French retailer Carrefour has taken the decision to consolidate its procurement for six of its most important markets and is establishing its own procurement center in Spain from where it will manage procurement for the G6 region which includes France, Spain, Italy, Belgium, Romania and Poland.

Recently, Carrefour has gradually abandoned partnerships with its competitors, so the decision to establish a European purchasing center is not at all surprising. At the beginning of 2023, a buying office called Eureka would be opened in Madrid, with teams already being prepared for negotiations, according to the specialist publication LSA. Eureka will only negotiate with major suppliers, while negotiations with local manufacturers will be conducted with the purchasing departments of each market. Thus, Eureka will have a reference and purchasing role on behalf of the six countries for the big brands, with a single interlocutor, a single contract and a single administrative process for orders and invoicing.

For Carrefour, according to the international press, the objective of this dynamic is also a rationalization of the flow of goods and the use of data in decision-making, a more precise monitoring of the business and a better measurement of commercial performance.

Carrefour is on its second attempt to centralize purchases at European level, after 10 years ago it tried to convince international brands to enter a centralized purchasing system, based on a centralized price corridor at European level. The first attempt was stopped after 12 months. The model that Carrefour is trying to adopt is a super efficient model, invented in Europe by the Schwarz Group, where negotiations for everything that means an international brand are centralized in Germany, and at the local level only promotional programs and "in" opportunities are discussed. /out”.

"Carrefour's strategy seems to come in the context where the vast majority of global brands draw their strategy at the regional level, restructure their negotiation teams and evolve towards a centralized business model, with moderate local agility. One of the very important points to understand will be related to how profitability will be allocated between the regional purchasing center and the local purchasing team. If the business model between regional and local will be successfully accepted by the local teams, Carrefour will be able to fully benefit from a better and more competitive pricing in the respective markets", says Lucian Marin, Managing Partner Growth Leadership Consulting.

How does this move translate for the local market

According to the information provided by the French retailer, Carrefour Romania will continue to negotiate with its Romanian suppliers, consolidating the already linked partnerships and developing new ones, all so that Romanians can consume local products, with an authentic Romanian taste. Carrefour Romania has the largest portfolio of local producers in the area of fresh food, with over 1,300 farmers nationwide, of which 600 producers are ultra-local. Furthermore, Carrefour collaborates with 19 cooperatives, of which 15 as suppliers and four as partners: Our Garden in Vărăști, Our Garden in Zarand, Our Garden in Insuraței and Our Garden in Brezoaele.

"The new procurement office will allow us to modernize our supply chain and IT systems to streamline the flow of goods. Data will be at the heart of this development to support collaboration, decision support, monitoring business plans and measuring business performance. The objective is to have a single point of contact for very large international companies, with global coverage, a single European contract and simplified administrative processes for orders, invoices and payments," Carrefour officials told Progresiv.

"The model seems to help in the future all 3 important directions related to procurement, by creating time opportunity and by maximizing procurement capabilities: a competitive price on global brands, a local assortment, with national brands and "differentiation" brands, and a sustainable private label ecosystem, both with local and international production. Through this move, Carrefour can achieve a change that will create a very good dynamic of profit and competitiveness", Lucian Marin also pointed out.

Competition authorities' pressure on alliances

Carrefour's decision to centralize purchases at European level comes in a context of wider movements in the European procurement market. Thus, after Carrefour announced in June that it was ending its partnership with Systeme U, the French retailer decided to abandon the collaboration with Louis Delhaize, the owner of cora hypermarkets. The partnership between the two players started in 2014. Since then, Carrefour France has negotiated the purchase conditions with the largest producers of consumer goods not only for its own stores, but also for the cora hypermarkets and the Match supermarkets of the Louis Delhaize group. The procurement collaboration agreement will end on February 28, 2023 in the French market and on December 31, 2022 for Belgium and Luxembourg.

Following the conclusion of the collaboration between Carrefour and Louise Dehaize, the owner of cora has taken the decision to sign a five-year partnership with Intermarché. The two retailers announced that the alliance should strengthen their competitiveness in the market. However, both groups will retain their autonomy and commercial independence.

Buying alliances are a controversial topic in the FMCG industry. According to many manufacturers, they serve mainly to increase the profit margins of the retailers involved. According to retailers, such alliances are a must to create a more level playing field in negotiations with multinationals and lead to lower selling prices in stores.

In addition, competition authorities are also placing increasing pressure on the acquisition of alliances between competing retailers. The coincidence leads Italian authorities to suspect Carrefour Italia of committing fraud with false invoices for four years. Grouping purchases in a central office could avoid similar abuses or suspicions.

"History shows that buying alliances are only a vehicle for additional 'taxing' of global brands through assortment-level 'sanctioning' power or brand activation at the point of sale, with no added value for FMCG manufacturers. In the case of global or regional purchasing powerhouses, sanctioning power can be transformed into an engine of "value creation" through data sharing, global listings, higher speed of regional listings, brand execution campaigns or accountability campaigns social", concludes Lucian Marin.

Article appeared in Progresiv Magazine