Dennree: “Holistic approach brings many advantages”

Dennree, founded in 1974, has been instrumental in shaping the history of wholefoods over the last 35 years. “Shaping the organic industry together” is the watchword that encapsulates this market leader’s commitment to the future. The company has created the BioMarkt-Verbundgruppe, a network of over 200 independent retailers that will play an important role in this endeavour. This explains why Dennree sees itself today not only as a wholesaler but also as a retailer. With numerous exclusive brands in both food and non-food, Dennree is challenging the conventional food trade. Denree, the organic company with the highest turnover in Germany, concentrates exclusively on the specialist trade, and from its headquarters in Töpen it does business with around 1,500 retailers in Germany, Austria, South Tyrol and Luxembourg. Organic Market.Info visited the company. (Picture: Company headquarters in Töpen)
One of the 160 lorries belonging to the company is a reminder of the early days of the organic market partnership concept, when the predecessor of the current network was called “Naturring”. You can still see the name in faded lettering on the old 12-ton lorry, whose advanced years mean that it can now only be driven on company property. It is impossible to say now how many tons of wholefood have left the nine Dennree warehouses at their various locations over the years since the early 1970s. It could well be in the millions. An old upholstery factory on the edge of the village of Töpen was converted in 1986 to create the first warehouse where the company headquarters now stand. Töpen is in the administrative district of Hof in Bavaria – the wider region is called the Vogtland – and was not far from what used to be the Iron Curtain separating West Germany from Thüringen. Since those days, the storage capacity has been expanded to 40,000 m², with room for more than 27,000 pallets. With around 10,000 articles from 600 suppliers, 1,500 retail customers, a massive fleet of vehicles, 1,050 employees and a turnover of 330 million euros (2008), the Dennree group is one of the top-flight companies in the organic trade in Europe.

“We’re aiming at the middle of society with our products,” says Peter Knopp (picture), the head of department for trade at the headquarters in Töpen. The fact that the wholesale business has eight regional warehouses across Germany and is also present in Austria (Dennree Naturkost Handels GmbH) simplifies the logistics: “One of our great advantages is our optimal distribution in the regions,” explains Knopp. There are hardly any journeys with empty lorries. After a delivery, empties and packaging are got ready for loading by the retailers, and goods are collected from suppliers along the route and brought to the various warehouses or to Töpen itself. “Collecting goods from our suppliers saves both a great deal of money and CO₂,” says Knopp, and he adds: “Our 190 lorry drivers play a very important role – they are our representatives dealing with customers, and they and the 230 employees in the warehouses determine how the company functions.” In Mr Knopp’s estimation, it is not just the calculable costs that are of benefit to an insourcing company, which means not relying on subcontractors but on its own operational efficiency: “Our holistic approach brings many advantages.”

The company’s three million product brochures every two weeks clearly can’t be printed in-house. However, it does have facilities for ripening bananas and packing citrus fruits, potatoes, onions and cheese. Regarding empties and recycling, Dennree insists on sustainability: it consistently applies a re-use policy, so that practically everywhere agricultural produce is collected in re-usable crates. Packaging materials are returned by customers and recycled – all of which takes up a basement area of 5,000 m² and keeps 12 employees occupied all the time. Dennree is one of the biggest employers in the district round Hof and takes its role in the locality very seriously: the various operations – fresh food (1,510 items), fruit and vegetables (433), dry goods (4,670), frozen foods (300), drinks (570) and pharmaceuticals and cosmetics (2,720) – are all covered round the clock by the employees. Automation is found only in the new high-stack warehouse where whole harvests, in the form for example of conserves, are stored. (Picture: Storage of dry goods)

Regarding the product range, company policy is to give top priority to quality and a good price-performance ratio. They stay in constant touch with retailers and are always improving their 32 Denn’s Bio-Markt stores (plus 5 in Austria) and the product range according to location. As well as the employees who check incoming goods, there are four who are responsible for quality assurance. “This means we can react quickly and flexibly,” says Peter Knopp. Despite these facilities, approximately 400,000 euros are spent every year on testing in external laboratories. “However, the best guarantee of perfect goods is our longstanding collaboration with companies that we have helped to become established and that have grown with us,” explains Knopp. He is a commercial expert who came to Dennree from the company Bremke und Hörster/Famila in 2003. What he really wants are companies that only supply the specialist wholesale trade. “Sustainable food retail is only possible if there is centralised storage where there is quality assurance and structured logistics. For us, the ideal suppliers are those who don’t supply retailers direct.” He went on to say that it is also easier to spot fraud if there are centralised operations and controls. (Picture: Denn’s BioMarkt in Bamberg, opened 9 July 2009)

Especially important in the product range are the more than 350 articles comprising Dennree’s exclusive brands Bergquell, Biomarkt, Dennree, Gustoni (picture), Königshofer and Yalia. “It is our mission to make available to customers professional brand articles that are fully competitive with the organic products of the conventional retail trade and drugstores,” explains Knopp. These brands are produced almost exclusively by specialist manufacturers like Berchtesgadener, Söbbeke and Voelkel. “We achieve reliability in taste and in quality, but because of the volume we can price the goods attractively.” The intention is, however, to expand Dennree’s own brands as gaps in the range occur that are not covered by innovative genuine manufacturers’ brands, because “variety is our trump card, and we want lots of good manufacturers on our shelves.” At the moment Knopp sees a need in the product range mainly for ice cream, body care and cosmetics and is critical of their competitiveness with the conventional retail trade and drugstores. This is the reason why, after a two-year introductory phase, they are planning to extend the Dennree cosmetics brand Yalia.

“The world of our brands is colourful and valuable and has a good price-performance ratio, so that we are reaching a wide target group – principally families,” is how Knopp explains the concept. Dennree’s retail concept in particular – Denn’s stores – attracts a very young clientele with an average age of 40. 50 % of them have the customer card that is now used by 100,000 consumers and is an excellent means of appealing to specific target groups like vegetarians.

Price management and brand management are issues that are high on Dennree’s agenda, but they say there is scope here for further development. “We are constantly talking to manufacturers about brand policy and pricing, because we expect every brand article to be reliable in terms of taste, quality and price,” Kopp explains. He is not satisfied with the sometimes tough negotiations on the reliability of some brands articles when it comes to pricing. Dennree thinks it will have greater scope in pricing with the foundation of the new network. With the “established community of values”, as Dennree calls the network of currently 205 retailers, the company has become the market leader in retail too. At least 70 % of turnover with a projected 300 businesses would secure the company’s future and would be a huge increase in its market power. (Picture: The textile range with the brand name Living Crafts is being extended)

The aim is to concentrate and secure the purchasing advantages, to further reduce costs, to increase turnover and gross proceeds and to defend the margins – in short to shape the way the organic trade functions. “We see the organic network in an overarching role. The values and interests that we represent are unequivocal and move the wholefood trade forward,” says Knopp. He explains that this has led to joint guidelines regarding the product range, and this is going in the same direction as the guidelines being developed by BNN Einzelhandel (the organic retailers’ association), the Verband der Bio-Supermärkte (association of organic supermarkets) and Naturkost Südbayern (association of wholefood stores in southern Bavaria). Dennree parted company with BNN Herstellung und Handel (organic producers’ and traders’ association) last year after disagreements over the approach to be adopted towards the conventional retail trade. “The network BioMarkt Verbundgruppe calls for unambiguous specialist trade loyalty on the part of brand manufacturers.” For some time now, Dennree has been in favour of creating a powerful joint representation of the interests of the specialist wholefood trade in order to overcome the fragmentation of the industry. Knopp’s conviction: “A merger of BNN EH, BNN HH, the Verband der Bio-Supermärkte and BÖLW (association of organic food producers) can only produce winners.”

Expansion is being carried out at a moderate pace (see our earlier report) but it is going in several directions: in Germany with new Denn’s stores being opened and run by the company (10 in 2009) plus various forms of collaboration with chains like Aleco (Bremen), Füllhorn (Sulzfeld), Viv (Berlin) and others. In Austria, Dennree is working together with the chain Maran (Vienna), and they have a joint advertising concept (5 Denn’s and 5 Maran stores in Austria). “The regional manufacturers have become established, and slow expansion can begin in Austria,” Knopp says. In South Tyrol several Naturalia stores and participants in a small association in cooperation with the Verband der Biofachgeschäfte (association of specialist organic stores) are being supplied. In Luxembourg, Dennree delivers to the Naturata stores. There are currently no other countries being supplied.

Dennree is obviously not troubled by the fact that the majority of specialist manufacturers produce goods for the conventional retail trade and drugstores. “We accept that and don’t condemn it. However, we do think that trade marks and second brand marks should always be used for the conventional trade, because the classic specialist trade marks are reserved for the specialist trade that has after all developed them,” says Knopp. “Of course, we also compare prices, and we want exclusive products. Supplying the conventional retail trade is detrimental to the image of specialist trade brands when they stand side by side in a shop with Coca Cola, L’Oreal, Nestlé and Unilever.” It is our experience that with a well run specialist organic store you enhance your image and can achieve higher turnover than is possible with partial ranges or full ranges in conventional retail stores like Karstadt Bio-Markt.

Dennree is happy with an average growth in turnover of 3 % in the first half year. The companies participating in the network even experienced growth of more than 15 % in the same period.


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