Consumers will win with supermarket takeover

Customers will benefit from the Denner takeover of Pick Pay Keystone

Retail experts predict the proposed takeover of supermarket chain Pick Pay by its Swiss rival Denner will benefit customers rather than reduce choice.

The buyout, which is subject to regulatory approval, will put Denner in a stronger position to reduce prices when German discounters Aldi and Lidl arrive in Switzerland.

The top Swiss discount chain will be the third biggest player in the market behind Coop and Migros, with 700 stores throughout the country when it takes over Pick Pay.

Reiner Eichenberger, professor of public finance at Fribourg University, believes the takeover is part of Denner’s strategy to meet the threat of the predicted price war.

“Aldi in particular is expected to adopt an aggressive pricing strategy,” he told swissinfo.

“Many of their branches will be located close to [neighbouring] Germany so it would not be a good strategy to price their goods at just ten per cent lower than their Swiss rivals. Denner would have to react to that by dropping their prices.

“Denner will be more effective and in a better position to do that after they buy Pick Pay, so that will be good for the consumer.”

Coop faces challenge

Retail expert Gotthard Wangler believes the takeover will benefit Migros, which does not stock tobacco or alcohol products, and could be bad news for Coop.

“Migros rents out space in its buildings to many Pick Pay stores. This benefits Migros because they have someone selling alcohol and tobacco. This optimal synergy will continue with Denner,” he said.

“Coop will come under pressure because they sell quality brands, and Denner is a quality brand discounter. Coop may now have to think of a new strategy.”

Denner denied that the takeover was influenced by the threat of the two German discounters, and expects the deal to be given the green light.

“We are looking to consolidate and strengthen our position as the third biggest food retailer in Switzerland,” said spokeswoman Eva-Maria Bauder.

“We have had a strategy of high growth and broadening our range of fresh products for the last five years. The impending arrival of Aldi and Lidl did not have any bearing on our decision to take over Pick Pay.

“We do not expect any problems from the Competition Commission as there is already diversity in Switzerland with many retailers in comparison with other countries. When Aldi and Lidl arrive there will be more competition, not less.”

Approval expected

Eichenberger also believes that the Competition Commission will let the deal go ahead.

“It would have been a different story if Migros or Coop wanted to take over Pick Pay because they have a larger share of the market,” he said.

The Competition Commission will have to consider whether consumers would be adversely affected by the takeover.

“We have to be confident that there will not be a position in the market that could dominate and impede effective competition. The impending arrival of Aldi and Lidl will certainly come into our thought process,” said spokesman Patrik Ducrey.

swissinfo, Matthew Allen

Key facts

The purchase of Pick Pay is expected to cost Denner about SFr50-70 million ($41-57 million).
The takeover is due to take effect on November 1, subject to regulatory approval.
The Pick Pay brand will disappear during the course of 2006.