The Zurich regional cooperative has probably lost more than 150 million francs with fitness centers abroad. The case shows that Migros has to clarify its structures.
Rearranging at Migros – the supermarket business is to be reorganized.
Migros Zurich literally wanted to flex its muscles abroad. From 2012 she began to build up a network of fitness centers in Germany and other European countries. But the ambitious plans failed. At the beginning of 2022, the largest Swiss Migros regional cooperative had to admit that it was withdrawing from the business.
As NZZ research now shows, the loss from the engagement was surprisingly large. Migros Zurich has probably lost more than 150 million francs over the years with the fitness centers abroad. This emerges from an analysis of annual reports.
Restrained information policy
The exact amount of the loss would also be of interest to the members of the Migros Zurich cooperative. But the company has never commented on it. It is true that Migros Zurich regularly publishes media releases on branch openings and showcase projects. But she didn’t issue a press release on exiting the overseas fitness center business. The case was only because of media reports famous.
Migros Zurich then published some information on the financial consequences of the failed foreign engagement in its Annual report for the year 2021. For laypeople, however, the information is hardly understandable; they received no attention.
Exit leads to deep red numbers
It’s all about the numbers. When Migros Zurich sold its foreign fitness centers (“Aciso Fitness & Health GmbH”) to a financial investor at the beginning of 2022, it cost around 73 million francs for the 2021 financial year alone. She had to completely write off the Aciso stake, waive claims and even inject capital as a “dowry”.
The loss made a significant contribution to the fact that the largest Migros regional cooperative reported deep red numbers in 2021 – it was the third year in a row. For comparison: in normal years, Migros Zurich achieves an operating profit of around 50 million francs with its domestic retail business.
Problems started before Corona
When withdrawing, Migros Zurich gave the reason that the corona pandemic had led to a major upheaval in the fitness world and was also demanding for Aciso. But this explanation is hardly convincing. According to Industry Overviews the fitness industry in Germany, Aciso’s main market, came through the Corona crisis relatively unscathed, also thanks to state aid.
In addition, Aciso’s problems began earlier. An analysis of annual reports by Migros Zurich shows that, starting in 2016, the company waived claims on loans to the foreign fitness subsidiary almost every year. She also injected fresh capital several times. In 2019, she wrote off the stake for the first time by around half, namely by 55 million francs.
The reason for these cuts was probably an unsuccessful business policy. Calculated over the years, according to NZZ calculations, a total loss of more than 150 million francs should have come together. However, due to the complexity of the situation, it is not possible to determine a precise figure.
On request, Migros Zurich did not want to provide any information on the exact amount of the loss. The company management also refrained from commenting on the processes surrounding Aciso.
Unlucky abroad
The failure of the Aciso adventure is part of a long series of unsuccessful foreign engagements by the Migros Group. Even insiders at the orange giant had long wondered why the people of Zurich actually run fitness centers abroad.
The events are also important because a power struggle is currently taking place at Migros between the regional cooperatives and the headquarters – the Federation of Migros Cooperatives (MGB). The fact that there are dissonances became apparent when MGB boss Fabrice Zumbrunnen recently surprisingly announced his resignation as of April 2023. Zumbrunnen seems to have been increasingly worn down because he wanted to streamline the complicated structures of Migros, but encountered resistance from the regional cooperatives.
Migros wants to clarify its structures
Migros has now confirmed that the FMC and the ten regional cooperatives are talking about how they want to work together in the future. According to insiders, the structures should be clarified before the next Migros boss takes office.
This involves questions that are as difficult as they are sensitive: What should the regional cooperatives still be able to determine and do themselves in the future, and what is the head office responsible for? Until now, the ten regional cooperatives, which are legally independent companies, have had a great deal of leeway. So they could also start adventures abroad like Migros Zurich with their fitness centers.
But it has long been evident that centralization is needed. The big competitor Coop abolished the regional cooperatives around twenty years ago and has since developed successfully with tight central management.
Struggles for the supermarket business
The focus of the talks is the supermarket business in Switzerland. The shops with the orange M are run by the ten regional cooperatives. The regions are already working together on some issues or have handed over certain functions to FMC, for example most of the purchasing. However, parallel structures still exist, resulting in excessive costs and inefficiencies.
The creation of a “supermarket AG” is now being considered within Migros. The supermarket business in Switzerland is to be bundled in the new, independent unit. Mixed teams from FMC and regional cooperatives will discuss the structure of the new supermarket organization over the next few weeks.
But many questions remain open. It is controversial, for example, who should be responsible for functions such as purchasing, logistics or expansion planning. It is also unclear whether the regional cooperatives or the MGB should have the say in the new “Supermarkt AG”. It will be of great importance for the future of Migros to clarify these questions convincingly.