In addition to Edeka, Picnic and now Jumbo, food retailers such as Swiss Migros, France’s System U and Swedish retailer ICA also follow to Everest.
“We will purchase jointly from 2024 to negotiate better purchase prices and thus be able to offer affordable products to our customers,” Jumbo said in response. “The customer will benefit from this. This is not immediately visible, but the customer will notice it with global brands throughout 2024.”
By buying together, European supermarkets can more easily negotiate discounts on their purchases. Therefore, the cooperation mainly focuses on purchasing international brands, such as Coca-Cola. Margins at grocery stores now fall mainly to suppliers, says Henk Hofstede, retail economist at ABN Amro. Supermarkets should be content with 1 to 2 percent.
Hofstede expects the collaboration will actually benefit supermarkets. “It ultimately gives them a much better negotiating position vis-à-vis tier-one suppliers, and a more equal standing.”
Cooperation is compared with the European Union. “The more member states you have, the better your negotiating position against major blocs like China and the United States. Working together to keep it within reach is the watchword in this case.”
Some A-brands, such as Coca-Cola, are much cheaper in Germany than in the Netherlands. Hofstede says there’s a good chance this will change now. “Coca-Cola is cheaper in Germany because it is a very large country with very large stores. It already has very large purchasing power.”
German supermarkets can therefore negotiate different prices from smaller supermarkets in the Netherlands. “If you can join this Dutch supermarket, you can also benefit from it,” says the sector economist.
Hofstede assumes that consumers will also benefit from this advantage. “Especially in these times of declining purchasing power, low prices are crucial for supermarkets to compete.”
Sales channels are as large as possible
At the same time, he believes there is a possibility that customers will face temporarily empty shelves or will not be able to order a product online due to failed negotiations with suppliers. On the other hand, the two parties depend on each other, he says. Supermarkets want to offer the right products to attract customers; Suppliers want to make their sales channels as large as possible.
This also depends on whether alternatives are available or not. Is there another supplier who can provide the product you want? Or are you focusing on private label brands that more and more consumers are choosing? “In the end you’ll have to dance the tango together.”
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