German retail behemoth Rewe, which refers to itself as Europe’s leading food retailer, has fleshed out the bones of its strategic expansion in Italy via organic growth and acquisition. Within the space of just twelve months, the Cologne-based group is set to complete a third major transaction in Italy, reports Swiss daily Schweizerische Internationale Tageszeitung.

Having taken 100% control of Penny Italia at the end of 1999 and acquired more than 50 Plus stores in Tuscany at the end of last January to reinforce the Italian division of its Austria-based Billa supermarket chain, Rewe is now buying the long-established retailer Standa, which headquarters in Milan. The deal places Rewe securely in the Italian retail super league, with more than 320 stores and annual turnover in excess of DM2.8bn. Most of its stores are in the metropolitan areas of Rome, Milan, Turin and Genoa.

Billa’s formal acquisition of Standa will be completed on 1 January 2001, on the condition that approval is given by the Italian competition authorities. Its present owner, which is relinquishing Standa for an undisclosed sum, is the Banca Mediocredito Lombardo, the retail banking arm of Italy’s Banca-Intesa group.

Following substantial restructuring in the last two years, Standa currently operates 119 supermarkets and cash & carry outlets in northern and central Italy and Sardinia. Annual turnover is estimated at DM1.6bn. The fact that Standa is being bought by Rewe’s subsidiary Billa rather than directly by the parent company indicates that operating synergies have been identified between the two operating divisions. Rewe confirmed this view in a press release which stated that the Standa stores would neatly complement the existing network of Billa outlets.

This expansion of Rewe’s presence in Italy is further evidence of a southern European strategy that has taken shape in the last two years. A linchpin of this strategy was the decision to withdraw from Spain and concentrate efforts on Italy. First Rewe bought out its Italian partner Esselunga in the Penny Italia joint venture, and this was swiftly followed by an overhaul of its holding partnership with compatriot rival Tengelmann. In a complex exchange of interests, Rewe sold its 40 Penny outlets in Spain to Tengelmann España in return for 54 Plus stores in Tuscany and environs. However, Tengelmann retains control of a further 38 Plus outlets in the Rome area, which did not form part of the deal.

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The prevailing wisdom informing this country-focused shift in strategy was the opinion of both German retailers that it made little sense in the long term to focus efforts on two southern European markets, each with negligible market share, if there was greater potential for success in one country.