Succeeding in tough times

By Rebecca Goozee, Deputy Editor

In an increasingly competitive and challenging market, where competitors are slashing prices, food costs are rising and consumers demand more information and choice, surviving in the food retail industry is tough. Herbert Bolliger, CEO of Swiss food giant Migros, explains what it takes to stay at the top.

“With approximately 600 stores throughout the country, Migros sells almost 25% of Switzerland's food, employs around 83,00 people and has annual sales of more than 12.3 billion”
-

Migros is one of Switzerland’s largest enterprises and its leading retail organisation. Consistently growing year on year, the company recorded an impressive 6.2% growth between 2006 and 2007, despite the current challenges in the retail and food markets. Nevertheless, Herbert Bolliger, the firm’s charismatic CEO, concedes there are significant challenges ahead.

The biggest test the firm faces is the rising price of food, and maintaining the difficult balancing act between offering value for money while at the same time retaining the company’s reputation for quality. Bolliger is committed to facing this challenge head on and wants to continue delivering top products to consumers as well as making a profit. “Our costumers tell us that they get the best value and quality for their money at Migros,” he says, “and I’m convinced that our economic success is based on products and services that offer distinct added value.”

As a co-operative company, Migros has grown steadily over the years to become Switzerland’s largest supermarket chain and its biggest employer. Founded in 1925 in Zürich as a private enterprise by Gottlieb Duttweiler, the company has come a long way from the days of selling only coffee, rice, sugar, noodles, coconut oil and soap from trucks that went from one village or hamlet to another. Today, the company is a community of regional co-operatives and a number of subsidiaries, combining a number of elements such as retail, tourism, culture, education and sport.

“We are very proud of our co-operatives – and grateful to them,” says Bolliger. “Our charismatic founder, Gottlieb Duttweiler gave his firm to the Swiss people and we now have over two million members. This means that Migros is deeply embedded in Switzerland’s culture and has a special place in the hearts of the Swiss population.”

The company’s unique structure consists of 10 regional co-operatives, whose main task lies in ensuring the distribution of high-quality, inexpensive products. “Our co-operatives permit direct contact to our regional suppliers on the one hand, and also ensure the active and emotional participation of the co-operative members,” explains Bolliger. “Thus the co-operative form has vast advantages that overweigh the slightly longer decision-making process by far. Of course we have to be as fit as any company listed on the stock market, but we can reinvest our profits to reduce prices and raise the quality of our products at the same time.”

Rising costs
Indeed, with food prices rising across the continent, keeping costs to a minimum is crucial to maintaining a favourable market position. While Bolliger acknowledges that high food prices are becoming a major problem for the industry, he is adamant that the company is working hard to keep costs low. More importantly, it’s not making any concessions on the quality side. “We have adapted to the changing needs of consumers and are aiming at innovations that bring added value – whether it be in the functionality, the pleasure experience or the environmental benefit of the product,” says Bolliger. “We’ve been developing our assortment according to different price ranges, distinguishing more clearly between the simple and the more sophisticated requirements.”

But the challenges don’t stop there. The retail trade today is characterised by increasing globalisation and the opening up of both domestic and international markets, which has led to the arrival of competitors offering hard discounts. “These competitors from abroad have arrived to a very modestly growing Swiss market and brought with them heightened competition,” says Bolliger. Despite this, he feels his company is well placed to compete, and has reacted to this changing market through a partnership with Denner Discount, Switzerland’s leading food discounter. Bolliger explains that this has given Migros a share in the growing discount market, with all of its supplementary product ranges. “A large part of our growth is down to this partnership,” he explains. “Large purchasing volumes are necessary to achieve more favourable prices, as well as more uniform product quality, lower administrative costs and simplified procedures.” All of which ultimately benefits the consumer, enabling Migros to offer low prices and keep its customers happy.

Quality and safety
Today’s consumers are more interested than ever in the products that they eat and drink, and as such they are extremely well informed, interested and critical, concerned with health claims, labelling and the origin of the products they consume. In order to make sure that his customers are well informed and happy, Bolliger established an M-Infoline, where customers can find information about products and services, or can offer ideas, suggestions or complain, six days a week, by phone, email or letter. “Every day Migros serves about 1.4 million costumers – that means that we are constantly in direct contact with them. Customers’ enquiries are answered individually and passed on the to the appropriate offices within Migros,” he says. “We have a website, an Internet portal and an in-house customer magazine, and also interview 100,000 customers and passer-bys every year to find out how we can improve our services.”

However, it is not just being able to voice their views that is important, but rather having the right products, following the right processes at the right time, with an effective supply chain. An effective supply chain needs to have full traceability, both from an operational and a compliance perspective. “Full traceability of a product and its ingredients are our highest priorities,” says Bolliger. “It is incredibly important for us that we have precise and trustworthy information on the ecological and social production conditions.” At all stages of the supply chain, Migros relies on uniform standards, from the agricultural primary production via the processing, to the ready-for-sale product in the shop. As a result, all fruit and vegetables are produced according to the worldwide standard Global-GAP (Global Good Agricultural Practice). Global-GAP ensures that all producers comply with the same regulations with regard to food safety, fertilisation, industrial safety and environmental protection. The Swiss-GAP Association has adapted the global standard to the conditions in Switzerland with its smallholders.

Over 10 years ago, Migros elaborated a code of conduct called the Business Social Compliance Initiative (BSCI) Codex, obliging all non-food suppliers to comply with social working conditions – such as a living wage or a safe working environment. Two years ago, food suppliers were also asked to acknowledge the Codex and by the end of 2007, 98% of Migros food suppliers, excluding fresh produce, have undertaken to comply with the principles of the Codex and submit independent audits. “Last year, we initiated the Global Social Compliance Program (GSCP) in collaboration with internationally operating wholesale distributors,” says Bolliger, “to much success.”

Labelling
As the expanding and diversifying population grows, so too do their needs, wants and demands, particularly regarding safety issues. So how does Migros plan on handling this product safety challenge? Primarily through the company’s labelling, answers Bolliger. “We play a leading role in the introduction and propagation of label products and ensure that comprehensive background information on the products is obtained from the manufacturer or the supplier. Trustworthiness is the key: we make ourselves trustworthy by checking, and having others check, that we really deliver what we promise.”

He goes on to explain that Migros has their own engagement labels, including a ecological and/or social value-added, and an expanding range of sustainable products. At present, Bolliger is focused on specifically developing the assortment of climate-friendly products and foodstuffs geared towards a balanced nutrition. “Labelling is an issue but we are faced with complex – and not always consistent – laws, and also with the task of informing consumers without confusing them. There is a limited amount of space on a label, and everybody should be able to read the information without having to carry a magnifying glass and an encyclopaedia in their shopping bag,” he jokes.

Sustainability
In addition to this are challenges specific to Switzerland in regard to spatial planning and worldwide concerns regarding the protection of the environment and sustainability issues. “Migros has always been very much involved in respecting and protecting the environment,” explains Bolliger. “We have a comprehensive environmental management team, which is co-ordinated by the ecology and energy departments in the Federation of Migros Co-operatives.” Bolliger has set the company binding goals in order to increase energy efficiency and reduce carbon dioxide emissions, convinced that the key culprit in the firm’s environmental pollution is its energy consumption. Bolliger claims that it will be possible to cut carbon dioxide emissions by 16% by 2010, an ambitious goal; however, he is confident that the company will be able to meet these goals, and has taken numerous measures to ensure that they will be achieved.

For a start, all new supermarkets are energy-efficient; the supermarket in Eschenbach, Switzerland, recently switched to 100% LED lighting throughout the entire store – in the refrigerated compartments, overhead, and accenting the selection of products on offer – through which it hopes to reduce energy use by 80%, including lower air conditioning costs due to the low waste heat generation of light emitting diodes. In addition, Migros has a new detergent, which cleans at a 20-degree wash, thus saving energy and CO2; and is also a key player in the use of climate-friendly fuels, flying employees CO2 neutral on business trips and successfully operating the largest take-back system in the Swiss retail trade.

“Migros has always endeavoured to offer good and reasonably priced products, but also to assume its social responsibility by manufacturing, processing and distributing such products without causing harm to the environment,” says Bolliger. It is one reason why Migros joined the Global Compact of the United Nations, a voluntary framework for businesses that are committed to aligning their operations and strategies with 10 universally accepted principles in the areas of human rights, labour, the environment and anti-corruption. “Last year, the independent energy rating firm Oekom Research scrutinised the performance of the largest retail enterprises, and found that Migros was the most sustainable retailer in the world. It is a title we are extremely proud to hold.”

Future
As Migros continues to grow, so too does Bolliger’s job. For the first time, he has developed a group strategy in order to provide a framework for the future orientation of Migros’ strategic business units. “We are geared to improving the quality of life for our customers and employees. We are predicting stronger growth abroad, with the intention of strengthening the existing business units and the Migros Group,” he says. “And for our group as a whole, we aim for profitable growth.” By adapting to the changing needs of consumers, and by focusing on innovations that bring added value, it seems Migros has every chance of succeeding in its goals and overcoming the current challenges in the industry.

Milestones

The 20s – the beginning
1925: Migros founded with five car sales
1926: First store opened in Zurich

The 30s – the expansion of the co-operative
1933: First Migros co-operative founded in Ticino
1936: Gottlieb Duttweiler founded the political party ‘Ring of the Country’s Independent
1938: First issue of the Migros’ weekly newspaper, ‘Azione’

The 40s – much is made
1941: The M-Aktiengeseillschaft is converted into regional co-operatives
1942: First edition of the weekly newspaper, ‘We Bridge Builder’
1944: Migros Club Schools founded
1946: The Dutti-Park was founded
1948: The first self-service shop opened in Switzerland

The 50s – supply and demand expands
1951: First sale of non-food items
1952: First MM with restaurants are founded in Zurich
1954: Gasoline and heating oil company ‘Migrol’, established
1956: Language school (Eurocentre) founded
1957: Migros Bank established
1958: Secura insurance company established

The 60s and 70s – sustaining growth
1963: Gottlieb Duttweiler Institute opened
1967: Introduction of Migros data
1970: First MMM

The 80s and 90s – the digital age
1986: First leisure centre opened
1992: Green light for foreign branches on the border
1993: First shopping centre opened on the border
1993: Migros engaged in Austria
1997: Introduction of the customer loyalty programme, M-Cumulus
1998: Introduction of online shopping
1998: Migros decides on a co-operation with OBI, a DIY store

2000 and beyond – fit for the new millennium
2000: Migros celebrates its 75 th anniversary
2001: Migros achieves a turnover of over 20 billion francs for the first time
2002: Introduction of corporate governance structures
2003: New umbrella label for products with social and environmental value introduced
2007: Migros own a 70% stake in Denner Discount

Sustainability report

In its annual sustainability report Migros sets out its economic, ecological and social activities. As part of its ecological focus for the future Migros has been concentrating on a number of factors:

• Monitoring energy consumption, as it has done for over 30 years
• Recycling 64% of operational waste
• Taking back 13,000 tonnes of customer waste
• Membership of the WWF Climate Group
• Inclusion of Globus, Interio and Fitness packs into Migros’ climate protection goals
• Carrying out a pilot experiment on refrigerant switch over in the Dietlikon store
• Opening of Minergie points of sale in Schwarzenburg BE and Buchs SG
• Use of biodiesel in eight regional Migros Co-operatives
• Carbon offsetting of all business flights for Migros employees
• Participation of over 1000 employees in the ‘bike to work’ campaign

 

The 10 principles of the Global Compact

The Global Compact of the United Nations asks companies to embrace, support and enact, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment and anti-corruption:

Human rights
Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and
Principle 2: make sure that they are not complicit in human rights abuses

Labour standards
Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
Principle 4: the elimination of all forms of forced and compulsory labour;
Principle 5: the effective abolition of child labour; and
Principle 6: the elimination of discrimination in respect of employment and occupation

Environment
Principle 7: Businesses should support a precautionary approach to environmental challenges;
Principle 8: undertake initiatives to promote greater environmental responsibility; and
Principle 9: encourage the development and diffusion of environmentally friendly technologies

Anti-corruption
Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery