Annelies Vlasblom

Eyes on the price

International supermarket buying groups in Europe

Publication

Gisela ten Kate

Sanne van der Wal

15 March 2017

Many leading European grocery retailers – including Kaufland, Metro, Ahold Delhaize, Edeka and Rewe – are increasing their leverage on suppliers through international cooperation and bundling volumes. At least six international buying groups (IBGs) operate on a European level; their main aim is to combine procurement in order to get discounts. Especially basic (private label) products that are uniform and can be bought in bulk, lend themselves to joint procurement. IBGs may negotiate discounts as high a 10 per cent, compared to the price an individual retailer would have to pay. The opportunity for IBGs to negotiate these levels of discounts depends not only on the type of product and the (often limited) bargaining power of suppliers but also on the ability of IBGs to align buying projects and product requirements. If they succeed in aligning buying projects, IBGs can make use of their retailer power: they have a potential consumer turnover that outranks leading individual retailers in Europe.

IBGs do their work behind the scenes without the general public being aware of them. The fact that IBGs create conditions that may facilitate unfair trading practices (UTPs) should be an important focus of the coordinated European approach to tackle unfair practices in the food supply chain that the European Parliament calls for. IBGs should use the full potential of their leverage to jointly strengthen the requirements on sustainability and put primary producers and workers at the core of their negotiations, instead of just the lowest price for their members.