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Consumers Block Take-Over

DW staff (als)November 13, 2007

Shoppers at the German organic foods supermarket chain Basic have pressured the company to retreat from an alliance with the Schwarz Group that operates the highly successful discount chain Lidl.

The produce section in a supermarket, filled with green vegetables
Organic food consumers didn't want a discounter saying what goes on Basic's shelvesImage: picture-alliance / dpa/dpaweb

Georg Schweisfurth, co-founder of Basic, expressed relief over the Schwarz Group's decision to back out of the deal to buy out the organic food store chain.

"I'm glad," Schweisfurth told Munich's Abendzeitung newspaper.

Basic customers had put on the heat with their pocketbooks -- buying less to show their displeasure over the possible buy-out and the aggressive business policies pursued by Schwarz, which owns the hugely successful discount grocery chain Lidl.

Though Basic had been seeking outside capital in order to expand, it bowed to customers and blocked the further sale of its shares to Schwarz.

"The customers have won," Schweisfurth said this week. "This is the first time in history that they have voted with their shopping lists on how organic farming should work."

Take-over would have had negative effect

In a press release on Friday, Nov. 9, Basic had said, "We underestimated the psychological effect that a buy-out of our stores would have."

Bottles of the organic beverage Bionade
Bionade is another organic product that has boomed recentlyImage: dpa - Report

The Schwarz Group had begun buying into Basic in February, raising its stake to 23 percent, at which point it began putting forward proposals for a buy-out.

Basic management and customers became incensed and some suppliers refused to continue business with the chain.

The Berliner Zeitung newspaper commented that the turn-about showed the power of consumer pressure.

"The idea that a company worth billions, which is known for its poor working conditions and tough buying policies, should bully its way into the organic sector did not suit them," the paper noted.

Not only does the organic label stand for healthy food, but also for ethical practices and the careful use of resources, the Berliner Zeitung added.

Pullout requires slower expansion

Basic has now said it would slow its plans for rapid expansion. Rather than the 25 to 50 stores it had intended to open annually after the Schwarz take-over, it will now open only five to 10 per year.

The company said it hoped the move reinforced the trust customers and suppliers originally had in Basic.

Basic is the second largest German organic foods supermarket chain after Alnatura, and had a turnover of 73 million euros in 2006, as reported by AP news agency.

The market in Germany for organically grown food grew by 18 percent last year, with the rapid increase forcing retailers to seek suppliers abroad, according to the DPA news agency.

At the same time, the amount of organic-farmed area rose by only 2.3 percent, or around 4.9 percent of the total area cultivated in Germany, creating tight market conditions.