In the late 1980s, many European retailers entered into international alliances that, despite their ambitious adjective' strategic', were mainly about combining buying clout abroad in order to negotiate better conditions with suppliers. In recent years, however, silence has prevailed and most of the alliances now seem to be more or less dead.
Elsevier Food International, Vol. 6, Number 4, November 2003
Klaus Schwarz

The silence surrounding strategic alliances can well be explained by the attitude of their representatives. They prefer mostly to work backstage and, contrary to what happened in the 1990s, they avoid the spotlight, leaving the centre-stage to their members.
For example, what has happened to Associated Marketing Services (AMS)? Royal Ahold has always been the dominant member of AMS, whose office is in Ahold's corporate headquarters in Zaandam, the Netherlands. AMS has therefore often been nicknamed 'Ahold Marketing Services' and the troubles its main member is currently encountering may well have a strongly negative impact on AMS. "Yes, we are certainly alive," is the reply from AMS. "We have members in 18 countries and in their 19,000 stores they are generating annual sales of  85 billion, serving 80 million customers per week."
Currently, AMS comprises Ahold (NL), Caprabo (E), Edeka (D), Hakon (N), ICA (S), Safeway (GB), Kesko (FIN), Dansk Supermarked (OK), Jeronimo Martins Retail (P) and Superquinn (IRL). French retailer Casino stepped back after its domestic buying alliance with its French rival Cora collapsed. Being for sale, UK retailer Safeway's membership of AMS is expected to expire when it finally becomes clear who is going to acquire it. One of the key strengths of AMS is global sourcing. This includes perishables as well as the economy label 'Euroshopper'. Furthermore, the members' private labels, non foods and articles not for resale are sourced jointly.

European Marketing Distribution

Peter Hampl, managing director of European Marketing Distribution (EMD): “We are still the only remaining alliance that can offer independent retailers in Europe a common international platform. All the others have meanwhile disappeared or only exist on paper.”

"We are still the only remaining alliance that can offer independent retailers in Europe a common international platform. All the others have meanwhile disappeared or only exist on paper," says Dr Peter Hampl, managing director of European Marketing Distribution (EMD). EMD, located in the Swiss town of Pfaffikon, is Europe's largest retail alliance of independent retailers. A core activity of EMD is closing deals with the top 50 manufacturers. Moreover, EMD allows smaller suppliers the opportunity to enter new markets where EMD members are already represented. Furthermore, the alliance functions as a brand manager for EMD's brands and private labels. For instance, in the category of energy drinks, EMD and a supplier of concentrates jointly developed the 'Power King' brand. Currently, over ten million cans of this drink are sold via EMD members in eight European countries. EMD also knows just how to stretch a brand: batteries are also sold under EMD's Power King label. The number of new brands officially registered by EMD has tripled this year, and in 2004, EMD plans to increase the number of EMD brands, especially in non-food categories.
On a bilateral level, EMD members can consult each other, for instance on questions such as how to deal with hard discounters (a question currently at stake in Ireland and Scandinavia). EMD employs a staff of 12 who facilitate knowledge transfer between members. "We organise workshops where members can meet, as far as they are not already in contact on a bilateral level," says Hampl. "Modern means of communication also add a great deal of efficiency to our organisation. A few weeks ago, we auctioned 400 tonnes of tuna, which had to be distributed to five countries in 30 different package sizes. We were the first to organise such an international auction via the Internet. Until then, this only worked on national levels." Next year, EMD will be targeting a purchasing volume with a value of some €200 million through Internet auctions. Before the end of this year, EMD will decide from which of the existing retailer-supported B2B exchanges it will acquire the relevant tools and then determine which licence should be purchased.

The impact of B2B e-commerce
Some three years ago, at the dawn of B2B e-commerce platforms, Carrefour's president and CEO Daniel Bernard said: "I believe that we are witnessing a new retail revolution." B2B exchanges were expected to make strategic alliances redundant but so far, this has not become a reality. As with the alliances, silence surrounded the B2B exchanges after the Internet bubble burst.
"Essentially, it is a very expensive and labour-intensive procedure for which you need to educate your staff," is the opinion of a general manager within the alliance regarding Internet-based B2B exchanges. "Buyers are always looking for new partners and sources. As long as B2B systems are only accessible to an inner circle of initiates, buyers prefer the old-fashioned but easy and efficient option of just picking up the telephone. B2B exchanges add value to the purchase of standardised commodities, but as the level of detail and sophistication increases, it becomes difficult to purchase via the exchanges." Most representatives of strategic alliances consider the exchanges not as a substitute but as complementary to their activities.
Global Sourcing, especially with regard to branded goods suppliers, and Global Account Management are of increasing importance to retailers. In recent years, large players such as Carrefour and Ahold executed promotions on an international, global, level. However, this has proven not to be an overall success, as in fact only a limited number of truly global brands allow such a worldwide promotion. This holds true especially for food. As far as non food is concerned, however, there have been surprising results such as Wal-Mart's peak turnover by selling televisions made in China via a worldwide promotion earlier this year.

One language, one partner

Frans Fedrix managing director of the Dutch buying alliance Superunie and chairman of the strategic alliance Europartners: “If we want to, we can join Markant or AMS, but the only thing these people do is talk. Sitting at a table with an Italian, a Spaniard and  Portuguese leads nowhere.”

Frans Fredrix, managing director of the Dutch buying alliance Superunie and chairman of the strategic alliance Europartners, says that joint promotions with leading branded goods suppliers and increasing sourcing opportunities of private labels are important tasks for Europartners, Top priority for Fredrix, however, is adding members to Europartners, as this alliance in fact consists of only two members: Superunie and Belgian retailer Colruyt.
Maybe a merger with another alliance such as Eurogroup is an option for Europartners, as Eurogroup also has only two members left. With Dutch retailer Laurus eventually leaving the alliance might Casino take the majority of Lausus' shares, German retailer Rewe and the Swiss Coop are the two remaining members. Because there is no geographical overlap, this might well be a good fit.
This is a bad idea, according to Fredrix. "In the past I used to work for one of the retailers that merged into Laurus and I have experience in working with Rewe and Coop Switzerland within Eurogroup," Fredrix was quoted by a Dutch agricultural trade journal. "I then solemnly swore that whenever I would take charge, we would stop talking and start working. If we want to, we can join Markant or AMS, but the only thing these people do is talk. Sitting at a table with an Italian, a Spaniard and a Portuguese leads nowhere. When Somer field was still a member of Europartners, we had to deal with a partner that had separate buyers for white wine, red wine and rose, while we have one purchaser for beer, wine and soft drinks. Those Somerfield guys drove me crazy!"
'One language, one partner' is Europartners' adage. "We want to keep Europartners small and efficient with a focus on action rather than words," Fredrix says. "We collaborate very well with Colruyt, one language, one partner." French retailers Casino and Auchan founded a new organisation IRTS - International Retail and Trade Services - in November 2002. IRTS was established in order to harmonise international sourcing and common promotion activities of the two French rivals in a 50:50 joint venture. In France, they remain rivals but internationally they seek collaboration. IRTS' office is located in Geneva (Switzerland) where it employs a staff of 30. Asking how they are proceeding, the answer remains vague: "Some dozens of contracts have been closed."

Silence reigns
The former alliance NAF located in the Danish capital Copenhagen has been replaced by Coop Norden. Its headquarters are in the Swedish city of Coteborg. Coop Norden was founded by the Norwegian Coop NKL (20 per cent), the Danish FDB (38 per cent) and the Swedish KF (42 per cent). In a second phase, they founded three subsidiaries Coop Norge AS, Coop Danmark A/S and Coop Sverige AB, which all three are 100 per cent owned by Coop Norden. This alliance coordinates the activities of its members in Denmark, Norway and Sweden. When asked about future perspectives, Coop Norden is reluctant to discuss any future plans. Another alliance of cooperatives is Coop Euro which is based in Bratislava (Slovakia) and whose members are cooperatives from Czechia, Slovakia and Hungary. Just like their Scandinavian peers they are unwilling to disclose any information.
Several alliances indeed seem to be dead. An example of such an alliance is BLOC whose members are 14 wholesale dealers and caterers in France, Belgium and Luxembourg. There is indeed someone who answers the telephone of BLOC's Brussels-based office but when asking to speak to a representative of this alliance, the name and telephone number are given of French member Maximo. Arman Kleinhentz, managing director of Maximo - a French caterer - is BLOC's president and confirms the alliance still to be active. He did however not want to answer any questions.
In 1998, the creation of Agenor - an organisation for coordinated buying of the French ITM group and its German subsidiary Spar Handels AG - provoked commotion among suppliers. Agenor tried to force suppliers into signing tough deals to prevent delisting from the shelves of their member stores. Today, it has gone quiet on the Agenor front. "I can assure you that Agenore is in good shape", an lnterrnarche spokesperson confirms. But further information is not available. Suppliers' sources confirm that the alliance is still alive.
Large European retailers like Carrefour, Metro, Tesco, Aldi, Lidl and Tengelmann have their own structures for organising international business, expansion and global sourcing. They are strong enough to handle this on their own without any support from third parties. One can therefore conclude that strategic alliances still justify their existence in adding buying clout -and if possible internal support - to the businesses of their smaller and medium-sized members .