The official launch of Coopernic in February 2006 has initiated a period of renewed focus on international grocery buying groups. This is unsurprising since buying groups are now, potentially at least, among some of the most powerful participants in the grocery market.
Elsevier Food International, Vol. 9, Number 3, September 2006
James Walton

The Brussels-based Coopernic is the newest of the European grocery buying groups. It is a group of groups; four of its five members are cooperatives which in turn represent smaller retail organisations. Coopernic is a notfor-profit limited company and ownership, political control, cost of running and any savings are divided equally among the five founding members. Aggregated turnover is around €94 billion, making Coopernic the second largest European grocery buying group. The formation of Coopernic has been greeted with some concern by grocery manufacturers, who regard it as a dramatic acceleration of retailer consolidation in Europe, with potential for major impacts on margins.
Members of Coopernic itself have a higher aggregated turnover than Carrefour and of the ten largest grocery buyers in Europe, five are buying groups rather than individual businesses.
A buying group may be defined as any organisation which seeks to combine the buying power of several members in order to acquire goods or services at a rate which is better than might be achieved through individual negotiation. Buying groups may also obtain other trading benefits such as special rebates, overrider arrangements or promotional support. In the grocery industry, the negotiation of overrider or rebate payments is the primary function of some buying groups. In such cases, use of the term "buying group" might be seen as misleading and "negotiating group" or "roof organisation" might be more appropriate, although "buying group" appears to have become the standard descriptor, at least in English.
In addition, buying groups may be formed in order to obtain goods and services which might
otherwise be unavailable, for example, own brand products or bespoke goods that could not be produced cost-effectively on a smaller scale. Buying groups are differentiated from other organisations active in the grocery sector, such as B2B exchanges, symbols and cooperatives, in terms of the scope of their activities and the nature of internal relationships.

New kid on the block
Coopernic - the acronym for Cooperation Européenne de Référencement et de Négoce des Indépendants Commercants - is the newest of the European grocery buying groups and beganin December 2005 as a joint venture between Leclerc and Conad (an extension of theirConalec joint venture which was founded in Italy in 2001).
By the time Coopernic was officially launched in Brussels in February 2006, membership had extended to include Co-op Schweiz, Colruyt and Rewe.
While the inclusion of Co-op Schweiz and Rewe had been expected, the membership of Colruyt was only flagged just before the launch. Colruyt -a Belgian grocery discounter - was the first non-cooperative retailer to join Coopernic. The speed with which Co-op Schweiz, Colruyt and Rewe chose to join the new group - all negotiations and formalities were completed within three months - could indicate a real sense of urgency on the part of the members.
In view of this apparent urgency, it may be worth pondering why the members of Coopernic felt it necessary to form an entirely new group rather than allying themselves with one of the more established groups.
Geographical overlaps with current members of other groups - with the potential for infringing local competition law - may have been a key motivation, but there may also have been a perception that a new group might be able to deliver advantages not available elsewhere. Eurogroup, a body operated by Rewe and Co-op Schweiz, could be viewed as another precursor organisation to Coopernic. It specialises in the sourcing of food and non-food from the Far East and is also a vehicle for information sharing.
This will continue to operate within the wider Coopernic framework and membership of Eurogroup may well be extended to other members in time. Coopernic is a not-for-profit limited company, based in Brussels, and ownership is divided equally among the five founding members. Political control is therefore also shared equally.
Two senior personnel drawn from each of the member companies form the ten-strong board of directors, and in view of the other responsibilities carried by each director, it is likely that direct involvement at Coopernic will be fairly limited, with most responsibilities delegated to full-time staff. However, the very senior rank of the board members suggests that the development of Coopernic is seen as a key opportunity by each member company. Achieving concerted action across all group members is a challenge for all buying groups but the involvement of senior management from all five companies should help to ensure that agreed activities actually take place.
At the time of writing, Coopernic is still assembling its head office staff, but its stated intention is to minimise costs by keeping administration to an absolute minimum. Where necessary, member companies will be called upon to provide necessary specialist expertise, for example the buying of particular products.
The cost of running the Coopernic operation will be shared by all members equally and, likewise, any savings achieved will be split. One consequence of the formation of Coopernic was the dissolution of the Lucie alliance which previously existed between Conad, Leclerc and Système U. In addition, plans to create a joint buying group for French cooperatives comprising Intermarché, Leclerc and System U have now been shelved. Système U has since joined with EMD, but these events underline the fact that buying alliances are to some extent unstable and may disintegrate if members break away to pursue other opportunities. Maintaining the loyalty of members is a key challenge for buying group management.

Group scale
Coopernic is a group of groups; four of its five members are cooperatives which in turn represent smaller retail organisations ("Cooperative" in this instance describes a retailer-owned organisation, rather than a consumer-owned organisation, as most UK cooperatives are.).
Total membership is 7,495 independent businesses, with 17,208 retail outlets across 17European countries although this fluctuates constantly as small retailers enter and leavemembership of the four cooperatives.It is worthy of note that, as shown in the table, there is some geographical overlap between members - particularly in critical western European markets - and thus there is the potential for competitive conflict.
The table (Geographical Reach & Store Numbers) also shows that Rewe has by far the longest "reach" of any Coopernic member and, for suppliers that already deal with Rewe (principally the larger branded suppliers), the ability of the Coopernic group to deliver additional distribution may be quite limited.
Rewe is also by far the largest member of Coopernic, accounting for over 40 per cent of aggregate turnover and, although the organisation is owned in equal shares, it is possible that its scale will lend it particular influence. Significantly, two of the three senior positions at Coopernic are held by Rewe personnel.
The store portfolio is varied, comprising wholesale depots, hypermarkets, supermarkets, discount stores and superettes. Aggregated turnover is around ¤94 billion, making Coopernic the second largest European grocery buying group after EMD and, indeed, the second largest European grocery buyer of any type, ahead of well-known operators such as Carrefour, Metro and Tesco.
Coopernic claims that its five current members between them account for around ten per cent of all European grocery trading. Unsurprisingly, the formation of Coopernic has been greeted with some concern by grocery manufacturers, who regard it as a dramatic acceleration of retailer consolidation in Europe, with potential for major impacts on margins.
The formation of Coopernic has particular impact given that all of its members are major retail powers in their own right, with leading positions in their home markets, as indicated in the tables. The individual scale of Coopernic’s members represents a challenge for suppliers in that the members presumably already had favourable buying terms in most cases. Interestingly, Coopernic has chosen to present itself in its published materials as a defensive organisation, formed - at least in part - as a response to the growing power of multinational grocery suppliers.
Coopernic members have not ruled out further recruitment from amongst Europe’s grocery cooperatives, although they have stated that membership will be limited to just six in order to maintain control and to reduce management complexity. 
 
Group strategy
As Coopernic is so new to European grocery, it is difficult to make any credible statements regarding group strategy other than to summarise what has already been published by the group itself.
Shared values of the Coopernic group are as follows:

• ▶ Entrepreneurial spirit, embracing challenge
• ▶ Independence
• ▶ Solidarity between members
• ▶ Social attitude to trade:
• • People always at the centre of the business
• • Access to all products and services at the lowest price
• ▶ Pragmatism and ambition

It should be noted that, although most members of the Coopernic group describe themselves as cooperatives, this does not necessarily imply that they follow the same sort of socio-political agenda as many UK-based cooperatives.
The stated goals of Coopernic are as follows:

• ▶ To expand the offer:
• • Range extension
• • Minimal standardisation of products
• • Shared know-how
• ▶ To achieve the best (retail) price:
• • Cheaper purchasing
• • Cost reduction and performanceoptimisation
• ▶ To negotiate jointly with multinational suppliers:
• • Price optimisation, especially on thebiggest brands
• • Cooperation and joint growth withsuppliers
• ▶ Product development:
• • Help the consumer to enjoy the bestproducts of each member
• • Develop joint requirements for own brand and entry-level grocery products
• ▶ Substantial reduction in logistics costs:
• • Competition between logistics suppliers to reduce costs
• • Maximising scale economies
• • Encourage cost competition betweenmember companies

Note that the aims of the group are framed in terms of delivering benefits to consumers; primarily as a means of enhancing the competitiveness of members but perhaps also with one eye on the developing political situation in Europe.

Sourcing strategy
Initially, Coopernic’s stated objective was to assist members to source own brand goods (especially entry-level items), fuel and goods not-for-resale, but anecdotal evidence suggests that it is already beginning to extend its activities into more premium branded goods and has invited meetings with major suppliers.
The CEO of Co-op Schweiz, Hansueli Loosli, has already been quoted in the Swiss media, expressing the expectation that his company would be able to reduce retail prices for branded goods by five to ten per cent as a consequence of Coopernic membership.
This statement has the potential to alarm suppliers, since it implies very large reduction in buy-in prices but, if achievable, price cuts on this level may be unique to Co-op Schweiz.
Prices of grocery goods in Switzerland have historically been very high relative to the rest of Europe, so the price cuts which might be expected as a result of combined buying will also be high; the savings available to other Coopernic members may be more modest.
By reviewing and standardising all buying terms, Coopernic is confident that it can achieve an average price reduction of 0.5 per cent from suppliers although, as always, this may be achieved in the form of rebates or other funding rather than buy-in prices. Already, Coopernic has begun to develop a reputation amongst suppliers for very aggressive bargaining.