Helmut Kosa

With the planned renaming of Merkur to Billa Plus, the Rewe Group is pursuing a strategy with many unanswered questions. Can the challenge to market leader Spar succeed?

From April 2021, following Konsum, Pam Pam, Mondo, Schlecker, Löwa and Zielpunkt, the name Merkur will also be consigned to the graveyard of retail brands. From a business perspective, the rebranding to ‘Billa Plus’ is a perfectly understandable strategy in the short term – perhaps also in the medium term. After all, last year Rewe lost its top spot in the market to Spar for the first time in the history of domestic food retailing. The idea of bundling the marketing activities into Billa and Billa Plus is certainly the right one from this point of view. In doing so, the Rewe Group can exploit synergistic effects in certain areas, use advertising budgets more efficiently, appear stronger with a common brand, and continue its growth.

A courageous step or a highly defensive strategy?

From a brand perspective, however, the question arises as to whether “Plus” is really a good solution? In the long term, this can only generate a growth advantage if Rewe succeeds in uniting the different marketing targets of Billa and Merkur into a single strong brand. At first glance, this strategy appears to be defensive – as it means giving up Merkur’s premium positioning. The brand promise of the retail chain, founded in 1969, included a more upscale shopping experience with a focus on freshness and a broad selection of high-quality products. It is questionable whether loyal fans of Merkur’s green logo will be persuaded to move to the ‘Plus’ variant of the yellow-red Rewe subsidiary in the future, or whether they will lose their loyalty to ‘Fränz’ (the face of the customer club ‘Friends of Merkur’).

Neither fish nor fowl

A central problem of the strategy concerns the rather uninspiring naming: there was more potential here. What does it mean for the original Billa brand if there is suddenly a ‘Plus’ variant? The ‘Plus’ suggests that a distinction will be made between a better and a worse Billa. The original brand is not upgraded but automatically devalued, because a ‘plus’ includes a qualitative component. By comparison, competitors such as Spar made clear reference to the size of their stores when branding them – see Eurospar and Interspar – and in doing so did not create a worse position for the smaller market.

From the existing Merkur customer side, the future name Billa Plus is also unappealing. The name originates from Billa – a brand that was never positioned as high in quality as Merkur. When Karl Wlaschek launched the grocery shop in 1961, he derived the name from ‘cheap shop’. The existing Merkur customer may therefore feel devalued. The hoped-for image transfer and upgrading of Billa does not happen. In addition, even with a green-branded Billa Plus, the image of the original yellow-red brand still resonates emotionally. Also, ‘Plus’ ultimately means something different to everyone – in the worst case it becomes the opposite: Minus.

Missed opportunity to challenge Spar?

The attempted attack on Spar’s market share could turn out to be an own goal. With this defensive strategy, Rewe has the chance to optimise its current business. But the probability of reaching new target groups is somewhat low. With Merkur soon to disappear, the Rewe group risks losing loyal customers who dislike the new brand image. Whether this strategy will be enough to regain the mantel of market leader from Spar is the big question. A bolder and more offensive strategy would probably have generated more fanfare for the launch of Billa Plus and attracted potential customers: a strategy that both upgrades Billa and opens up new target groups for the recently weakening Merkur. In any case, it will not be enough to simply stick a new brand on it – the new brand must be energetic and offer both employees and customers a truly tangible advantage compared with the past. Otherwise, there is a danger that Billa Plus will become a big minus for Rewe.

Guest commentary was published on 8th February 2021: cash.at