Introduction
In today’s fast-paced retail landscape, suppliers are navigating an increasingly complex set of challenges, driven by the evolving strategies of retail alliances and buying groups. Insights from our most recent International Customer Forum shed light on how key players like Everest and AURA are reshaping market dynamics across Europe.
These alliances are more than a passing trend – they signify a lasting transformation in how retailers will operate going forward. Their growing influence is pushing suppliers to rethink their approaches, from innovative pricing strategies and brand differentiation to deeper scrutiny of supply chain models. In this blog, we will explore the critical shifts brought about by this consolidation of purchasing power and share actionable insights for industry suppliers looking to stay competitive in this changing environment.
The evolution of buying alliances and the formation of AURA
Buying alliances like Eureca and Everest are adopting diverse strategies, with Everest emerging as a more successful model. As a significant share of retailers’ margin pools now relies on international collaboration, a return to traditional, localised practices seems increasingly unlikely. This shift has been driven by aggressive management of the 5N framework while consolidating into stronger alliances.
For multinational suppliers in countries such as France, Germany, Belgium, and the Netherlands, the pressure to negotiate a greater proportion of their turnover at the European level rather than locally is intensifying. This trend is only expected to accelerate as alliances pursue new synergies and enhance their capacity to sustain growth. The push for a unified European price continues to gain momentum, making it difficult to envision a slowdown in this process.
Moreover, the European Commission remains aligned with retailers, citing the clear consumer price benefits that alliances provide. This stance has further tightened the squeeze on suppliers’ profit and loss (P&L) statements while allowing retailers to maintain a favorable public image. With limited options to counteract these pressures, many FMCGs across Europe are now focusing on strategies to slow down the progression of these alliances.
The recent announcement of the AURA alliance has shaken the FMCG industry, surprising many suppliers. The prevailing sentiment is one of “speed over quality,” given AURA’s contradictions with earlier retail communications. Although its stated goal is to “negotiate international marketing services,” AURA has also indicated that these services will be managed through EPIC. Adding to the complexity, some AURA members are simultaneously part of other alliances, further muddying the waters.
Currently, the formation of AURA appears somewhat chaotic, sparking concerns that it could hinder future collaboration opportunities. While Intermarché is viewed as a collaborative partner, Everest has built a reputation for aggressive negotiations, leaving suppliers apprehensive about their relationships in this evolving landscape. This dynamic raises the possibility of pushback or rejection within the marketplace.
AURA’s formation also brings anticompetitive concerns to the forefront. With its members accounting for approximately 30% of the French market – a figure well above the EU’s threshold of 15% – it remains unclear how the French authorities or the EU will respond. The lack of action so far has left suppliers questioning whether the EU will enforce its guidelines against alliances that consolidate such significant market power.
This ongoing consolidation and regulatory ambiguity underline the increasingly complex challenges suppliers face in navigating the European retail landscape.
How supplier organisations are continuing to adapt to the changing retail landscape
Developing a robust regional-level strategy is essential for success in Europe, a mature market where organic profit growth opportunities are limited. In this environment, prioritising top line growth over bottom-line optimisation is critical. While global suppliers may offset European losses with gains in other regions, businesses heavily dependent on the European market face a tougher challenge. To thrive, FMCGs must strike a balance between retaining existing business and pursuing sustainable growth. For some, this may involve reallocating resources to regions offering greater opportunities.
Achieving success requires strong alignment between local and central teams to foster cohesive and efficient operations. Each team member’s role should center on collaborating with customers and maximising ROI. While some Key Account Managers (KAMs) excel at negotiating local trading terms that drive execution and returns, others may struggle with the challenges posed by international agreements. Establishing clear governance and responsibilities across the organisation is crucial to minimise business disruption and ensure seamless operations.
Striking the right balance between simplifying product assortments and maintaining differentiation is another key focus area, especially as evolving consumer needs demand a more sophisticated approach. Alongside this, strong financial governance is vital to monitor and measure success effectively. This includes careful planning of cost price increases to enable strategic budget management and transparent communication with stakeholders.
A proactive approach to managing European P&L is also critical, particularly in markets like Germany and France, where exposure to international customers and buying groups is significant. This provides suppliers with a comprehensive view of profitability and allows for more informed decision-making.
Finally, to ensure the success of centralised strategies, suppliers must revisit employee incentive structures. Aligning incentives with regional goals rather than solely local targets ensures commercial teams are unified in driving success for the broader European operation. This alignment supports a more cohesive and strategic approach, enabling businesses to navigate Europe’s complexities while remaining competitive in a challenging market.
Conclusion
In conclusion, the evolving European retail landscape presents both opportunities and challenges for suppliers. As retailers consolidate power and push towards a European net price, suppliers must adapt quickly by refining strategies that balance profitability and enable innovation. Clear roles and effective governance within organisations are essential to ensure alignment between local and central teams, facilitating strong execution and ROI generation. The growing complexity of the market, coupled with the increasing role of international collaboration, requires suppliers to be agile in managing their P&L and responding to shifting consumer demands. Innovation, coupled with strong financial oversight, will be crucial in maintaining competitive advantage. As this transformation accelerates, suppliers who can navigate these changes with a focused, regional strategy will be best positioned to thrive in the increasingly integrated European market.
