Why does Picnic investment make sense for Edeka?

Edeka, the German market leader in groceries, is increasing its stake to 25% in the Dutch pure-play online grocer Picnic. Picnic aims to raise 500 M€ more funding for continued growth in Germany and France.

Clarity of online strategy

Edeka has for years been unambiguous about how it wants to approach online grocery retailing. The company had not committed to investing heavily online before investing in Picnic back in 2018.

For a long time, the online grocery market in Germany developed slowly and had only a miniscule market share. However, that has changed with the introduction of Picnic and Knuspr and the pandemic.

All of a sudden Germany has become one of the hottest online grocery markets in Europe.

By focusing its online efforts on Picnic, Edeka clarifies how it will approach online. Instead of developing on multiple fronts, focus enables the company to concentrate on the most essential.

Edeka focuses on stores, having the option to go all-in

Picnic lets Edeka focus on developing a more profitable and familiar store business. This does not need new kinds of investments in physical infrastructure that can be costly. Nor does this need new kinds of capabilities to be acquired.

At the same time, Edeka can learn from Picnic how the online channel works and what kinds of customers buy online. With a 25% share of Picnic Edeka would probably get rather good transparency into the performance of the company.

At the same time Picnic is left to develop the business as they see fit. This enables the highest probability that Picnic can keep continue to grow rapidly.

Inside Edeka, the 60+ billion € corporation and its bureaucracy would probably crush Picnic, a small and unprofitable quirky model of the future.

If Picnic continues performing as Edeka expects, Edeka can continue to increase its share of Picnic. Thus, eventually, Edeka could buy out the whole Picnic and have a fully-fledged online grocery operation.

Going into markets where Edeka is not present

With the rapid growth of Picnic, Edeka is indirectly expanding abroad. As a company operating solely in Germany, Edeka will learn a lot about how to operate in the Netherlands and France. As close as the countries are geographically, they are somewhat different as grocery markets.

The nascent expansion to France will give Edeka a valuable perspective on expansion. Even though Picnic has a different sourcing partner in the country (Cora), Edeka can still follow how the expansion unfolds and what kinds of bottlenecks there are. If Picnic is to expand successfully into France, it will most certainly attract more interest from Edeka.