Europartners: The Buyers' Business

Straightforward and close to the buyers' core business - these are the watch-words of Europartners, a buying alliance made up of Superunie of the Netherlands, Somerfield of the UK and Colruyt of Belgium. Europartners has big plans to increase its scale of operations rapidly.
Elsevier Food International, Vol. 4, Number 1, February 2001
Pascal Kuipers

Whenever Frans Fredrix sees large offices that house Europe's strategic alliances (international retailers combining their buying clout and - eventually - seeking synergies in logistics and marketing), he's happily reminded that his own alliance doesn't have such high overheads. Fredrix is general manager of Superunie, a Dutch purchasing alliance of 16 retail members representing total sales of NLG 8 billion (US$ 3.2 bn), with a combined share of 16 per cent of the Dutch food retail market. Fredrix initiated the international buying alliance Europartners back in 1995, and stresses that what distinguishes it from other cross-border buying initiatives is that it is a local buyers' business. "Imagine you were a local buyer who worked for a retailer that was part of a strategic alliance with one of those impressive offices; where international buyers decided what was best for you, a local buyer. How would you feel about it?"
Listening to Fredrix, it's obvious that buying alliances must differentiate to attract new retail members, to keep themselves alive and their accumulated purchasing power credible. In his view, it is essential that Europartners is primarily the members' buyers' business. "The buyers communicate via an Intranet system where they exchange information and contactss and investigate the possibilities of joint tender to purchase products. They decide amongst themselves who will lead the project, and then they go forward with it. Europartners is part of the buyers' daily routine and they don't perceive it as a threat to their own position. It may well be that other alliances have to deal with frictions between the members' local buyers and the buying managers that operate from the alliance's central office. At Europartners, it's all very pragmatic - it's about give and take. This time, you're in charge of a purchasing project, next time it's your international colleague's turn."

Isolated and dominant
Europartners began in 1995 when Superunie asked the UK retailer Somerfield to set up an international strategic alliance with joint purchasing as its dominant factor. This idea fitted in perfectly with Superunie's profile as a Dutch purchasing organisation that represents independent retail companies, each of whose stores holds a different position within the market. These include both service and price-oriented retailers, and stores can find themselves competing in both regional and local market situations. Superunie's member retailers can only do this by separating the purchasing issue from their operations and letting Superunie take care of it. Meanwhile, the retailers can concentrate on sales, merchandising and marketing of their respective retail banners.
"Europartners is in fact an international blueprint of Superunie's Dutch operations, where the focus is on purchasing," says Peter de Ries, buying director of Superunie and, together with Fredrix, the man in charge of Europartners' strategy and growth, "You can see similar developments at Somerfield, where buying and merchandising are becoming increasingly separate processes, By acquiring the discount banner Kwik Save in 1998, Sornerfield became more discount-oriented and thus a focus on purchasing at the lowest possible price became imperative, That's why Somerfield and Superunie fit so well together within Europartners."
The Dutch buyer and the UK retailer were Europartners from the start. Billa (Austria) and Cora (France) were only members for a short space of time but, last September, Belgium retailer Colruyt joined the buying alliance. According to Fredrix, this coming and going of members does not indicate problems within the organisation. "The fact that Billa and Cora were only members temporarily is no disaster. In fact, we've learned a lot from them in a short space of time, We managed to expand our network of possible suppliers via these members and, especially via Cora, we gained a lot of experience in purchasing non-food items, Billa left us after Mr Wlaschek - the company's 84-year-old majority shareholder -suddenly decided to sell the company to German retailer Rewe. This was a total surprise, not only to me but also to Billa's then management. Cora teamed up with Casino to create Opera, a French buying alliance that is in fact similar to Superunie, in that buying is an isolated and centralised business. Cora opted for Casino, a member of Associated Marketing Services (AMS). That's why Cora left Europartners. Colruyt have added new zeal, information and contacts to Europartners, and that can only be a good thing. Co-operation within Europartners should be dynamic."

One member per country
Cora had to decide between Europartners and AMS, the strategic alliance whose members include a.o. Ahold (the Netherlands), Edeka (Germany), Safeway pic (UK) and Casino (France). The latter company is Cora's partner in the buying alliance Opera and, via this alliance, Cora joined AMS in February last year. Europartners' new member Colruyt, though, is still a member of BLOC. This is a predominantly Belgian strategic alliance with ambitions to expand its European leverage."Colruyt's membership of BLOC is still in a transitional stage," Fredrix says, leaving it open as to what Colruyts final decision will be.
Like other alliances, Europartners' membership base consists of retailers based in different countries, because having direct competitors within the alliance would prove counter-productive. "In fact, it should not be a problem to have direct competitors within Europartners, as long as they separate their purchasing from other operations," says De Ries. "As I explained, that's how Superunie operates, how it manages to work for its members although they compete with each other within the Netherlands. In practice, though, international membership does not allow such co-operation. Europartners could not have both Cora and Colruyt as members because, with Cora operating in Belgium and Colruyt in France, they're both working on the other's turf."

North of the Alps
With Superunie and Somerfield as the only constants surrounded by ever-changing satellites of temporary members, the situation certainly isn't ideal for Europartners. "We were too lean with just two members, so it's good to have three now," acknowledges Fredrix. "If we wanted, it could have been seven or eight members, but that's not a manageable situation. Four members, maybe five, is Europartners' maximum size. "Four would be great, but five would probably be too much of a good thing," adds De Ries. "Our no-nonsense, hands-on approach only works with a limited number of members."
The question, then, is who would be Europartners' ideal fourth member?
"It will have to be a retailer based in a country north of the Alps," states Fredrix. "In addition to the language and cultural differences in southern Europe, there is too little overlap in assortments to be able to really benefit from joint purchasing." "Comparing Colruyts assortment to the assortment Superunie purchases results in a 60 per cent overlap," says De Ries. "This is a good basis that we'll increase when we also purchase private label items and low priced budget brands via Europartners. Taking into account the overlap of the assortments of Superunie, Somerfield and Colruyt, Europartners' optimised purchasing volume is about NLG 6 billion (US$ 2.42 bn). In practice, we currently realise about NLG 750-1,000 million (US$ 300-400 mn). What's much more interesting, though, are the cost savings made via Europartners. We calculate these every month - something that's very important if you want to know exactly what the consequences and benefits are. At the moment, the costs saving run into several million Euros."
By not limiting itself to purchasing alone, Europartner may well further increase the benefits it can offer to its members. Logistics are something that members still currently deal with themselves. As part of a purchasing project logistic experts from the member retailers are trying to work this area out as efficiently as possible. "Superunie has three warehouses for imported products and, in the UK, Somerfield is going to dedicate one of its warehouses to imported goods too," says Fredrix. "For Somerfield, a central warehouse based on the continent would probably be the most useful option, enabling them to store imported goods there." And what about purchasing via the Internet? Will Europartners join one of the E-marketplaces such as the World Wide Retail Exchange (WWRE) or Gloabal Net Xchange (GNX)? Says Fredrix, "The content of these exchanges is my primary concern. There must be enough suppliers to choose from, and we will only know this when the E-marketplaces are up and running. At the moment, we are in contact with all of these portals and we will keep all our options open. Via Somerfield, we have contacts with WWRE, and Colruyt works with Equadis.com. The area will need high investment in terms of software, but before we start doing this we want to determine exactly what elements we want to utilise - and it looks as though it'll be the auction element. What we do know for sure is that Europartners as a group - and not as individual members - will join one E-marketplace or another sometime in the near future."