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Early May 2024 marked an important milestone in the continued evolution of European retail, with Casino completing the sale of an initial set of 121 stores in France to Intermarché, Auchan and Carrefour for a transaction value of €698 million.
This latest development highlights the challenges faced by retailers like Casino, which, in the face of weakening consumer confidence, high inflation and rising costs, have had to undergo radical restructuring to remain viable. Following the sale, Casino will now be much smaller and will focus almost exclusively on proximity formats in urban areas.
While the €698 million sale got many of the headlines, another announcement is of even more significance: the new purchasing partnership that has been created between Intermarché, Auchan and Casino. Subject to competition authority approval, this long-term alliance will be in place for over 10 years with the ambition to create "France's leading central purchasing group.” The partnership will be broad in scope, covering not only purchasing from national food brands but also other areas, such as energy and non-food purchasing.
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The concept of the European buying group or purchasing alliance is nothing new. It has been a feature of continental Europe for several decades. By combining scale and volume, otherwise competing retailers aim to drive costs down with leading manufacturers and provide shared services like private label development and marketing support.
This new partnership between Intermarché, Auchan and Casino is just the latest in this continually evolving set of alliances, with other notable European buying groups including Epic Partners, Everest, Eurelec and Carrefour's new purchasing platform Eureca, which now includes 20 suppliers.
Such groups have not been without controversy, however, and we have seen several high-profile legal disputes and commercial disagreements. Most recently in April 2024, Carrefour and PepsiCo resolved a three-month price dispute, which had seen the brand’s products removed from sale. A similar disagreement between Belgian retailer Colruyt and Mondelez International was settled in June 2023.
Competition authorities have also been playing close attention to the sector, and last year the European Commission closed its preliminary investigations into two European retail alliances, AgeCore and Coopernic, while the European Brands Association (AIM) asked the Commission to "remain vigilant" by monitoring alliances "to ensure fair competition for all actors in the retail supply chain."
We envisage three developments around European Buying Groups in the near future.
Firstly, there remain some significant European retailers who don't currently belong to one of the major groups. This includes Mercadona, Metro and Spar International, all of which would be significant additions to one of the existing partnerships. The UK also remains an outlier. While Asda and Morrisons have been involved in groups such as AMS and EMD, these have tended to focus only on private label, while Tesco also tried a partnership with Carrefour that was largely unsuccessful and ended in 2021.
However, with Asda and Morrisons now under private equity ownership, and with the latter now led by Rami Baitiéh (who is ex-CEO of Carrefour France), we could see UK retailers become more active participants, especially in the face of continued cost and profitability pressures.
There is also an unstoppable move to greater centralization of buying structures across Europe, requiring manufacturers to realign and adapt accordingly. We could see the partnership of Intermarché, Auchan and Casino extend beyond France, while other international retailers may follow Carrefour's Eureca model of centralized purchasing across key markets.
Finally, the proliferation of Retail Media Networks means that 95% of the top 20 retailers globally now have existing Retail Media Networks or partnerships (Source: Flywheel Retail Insights). This will require greater consolidation and consistency across retailers, and we could see purchasing alliances develop their own Retail Media Networks for their members to remove costs and avoid duplication.
If, as we suspect, these buying groups become an even greater feature of the European landscape, then they will naturally become a more critical part of any manufacturer's commercial planning and budgeting cycle. Understanding who the largest and fastest-growing alliances are and their potential future make-up is critical.
Flywheel Consulting has been offering bespoke solutions to help brands navigate this increasingly complex landscape for years. If you’re interested in learning more, contact us.
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