Supermarket chain Tengelmann is to revamp its 700 German stores to focus on fresh produce.

The retailer is understood to be poised to roll out a new store design, which will involve shop exteriors taking colour inspiration from the German flag. The red, gold and black design will replace the existing red and beige colour palette. Inside, bright coloured wall panels and posters will replace the tiled walls.

Tengelmann’s fresh-food concept will go head-to-head with German grocery rivals Rewe and Edeka, which are increasing their convenience store numbers and fresh-food offers.

The move follows the conversion of 75 Tengelmann stores to focus on fresh, local, organic and fair-trade produce. About 60 per cent of the product range is fresh and 40 per cent is dried.

The new shops also have 10 per cent more staff in order to provide better customer service. The shops that have been converted already are understood to be achieving double-digit growth.

Matthias Queck, retail analyst at Planet Retail in Frankfurt, said: “Tengelmann is a relatively small player in the German supermarket sector and it could not compete with the price-oriented retailers, so it moved the brand to a more upmarket format.

“The first stores it has converted seem to have been successful and have given it a niche.”

Rival Rewe is set to roll out more convenience stores, while Edeka is searching for city centre locations where it can introduce more fresh-food offers.

“Tengelmann has strong competition from the larger supermarket chains but, in certain areas, it has strongholds where it can do well,” added Queck.

The retailer’s strengths lie in four core regional areas: Nord-rhein, Berlin and Umland, Rhein-Main-Neckar, and Munich and Oberbayern. It is thought that Tengelmann will focus on converting its stores in Hamburg and Munich initially.

Sales for Tengelmann Group’s financial year 2006/07 in Europe were up 4.9 per cent to 19.24 billion (£15.24 billion).