While the concept of global account management is well established in industries such as automotive, chemicals and IT, it remains relatively new to grocery retailing. To date its impact has been limited, as retailing remains one of the least globalised of any industry. Although this is changing, it is likely to lag behind other sectors for some time and it remains to be seen whether retailing will ever be considered truly global.
Elsevier Food International, Vol. 6, Number 4, November 2003
Nick Downing

Few would argue that grocery retailing is not becoming more globalised, even if the saturation point is decades away. Driven by a relatively small number of players for whom globalisation is an integral part of their growth strategy, the retail landscape around the world is changing. As their global operations continue to grow, retailers are looking to leverage the advantages associated with international scale and continued trade globalisation. Consequently, most of the key global retailers have now established some kind of international team, for example Ahold Global Sourcing, the Auchan-Casino joint venture International Retail Trade Services (lRTS) and Carrefour DMG. One of the key roles of these teams is to negotiate at international level with brand manufacturers on a range of issues such as price, category management and promotions. Where the retailer and the supplier have dedicated resources to manage the relationship, we consider this to be global account management. Although this is still very much in the early stages, it represents a major challenge for both retailers and suppliers.

Shift in opinion
The majority of suppliers still see global retailing as a threat. In IGD's 2003 survey of international brand manufacturers, 53 per cent viewed global retailing as a slight or major threat to their business, while just over 40 per cent saw it as a slight or major opportunity. However, over 80 per cent of suppliers claim global retailing will be an opportunity in five years' time, which represents a major shift in opinion, and illustrates a number of points:
• Only a handful of respondents has a neutral view on the issue, reflecting how polarised opinions are.
• Most suppliers simply have not made the necessary structural or technical changes required to deal with the demands of global retailers. However, most expect these to take place over the next few years. Many are still in the process of centralising information and building international teams, while others have not even started.
• Although retail globalisation has slowed in the past few years, many suppliers have still been caught out with the pace of change and the resulting demands placed upon them.

How are suppliers responding?
Manufacturers are adopting four broad approaches to deal with global retailers:

1. Limited international coordination of national sales operations
Over half of the suppliers interviewed by IGD, described this as their current approach. This again illustrates how unprepared many suppliers are to deal with the growing demands of global retailers. Although it has been shown that suppliers are more global in terms of their country coverage, most still lack the people and structure they need to serve global retailers.

2. Extensive international coordination of national sales operations
In this case, a full-time team of two to five people is created, supplemented in some cases by part-time colleagues from individual countries. The team often grows out of the approach outlined above, once the company has decided on that required dedicated resource.

3. Creating a Customer Business Unit eCBU) at regional level
Just seven per cent of those surveyed said that they had a CBU operating at regional (i.e. continental) level. Those who did, were some of the world's largest FMCG suppliers with global brands and a presence in all the key markets. To date, few companies have had the need or financial justification to create regional CBUs. However, almost 30 per cent of those surveyed claimed that they would have one operating at regional level within five years' time. Many suppliers who currently coordinate sales at an international level, expect the function to evolve into a CBU.

4. Creating a CBU at global level
Just over ten per cent of those surveyed claimed to have a CBU operating at global level. All suppliers but one in this category also had a regional CBU. Global CBUs operate in broadly the same way as regional units, the geographic scope is simply wider. To date, the level of retail globalisation has limited the impact of global CBUs.

Building a global account team
Before creating a team, suppliers need to identify suitable retail partners. The comparable internationalisation of the retailer and the supplier will be a key factor in evaluating potential success. Suppliers must also assess their likely bargaining power. When the two parties are well matched in terms of the balance of power, a global or regional relationship can work well. Although managed centrally, there will still be a need for local relationships around the world.

Although retailers have been the main drivers and instigators of international agreements, suppliers can also realise a number of benefits to make the much-hyped 'win-win' relationship a reality.
The opportunity to increase sales in new markets was rated by almost half the respondents to IGD's survey as very important. Similarly, 44 per cent considered the chance to increase sales in existing markets as very important. Suppliers are prepared to sign international contracts provided they achieve real financial gains in return. However, there are concerns that retailers may not be able to deliver, partly due to the slow pace of retail globalisation and the saturated nature of some developed markets. 
However, a select number of retailers are gradually expanding abroad and continuing to realise impressive growth at home. This is especially true of Tesco and Wal-Mart. The most successful retailers will be in a favourable position when dealing with suppliers, as they will be able to offer improved distribution and sales.

The role of global account teams
Pricing and developing common trade terms are the most important activities of global account teams. Few suppliers have established a consistent approach to pricing in international negotiations. This has fuelled speculative grey market sourcing and encouraged retailers to exploit differences in price and terms, straining trading relationships. However, suppliers are taking a number of steps to address this:

1. Cataloguing prices and trade terms
Catalogued prices and trade terms are an essential pre-requisite to successful international  negotiations, a point acknowledged by one global supplier: "Before establishing any kind of international team, we first had to centralise European pricing data.
We accept the trend towards global and regional agreements and want to be ready for it."

2. Developing pricing corridors
The next step is to calculate average or reference net prices by SKU across the suppliers' operating markets. This is used to create pricing corridors of maximum and minimum prices to apply to the suppliers' products and markets, as shown in the graph.

3. Standardising terms
As with pricing, suppliers also need to catalogue, assess and rationalise or harmonise terms offered to retailers in different countries. Some of the key terms to address are overriders, cash discounts, listing fees, promotional fees and credit.

Suppliers anticipate that responsibility for pricing will shift away from national level over the next five years. Almost 50 per cent claimed that pricing was currently determined nationally, 20 per cent claimed this was done at a regional or global level, and 30 per cent claimed it to be a combination of both. However, 50 per cent claimed that pricing would be decided exclusively at regional or global level in five years, largely due to the need to create and maintain pricing corridors. Just seven per cent thought that it would still be exclusively decided at a national level, while 43 per cent believed it would be decided jointly between local and international teams.

The future
Pricing and trade terms are not the only roles of global account teams, but they are by far the most important. Even so, retailers will increasingly look to international brand manufacturers to provide global support in areas such as category management, the supply chain, promotions and new product development. To date, a relatively small number of retailers such as Ahold, Carrefour, Metro and Wal-Mart have driven the agenda. The pace of future retail globalisation will determine whether others will follow.