stores in eastern and south-eastern Europe, there’s plenty to do at the company. Plus, it has just registered a fall in profits.

At Rossmann, that isn’t slowing anyone down though. Handelsblatt spoke with Raoul Rossmann about expansion plans and the ins and outs of succession.

Mr. Rossmann said compared to his father, he has it easy, though given the size of the business now, he also bears a bigger burden of responsibility.

But his feet are firmly on the ground. Seeing the Rossmann family name lit up in red above tens and thousands of stores is “as normal to me as drinking water,” he said.

Recalling when the first store opened on a side street in Hanover in 1972, Mr. Rossmann said: “I inherited a very professional structure.”

His father solved many of the problems that arose when the business was founded, then again when it expanded through the ’70s and ’80s. “Things sometimes went haywire and people had to step in here and there to take care of things,” Mr. Rossmann said.

“It's unbelievably difficult for sons or daughters who can see the necessity for modernization, but who come up against a wall and have to argue and fight about it. But that's not the case here.”

Raoul Rossmann

On the other hand, today errors count for more. “Twenty years ago, in the worst case scenario, a mistake would have affected quite a small company,” he said. “Nowadays we have 30,000 employees in Germany.”

Mr. Rossmann’s training to take over the business starteed modestly. He first led a team of 60 employees in one of the company’s purchasing divisions. “Through that, I’ve gradually been introduced to increasing responsibility,” he said.

His parents have now passed on the majority of the family share in the company to him and happily, there’s no bad blood with his older brother over the succession, Mr. Rossmann said.

Raoul Roßmann (Einkauf und Marketing) spricht am 06.04.2016 während der Jahrespressekonferenz in der Unternehmenszentrale in Burgwedel (Niedersachsen). Foto: Holger Hollemann/dpa [ Rechtehinweis: Verwendung weltweit, usage worldwide ]
Raoul Rossmann. Source. Foto: Holger Hollemann/DPA

“I was just glad I didn’t have anything to do with that process,” he said. “My father created a good inheritance model. I know in other family companies it can be difficult and I’ve heard a few horror stories!”

Founder Dirk Rossmann, 69, is still in the driver’s seat. That’s fine, Raoul said. They have a good working relationship – as far as he’s concerned, things could stay like that forever.

“What’s important to me is that I feel like I can develop freely, I can get enthused about things. What happens sometimes is I get emotional very quickly,” Mr. Rossmann said, adding that he’s glad they tend to agree and that impatience is one of his faults.

Luckily, though, they don’t fight much.

“It’s unbelievably difficult for sons or daughters who can see the necessity for modernization, but who come up against a wall and have to argue and fight about it,” he said. “But that’s not the case here.”

It’s not like it was all smooth sailing over the years. Between 2000 and 2010, the company went through a phase of aggressive expansion, including some takeovers. That meant integrating new businesses while running internal projects which kept the company pretty busy.

There was the odd scandal too. In the non-food purchasing division, Mr. Rossmann’s predecessor left following corruption revelations. “It was an extraordinary situation, because on the one hand trust within the department had been damaged and on the other, relationships with suppliers had to be completely rebuilt,” he recalled.

These days Mr. Rossmann is head of the key areas of brand purchasing and marketing and said the division operated professionally, and there wasn’t much he would change.

Instead, he’s looking into online retail more closely. At the moment the company’s turnover with e-commerce is modest. Mr. Rossmann said that even if it were to grow by 20 to 30 percent, it would still be nothing more than a minor contributor to the bottom line because prices for toiletry articles don’t differ much between storefront retail and online purchasing – unlike fashion items or electronics. That puts a brake on growth and means growth of the sector is slow.

No acquisitions are planned in this area any time soon, he said. “We’re not seeing any new or interesting ideas from other market players,” Mr. Rossmann commented, referring to online purveyors of diapers and other baby products such as windeln.de or babymarkt.de.

“We can do all that off our own bat,” he said. “If we want to push something then in Germany alone we have 2,000 shops and brochures with a circulation of 28 million to bring a product to the fore.”

Every week, Rossmann opens three new retail outlets in Germany, but for the moment Mr. Rossmann said he wasn’t worried about hitting a growth limit. “There’s still room for 500 or 600 more outlets in the German market,” he said.

Rossmann isn’t  only opening brand new branches but also closing smaller stores with 300 to 400 square meters of retail space and opening new, larger branches.

In the next five to 10 years the group is going to be busy modernizing, rebuilding and expanding its outlets. Mr. Rossmann said he saw a great deal of potential, though he added, “What happens in ten years can’t be planned at this stage.”

Despite the strength of Rossmann, profits aren’t growing but Mr. Rossmann was unconcerned, indicating the cut-price grocery sector. “For years, Aldi and Lidl have been experiencing a situation which is similar to ours at present, in which growth is just 1 to 2 percent. But those businesses are still surviving despite that,” he said.

150 Rossmann-01

Rossmann just has to get used to lower growth rates, he said, adding, “It will only become problematic if sales margins begin to erode.”

What matters more is the competition. “When you look at the market research data, we’re actually growing more strongly than the rest of the drugstore sector – and by a long way,” he said. “And in the past that wasn’t always the case, even in years that we had much stronger growth.”

Mr. Rossmann says he’s not concerned that the collapse of rival drugstore chain Schlecker could be repeated by his own firm. Schlecker went under in early 2012 after running into liquidity problems following a period of rapid expansion.

“We’ve always had too strong a culture of self-criticism to allow that to happen,” he said.

Mr. Rossmann very clearly remembers the ’90s, when the family firm wasn’t doing so well. He said that as a 12-year-old at the time, he didn’t fully understand the business ramifications, but his father’s uncertainty at that time left a lasting impression on him.

The handover between the two generations is underway and while it will mean Raoul taking full responsibility for the family company, some things won’t change, he said.

The transfer of shares from father to son was important but regardless of how the shares are distributed, Mr. Rossmann said, “We are both company employees and both working towards the same goals. He may never completely retire, but he’ll give me the freedom to build my own achievements.”

 

Florian Kolf covers the retail and consumer goods sectors for Handelsblatt. To contact the author: kolf@handelsblatt.com

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