November 11, 2016

Eurelec shops for Rewe and Leclerc

M-E. Leclerc & Alain Caparros (photo: Anna-Maria Romanelli)
French connection: Michel-Édouard Leclerc and Rewe boss Alain Caparros like shopping together in Brussels (photo: Anna-Maria Romanelli)
It was only a little letter from a small office in Brussels, but it has sent a big shockwave through the industry that could revolutionise the way retail groups do business with their major suppliers.

The sender, Eurelec Trading Scrl, opened for business in June as a cooperative joint-venture between Rewe und Leclerc. Its function as a European buying office is to obtain the best possible terms & conditions for these German viz. French retail giants.

Logically, Eurelec has started its annual negotiations for 2017 with the big boys. We understand that there were originally six international brand manufacturers involved, but now only four: Mars, Mondelez, PepsiCo and SCA. Apparently, they have been asked to come to a decision by the end of this month, and it is generally believed that they will accept.

Eurelec seems to have detailed knowledge of the terms & conditions these suppliers accord retailers on both sides of the Rhine. So has there been collusion between Rewe and Leclerc in contravention of EU cartel law?

Never underestimate a letter from Brussels

This would appear not to be the case; otherwise the 70-odd specialists who have been working for Rewe buyer Jean-Marie Malbranke over the last 18 months weren't worth their salt. Eurelec functions as a supranational wholesaler and passes on the deals it has obtained from suppliers to its retail members.

Eurelec's legal experts are convinced that they only have to alert the French competition authorities, if the buying volume succeeds €3bn. As French retailers prepare to meet stricter legislation (loi Sapin 2) demanding greater transparency on terms & conditions, this construction will obviously have particular charm for retailer cooperative Leclerc.

Clearly, Leclerc wants to "go global in an increasingly global world," as its president Michel-Edouard Leclerc recently told business magazine LSA. But demands for European terms & conditions go back at least as far as 1992 when a single European market was created.

The forerunners were Metro C&C, French retail giant Carrefour and the now defunct, but then leading European drugstore operator Schlecker. Suppliers have reacted sceptically since then and continue to point to the big national differences in taste, packaging, consumer buying habits and historical pricing architecture. Schlecker fell on its face for exactly these reasons when it tried to sell German products in, for instance, Spain.

New German wave

Despite these early failures suppliers can be criticised for not heeding this warning shot across their bows. Although some of the bigger brand manufacturers do have sales managers for key accounts such as Metro, Tesco, Carrefour or Walmart, they don't seem prepared for the latest wave of European standardisation by the German discounters.

Schwarz Group subsidiary Lidl has led the way in creating a pan-European assortment with standardised packaging, centralised logistics and one buying price. Sister company Kaufland is currently playing catch-up. Aldi has also used the international own label card well. This has obviously put all those competitors under pressure who still do not source internationally.

It is interesting to note that the less homework international suppliers have done on harmonising terms & conditions on national markets, the more irritated they are by such demands from retailers.

Ahold Delhaize – a wake-up call

If they needed a wake-up call, however, they only have to remember the merger of Ahold and Delhaize this summer. When the deal finally became de jure on a Saturday midnight, an invitation to meet was in the post on Monday. Since then suppliers have been "asked" to "harmonise" their terms & conditions for the Netherlands and Belgium.

Meanwhile, Rewe and Leclerc still have some way to go in terms of their own coordination. Both partners are equally represented on Eurelec's supervisory board, but they continue to source in some countries via their older European buying alliance, Coopernic.

Practice, doubtless, will make perfect.

Podcast microphone (photo: Gerhard Seybert-Fotolia)
(photo: Gerhard Seybert-Fotolia)

Podcast. Click arrow to listen to an audio version of the text:

Lebensmittel Zeitung with digital sister (photo: LZ)
Our German B2B newspaper, Lebensmittel Zeitung, in print & digital
Read in German: 'Eurelec stellt erste Ansprüche' by Bernd Biehl, Mike Dawson & Christoph Murmann on pages 1 & 3 of
Lebensmittel Zeitung, no. 45, 11.11.2016, with additional commentary on page 2 by Bernd Biehl ('Europa-Kondition 4.0')

German Retail Blog

Sign up for your FREE newsletter now!

Comments for this article are closed.

This is an English-language blog, please write all comments in English!
Thank you.