Discount Retail Chain Rema 1000 (owned by Norwegian Rema-Reitan) becomes Denmark's largest grocery chain after the acquisition of German discounter Aldi. But a number of challenges await the Norwegian low-cost giant.
It has been a few weeks since it became known that Rema 1000 is making a significant splash on the Danish grocery market. The acquisition of 114 stores from the German chain Aldi's Danish operations will probably make the Norwegian discount chain the largest, at least in terms of market share, also in Denmark.
Cut into the sea
Odd Reitan (owner of the Rema-Retain), his son Ole Robert Reitan, who is also one of the top members of the company, and the rest of the delegation are shown into the store. One of the first things Reitan senior notes, and comments on, is the light. "You have very nice light here. It makes the goods shine. "It's nice to hear," says merchant Max Skov Hansen, showing father and son further into the store.
Rema 1000 started cautiously on the Danish market in 1994. It was not until just over ten years later that the initiative gained momentum. Now the chain has 363 stores spread throughout Denmark (a country that in area is smaller than the old Finnmark county). Professor at Copenhagen Business Scholl, Mogens Bjerre, points to two challenges Rema 1000 must solve:
They need a permit from Konkurrence- og Forbrugerstyrelsen in Denmark because the acquisition will make them dominant in the market.
In a relatively short time, they must find 114 people spread across the country who are willing to invest time and money in building a new store.
"We see that Rema 1000 is created in places that otherwise would not have a store if you were to hire a store manager because it simply would not be financially viable. The merchants often work 70-80 hours a week, which is part of the reason why Rema 1000 can establish itself where they actually do," says Bjerre.
Strong brand name
But Rema 1000 must be said to be a Danish success story already. In recent years, they have topped a number of awards. Among other things, as Denmark's strongest brand name that is, stronger than, for example, Ikea, Lego, Arla, DR and all other competitors in the grocery market.
"We're trying to create a small convenience store for people who live in a big city. We are people's pantry most people do not have large refrigerators and large freezers at home and therefore many often shop in the store. We will get to know the customer and know what goods it is important for them that we have in the store, explains the merchant at the Rema store in Valby.
Odd Reitan listens attentively. He thinks that philosophy is part of the reason why Rema 1000 has had a great success in Denmark. That, as well as the fact that local merchants themselves invest in and own the stores.
"We have organized the Rema chain very much based on self-interest, where we have merchants who run their own store on contract with us. This is part of the reason for the success both in Norway and in Denmark. And it suits Danish culture, you know, to run for oneself to be one's own merchant," says Odd Reitan.
The Germans who went bankrupt
Now comes the biggest expansion in the Danish market. The German grocery chain Aldi has been in Denmark for 45 years. But the last few years have been heavy financially. In 2021, the deficit was almost DKK 400 million (US$57.5mn). They cannot afford to lose this and have therefore decided to close down operations in Denmark.
And then Odd Reitan was ready with the checkbook to buy vacant store premises.
But in the 70s, everything was different. Odd Reitan tells about the study trip to Germany that was the start of Rema 1000 in Norway. At that time he ran some convenience stores in Trondheim. He didn't think he was very successful, but had heard of the brothers Karl and Theo Albrecht who were constantly gaining market share with the Aldi chain.
"They had succeeded tremendously. So I thought that here I have to go down and watch, so we went to Germany to visit Aldi and it was a great experience. That was the turning point for me. Then it was about absorbing as many impulses as possible there and then going home and translating it into Norwegian. And it eventually became Rema 1000," he says enthusiastically.
Think the Danes like to try something new
Odd Reitan tells about how the store manager in Germany presented his strategy to cut the cost of operations in order to push prices down. "I remember the store manager picking up his arm like that," Reitan says, using his fist and holding his right hand up in the air.
"Like he was holding meat. He also said: "You see, Reitan loses, that here it is a matter of cutting the costs all the way to the bone. Then you can sell cheap," he says, pretending to lead a knife into the imaginary meat.
Odd Reitan went home and created what is now Norway's and becomes Denmark's largest grocery chain. STUDY TRIP: Odd Reitan tells about the study trip to Germany that laid the foundation for the Rema 1000 chain. A success that receives attention also in the academic communities. Mogens Bjerre has done a lot of research on the grocery chains. He believes much of the reason why Rema 1000 succeeds is the business model. Local merchants who own large parts of the store and work on contract for Rema 1000. Bjerre also believes Rema 1000 has succeeded in becoming a chain that most people like.
"The Danes are also curious about new concepts, and we probably also have a greater openness to foreign chains here," says Bjerre. "There are also stories about Rema 1000 merchants who know their customers by their first names and they also have a reputation for being good at looking after their employees," he says.
Hope he makes money
Reitan himself has, at least not as it appears, any particular concern related to growth in Denmark. Nor the fact that he is taking over retail space where the business has run at a thunderous deficit in recent years. He will continue to run his race. And stay true to its concept. "We are planning for the Rema concept that is in Denmark. We're not making any changes to that. Then we'll see what it does to the turnover.
"We hope that it will increase. We expect it," he says laughing.
Aldi will withdraw from Denmark in January. If permission for the acquisition is granted, redevelopment of the stores could start fairly quickly in 2023.
See here for more: Rema-Reitan buys the chain that was his role model: "You have to cut costs all the way to the bone" – NRK Urix – Foreign news and documentaries
