You're reading: Executives To Watch: Metro Cash & Carry rebounds in highly competitive food market

Three things stand out in the biography of Martin Schumacher, the managing director of Metro Cash & Carry Ukraine.

No. 1. He’s well-traveled. He’s worked in Germany, the United States, the United Kingdom, Canada and now Ukraine.

No. 2. He specializes in turnarounds and working in unstable environments.

No. 3. He was born into the food business. He started out with a family-owned wholesale, distribution and brokerage firm in his native Germany. The enterprise was founded by his great-grandfather, also Martin, in 1875, and was sold in 1995 by his parents, who still live in his hometown of Kempen.

“I like to solve complex things,” Schumacher told the Kyiv Post in an interview. “I got my first business opportunity at our family business, which went through significant financial restructuring in the early 1990s. I worked side-by-side with my father to make sure we achieved the financial turnaround of the business.”

He also was able to apply his turnaround skills to jobs with A&P (The Great Atlantic & Pacific Tea Co, Inc.) in Canada and the United States, and at Alix Partners in the United Kingdom.

Martin Schumacher

Martin Schumacher

Position: Managing director of Metro Cash & Carry Ukraine

Nationality: U.S. citizen; native of Germany

Personal: Married, four children

How to succeed in Ukraine now: “Believe in the upside, invest a lot of money, outspend your competition and gain market share. The condition for that is you have to believe in the upside and you have to live with the risk. So can you live with the risk? Our answer is yes. We keep investing. We are very committed; we’ve spent more money in this market than we have in a long time to gain share.”

When he joined Metro Cash & Carry Ukraine in July 2013 as part of a restructuring team, the business “was in serious decline and trouble.” He later became commercial director and then, when his predecessor left in January this year, Schumacher took over the top job.

The Metro group, with global revenues of €60 billion, is headquartered in Dusseldorf, Germany. Metro Cash & Carry Ukraine has 32 outlets, but only 26 if those in Russian-annexed Crimea and territories in separatist-held Donbas are subtracted.

Sales have reached €500 million annually in Ukraine. That’s progress, Schumacher said, considering the bumpy ride that the nation and the 4,000-employee company have been on in recent years.

“My wife always tells me, when you do one of these projects, you are the happiest person,” Schumacher said. “I’m not a really good routine guy. I need the challenge of an unstable and unsecure environment.”

He’s come to the right place.

But how does one grow sales in a shrinking economy, especially in the heavily competitive area of food sales? Metro Cash & Carry Ukraine cut costs, reviewed its assets, intensified its focus to food, talked to customers, improved supply chains and boosted its advertising budget.

“Businesses that are struggling usually try to do too many things,” Schumacher said. “You have to make sure your product is better than it was before, and better than your competitors. You have to be open, invest in salespeople (and) invest in media to sell your story.”

The upswing started in June 2014, he said, at least in terms of the quantity of goods sold.

The self-service bulk wholesaler is broken into two parts – business to business (B-to-B) sales, supplying restaurants, kiosks and groceries and a business to consumer (B-to-C) component. The B-to-C component caters to above-average income customers who own a car to be able to get to one of the stores, which are usually located on the outskirts of cities.

One big advantage in Schumacher’s line of work is that war or no war, people love to eat. “The food market is very stable in Ukraine,” Schumacher said. Even in down times, people still consume about 3,000 calories daily.

“There’s a decline in some categories,” he said. “There’s a shift from higher priced goods to lower, from imports to domestic.” Metro Cash & Carry also has some other competitive advantages over domestic competitors, including size, cash and ability to access foreign financing if needed. He regards Costco as the international role model in big-box retailing.

Beyond the numbers, Metro Cash & Carry also embraces the “new Ukraine” that is emerging after the 2013-14 EuroMaidan Revolution that drove President Viktor Yanukovych from power.

“The success of Metro Ukraine is closely linked to the success of Ukraine as a country. A stable, growing Ukraine that follows rule of law, that is well-integrated into the global economy – that is going to be wonderful for all of us,” Schumacher said. “With the limited means I have, I try to contribute to making sure that Metro Ukraine is a voice in this positive transformation of Ukraine.”

Such a Ukraine would also be good for business, forcing competitors out of the shadows and into the open, to compete under transparent business conditions such as those as Metro Cash & Carry, where the workforce receives official salaries and customers are issued official receipts, ensuring that taxes get paid. The business also screens suppliers for tax compliance and criminal records.

Schumacher describes the business approach as non-political and the same as in Russia, Kazakhstan or anywhere else. “We promote transparency, the rule of law,’’ he said.

Metro Cash & Carry’s higher visibility – through advertising, sponsorship of events, lobbying and Schumacher’s active participation in business associations – was partly triggered by a very unhappy event from the Yanukovych era.

Mykola Barash, a Yanukovych-era head of the Anti-Monopoly Committee, accused 18 retailers, including Metro, of price collusion and fined Metro €100 million alone. The fine was knocked down to €1 million, but Metro is still fighting in court.

“It’s a farce,” Schumacher said. “The case is a fabrication.”

One of the upsides of the legal fight is that the company saw the need to become better at public relations and for taking a more visible leadership role in the community. “As we learned, we have to engage more, promote more what we stand for,” he said. “We will do whatever it takes to fight this. We will not give in. We will not make a deal.”

While growing up in Germany, where he still commutes to see his family on weekends, Schumacher has spent most of his adult life in the United States. “I am a U.S. citizen and a proud one,” he said. “America has given me and my family opportunities and has shown me the true meaning of freedom.”

Kyiv Post chief editor Brian Bonner can be reached at [email protected].