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Interview with Lovro Mandac, Chairman of the Management Board at Galeria


Since 1980, the business activities of METRO Cash & Carry have been closely linked to the world of the department store: This was the year in which the cash & and carry company acquired a minority stake of 24.9 percent in the Kaufhof department store business. In 1996, METRO bought the remaining shares in the company. Lovro Mandac, the Chairman of the Management Board of Galeria Kaufhof, has been part of the relationship between METRO and the department store giant for 27 years now. A conversation about the melding of two worlds.

Mr Mandac, did METRO Cash & Carry turn a lot of heads in 1980 when it acquired a stake in Kaufhof AG? At first glance, a cash & carry company and a group of department stores do not seem like such a good fit. 

For the employees, it was strange. They felt that the so-called "box pushers" from Düsseldorf were being brought into the world of the exclusive department store. This was how the colleagues were viewed. But Kaufhof underestimated several trends, particularly the one in which shopping centres were built "out in the middle of nowhere". Lamps, carpets, kitchens – everything we were selling at the time could be sold more easily and less expensively "out in the middle of nowhere". Initially, Kaufhof had no response to this trend and believed that it did not have to change.

How did METRO take advantage of this?

Erwin Conradi, the Chairman of METRO's Management Board, was aggressive. At the same time, banks held a large stake in our company and wanted to sell it. After all, the oil crisis had just ended. Just about every stock was crawling along the bottom, and METRO was able to buy us at a relatively cheap price.

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Two different worlds

Didn't the deal cause a cultural clash between two different worlds – the breast pocket handkerchief here and the work coat at the cash & carry company?

This was indeed true for the operating business. But things were different in the executive suite: The colleagues at METRO were chic, dressed to the nines. Hardly anyone wore better suits than Erwin Conradi, the Chairman of the Management Board of METRO at the time. Conradi had two pilots who took him to business appointments in a company plane. The two helicopters that the Chairman of Kaufhof used for business trips and that were flown by four crews based in Butzweiler Hof in Cologne had to be given up after METRO bought its stake – of course. 

Did both companies work closely together immediately after the deal went through?

The critical point for METRO was setting up a joint purchasing system. The shared purchasing company Gemex was then created in Hong Kong. Kaufhof and the Kaufhalle department stores that were a part of it were the biggest purchasers at the time. For textiles, our purchasing volume remains extremely large today. Back then, we also had the mail-order business and the retail shoe business. This created huge volume. Kaufhof, Kaufhalle and related companies had more than 1.5 billion marks in sales at the time. This was a huge amount back then. For METRO, the combined purchasing strategy was certainly attractive.
There was not much collaboration beyond that then...

No, hardly any in day-to-day business. Every now and then, a METRO colleague would come to Cologne for a visit. Every once in a while, they'd check in – that was it. 

To a certain extent then, METRO Cash & Carry and Kaufhof were sort of competitors at the time? 

Yes, because METRO had an advantage that we didn't in the 1980s: METRO targeted professional customers and was allowed to stay open until 10 p.m. on Saturday. We had to close at 2.30 p.m. But this has changed over the years with new laws on store hours – today, we are open until 8 p.m. on Saturday.

New computerised merchandise management system

In what areas was the connection even apparent?

We worked together more closely in purchasing. In the mid-1980s, there was also close collaboration in controlling. Kaufhof was a little behind the times in merchandise management – namely time, volume and spatial planning and management of the purchasing process. Our accounting system was also outdated. In 1982, we started developing a computerised merchandise management system because we saw how successful it was at METRO. Having a system like this is invaluable. It was not until 1993, more than 10 years later, that we were able to complete the project. It must have been incredibly complex. Kaufhof is actually much more complex than METRO. We have significantly more products. Today, we have one of the best merchandise management systems in the world.

Did you inherit the merchandise management system from METRO then? 

No, we developed something new. We needed our specialists who are completely familiar with our systems. This was key. Over the last few decades, you have very closely monitored the evolution of METRO Cash & Carry from the outside: How do you see your "brother" today – are they ready for the next 50 years? I see a need for change, but METRO has already initiated this transformation with its new market positioning. They have the courage to change – and that is a good thing.
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