Vitalia focuses on socially responsible expansion

With 83 stores, Vitalia is the biggest retailer in the health food sector. Whereas the priority during the time of the former owner, Bernd Büttner, was aggressive expansion, under the management of Otto and Peter Greither - the owners of the manufacturer Salus and the new owners of Vitalia since the beginning of 2010 – there will be moderate expansion whose aim will not be a price war with other health food stores. “We’re focusing on advice and we want to be the best by virtue of our quality and modern stores,” say top managers Florian Lindner and Ulrich Kranzer with one voice when interviewed by Organic-Market.Info. (Picture: Vitalia store at Viktualienmarkt, Munich’s famous food market)
Up to two or three years ago, Vitalia opted for combined health food and organic stores with 400 – 900 m² of retail space, a high proportion of fresh produce and a complete organic supermarket product range. With the name Bio B (B for Büttner), a new marketing strategy was introduced alongside the traditional Vitalia health food stores. It was said by people in the industry that, because of time pressure, the rent on some premises was abnormally high. When Vitalia became insolvent in October 2009 (see our earlier report), these health food and organic supermarkets and about a further 40 stores were closed by the administrators in order to return the company to viability. This bold contraction in size was the right thing to do, and Vitalia could then be sold. The firm with all its employees was acquired by Otto and Peter Greither. (Pictures: Vitalia store in Augsburg)

One of the inherited legacies from the past was the fact that many of the more than 87 remaining stores had not been modernized for a long time – in some cases for more than ten years. All the financial resources had gone into expansion and large-scale stores. “One of the reasons for the collapse of the old Vitalia was the large-scale stores,” is the view of the current management. When renting premises today, the target retail area is 120 – 200 m². Only 17 Vitalia stores come into the organic supermarket range of 200 – 400 m². “However, with 400 m² of retail space advising customers is difficult,” says Florian Lindner. “We’re concentrating now on the core of the health food business,” states Ulrich Kranzer. Whilst in 2010 and 2011 considerable investment had again to be undertaken, the two executives expect to break even in 2012. The company is happy with its turnover of 47 million euros in 2011. What is encouraging is that with the same retail space growth of 6-8% has been achieved. In about two to three years time, the current round of modernization will come to an end, and all the shops will have been given contemporary upgrading.

At the beginning of 2011, Vitalia re-positioned itself, with four different types of store, the gradual modernization of premises and moderate expansion.

The four types of store are the town-centre premises with premium locations consisting of a retail area between 80 and 120 m², mostly without fruit and vegetables but with a small dairy product offering. Similar to these stores are the outlets in railway stations and shopping centres that don’t have a great deal of retail space but benefit from high footfall (Leipzig, two in Berlin, Stuttgart). In these stores, they concentrate not only on a dry goods range but also on high-price products like cosmetics and food supplements. The local food shops with 120 – 220 m² are located in residential areas, sell fresh bakery goods and have 6 – 8 metres of chilled shelves for the white and vegetarian range and also shelving for fruit and vegetables. This applies to the large-scale specialist organic health food stores with up to 400 square metres. 48 of Vitalia’s stores are in Bavaria, 16 in Baden-Württemberg and the rest are found in East Germany, Berlin and Bremen. (Picture: Magazine display in the entrance area)

“We don’t want to compete with Alnatura and Denn’s,” is the clear message from Lindner and Kranzer referring to future development. What is principally acknowledgment of the economic strength of the two big players in the industry applies to the health food sector as well. “We’re not focusing on competition and squeezing out the others – a price war won’t take us very far,” is the clear and unequivocal standpoint. “We’re a specialist trade and not discounters, and we don’t want price competition, either with other health food stores or with drugstores.” The sins of the past are to be put right: in Karlsruhe a Vitalia store is soon to be closed because it is across the street from the old established health food store Neuleben.

But, as Mr Kranzer concedes, it’s not easy to get customers who are expecting bargain prices to think along different lines. To provide customers with information, Vitalia is relying on a 4 – 8 page monthly flyer that has a print-run of 740,000 copies. A dozen stores with an especially large stock of fresh foods are given in addition “Frische-Kick” – a brochure that appears fortnightly and advertises fruit, vegetables and dairy products. The company also focuses on adverts in daily and weekly papers, centre advertising material and ads on commercial radio.

Expansion is now to go ahead with five to seven new health food stores a year. “In this figure we include take-overs of health food stores nearing closure that might have had a problem with who would continue the business,” Ullrich Kranzer explains.

The proportion of organics in the product range of Vitalia will probably be considerably higher than is stocked by other health food stores. Vitalia allocates prominent shelf space to whole food companies, with priority given to Rapunzel. This is why a far bigger organic range than usual is offered, and this means we can expect to see 80 % organic. Söbbeke, Andechser, Barhouse, Allos, Zwergenwiese, Soto and Taifun are well represented too (see picture).

Fresh green produce is delivered several times a week by Dennree to the stores that stock fruit and vegetables. Since this applies to 60 % of the 83 stores, the share of turnover is only 5 %. However, in the case of cosmetics, the figure is 15 %, and dairy produce is 11 % of turnover. The company states that 18,000 articles are listed for their health food retailers, although this range is to be streamlined in the future. The target is 12,000 in order to focus more attention on the 4,000 fast-moving lines. The main wholesale suppliers are, apart from Dennree, Claus-Pural and Menson. As well as fruit and vegetables, you find fresh bread and bakery goods of organic quality (with the exception of the Schär gluten-free line). However, the organic offer varies greatly. Whilst in the current model store in Augsburg a rather small bread shelf might not be totally convincing, in the shop at Viktualienmarkt in Munich, the customer has the same choice as in an organic baker’s shop. In this case – shop-in-shop – Vitalia operates in collaboration with Schubert, the wholemeal bakery (picture).

“It has to look light, friendly and modern and appeal in particular to younger customers,” explains Ullrich Kranzer, who has been with Vitalia since February 2011. The 38-year-old business graduate was for three years the personal assistant to Peter Greither before his move to Vitalia. Greither lives in Switzerland, from where he manages his various business interests. Kranzer’s remit covers marketing and PR, sales, control of the stores and expansion. He says that he had previously compared shop concepts in great detail and had studied marketing channels. “From on high, I’ve had a look at lots of practical examples in the past.”

Although in some of the stores they are still using old electricity-consuming, plug-in chilled shelving, they are working on an efficiency revolution. New cabinets are being installed (picture) or doors are being retrofitted. Since December 2010 all Vitalia stores have converted to eco-electricity. The lighting is to be converted later to LED, which equates to an almost 90 % saving of electricity.

Apart from Kranzer, Florian Lindner works in the operational field. The 27-year-old has worked for eleven years for the Greither family, for example at Salus in Brückmühl in controlling, one of the staff positions in the company management. He was also entrusted with the reorganization of the Greither company Herbaria in Fischbaubach. He is currently responsible for commercial management, including accounting, personnel, IT and purchasing. The two new top executives have the support of all the department heads who have years of experience in the health food business: Ruppert Zimmermann (sales manager and a Vitalia veteran), Florian Bauer (purchasing manager and a permanent fixture) and Klaus Stocker (responsible for expansion).

The white coats (picture) that Vitalia’s employees wear are hardly contemporary and are reminiscent of a chemist’s shop. So there could be further changes and improvements in the retail business at Germany’s biggest health food company until this relic of earlier times is finally laid to rest. In the future, Vitalia will have to think harder about what the company stands for.

“We want to play a pioneering role for the health food industry,” says Ullrich Kranzer optimistically. Without a doubt, they have now completed the first stage of this aspiration. (Picture on right: Talking to customers, Vitalia store at Viktualienmarkt in Munich)