Alnatura expansion

Organic Food Chain Faces Healthy Competition

  • Why it matters

    Why it matters

    Organic foods chain Alnatura faces more competition from DM, Germany’s biggest drugstore, so it is finding new partners and increasing its outlets.

  • Facts

    Facts

    • DM has already stopped selling 80 Alnatura products, and that will soon grow to 200.
    • Organic food is a big business in Germany with annual sales of €8 billion, or $9 billion.
    • In 2010 Alnatura was Germany’s largest organic supermarket chain. Now Dennree is number one.
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    Audio

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Alnatura greens DPA Frank Rumpenhorst
Source: DPA

Alnatura suddenly faces an uphill battle. Source: DPA Frank Rumpenhorst

 

Competition increased on Germany’s organic food market earlier this year when Germany’s biggest drugstore announced it would launch its own brand, taking on Alnatura, one of the country’s biggest organic food producers.

Challenger DM also said it would scale back its stocks of long-time partner Alnatura.

For Alnatura, whose products range from pasta and cereals to chocolate and coffee, that means a huge reduction in sales. The company isn’t saying how much of its sales come from DM stores. Sources say it could be up to half, though Alnatura disputes that.

Götz Rehn, chief executive of Alnatura, said DM drugstores have stopped selling 80 Alnatura products and soon that number will increase to 200. That will affect his business, Mr. Rehn conceded in an interview with Handelsblatt. “This year, our growth will slow,” he said.

Organic food is a big business in Germany with annual sales of €8 billion, or $9 billion. In 2010 Alnatura was still the country’s largest organic supermarket chain.

Since then, competitor Dennree has taken the lead and is well positioned for more growth with 166 stores.

Mr. Rehn was eager to see the silver lining and said this could be a wake-up call for Alnatura. “Change always contains something positive,” he said. “If there are cuts, it will send a jolt through the organization – and then you get more inventive.”

Alnatura had depended too long on its lucrative partnership with DM, he said, and neglected its own expansion.  Now the organic pioneer is picking up the pace. “This year, we will open our 100th store,” Mr. Rehn said.

It is not always easy to find the right location for stores. Each year, Alnatura looks at 1,000 locations and, of those, may build around ten new stores, Mr. Rehn said.

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More stores, however, won’t make up for the loss of sales via DM’s drugstores. So Alnatura is expanding its network of sales partners so it no longer depends on a few big partners, such as DM.

Edeka, the largest German supermarket corporation, started stocking Alnatura goods this month. “When we looked around for new sales partners, many dealers were very interested,” Mr. Rehn said.

Alnatura is also looking abroad for revenue and has three new sales partners in Austria — Billa, Merkur and Mpreis. And in Switzerland, Alnatura is already cooperating with the supermarket chain Migros.

“I’m confident that we can compensate for sales losses with the new partners,” Mr Rehn said.

Alnatura plans still more growth, including “several new markets in Europe,” Mr. Rehn said. “We are in very concrete talks with a trading partner for a neighboring European country.”

 

Alnatura ceo source alnatura dorothee van boemmel
Alnatura’s chief executive Goetz Rehn prefers to grow sustainably. Source: Alnatura, Dorothee van Boemmel

 

The race to catch up could pose a challenge to Alnatura’s non-traditional working style and business model, however. Mr. Rehn prefers to call his company a “working group.” Employees don’t have jobs, but rather tasks. Even the chief executive regularly does internships in different stores and sometimes he stocks the shelves.

“Alnatura is a cultural experiment,” Mr. Rehn said. “We take an innovative approach and try to shape our business in a way that’s meaningful.”

Swift expansion could threaten that holistic approach, but Mr. Rehn said he prefers to grow at a slower pace. “I didn’t get into this business just to sell organic products, but rather to operate sustainably.”

Mr. Rehn knows there is no alternative to the growth strategy and the company’s headquarters is expanding. Right now, some of Alnatura’s 370 employees there work from containers or rented rooms; soon, they will move to a new building with space for 500 employees.

Alnatura’s online operation also needs to speed up. It only started in April this year, together with online retailer Gourmondo. Customers can now order 950 of 1,200 Alnatura products in 19 European countries.

Even as Alnatura grows abroad, Mr. Rehn prefers sense over speed. “We have so many new ideas, and the danger is not thinking everything through,” he said.

 

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Handelsblatt’s Florian Kolf covers companies and markets, and leads the consumer and luxury goods team. To contact the author: kolf@handelsblatt.com

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