Belgian retailer Delhaize and Italian retailer Esselunga will bring €4 bn and €3.6 bn respectively to European Marketing Distribution's purchasing potential of nearly €119 bn. EMD currently represents 14.4 per cent of the total European market, and aims to reach a level of 20 per cent as soon as possible. So what other plans does EMD's managing director Peter Hampl have for the future?
Elsevier Food International, Vol. 4, Number 3, September 2001
Pascal Kuipers

In a few years'time, the large multiple retailers like Carrefour and Metro AG will be trading about 70 to 75 per cent of the European market, leaving around 25 to 30 per cent for the smaller independent retailers and wholesalers," says Peter Hampl, who's been EMD's managing director for the last 11 years. "EMD wants to represent the lions' share of the independents' purchasing power."

Dr. Peter Hampl (1946) began his professional career working within the winter sports industry in his native Austria. In 1977 he became a member of the management board for Austrian retailer F.M. Zumtobel, with purchasing responsibility for the wholesale, Cash & Carry, discount and hypermarket operations. Hampl became chairman of the management board of Selex Handels GmbH in offenburg, Germany in 1990, where he was responsible for concepts, strategies, import and the private label business. Since May 1991 Peter Hampl has been managing director of EMD in Pfäffikon, Switzerland.

Hampl well recalls the European buying-alliance fever that marked the early days of EMD, which was established in 1989. "Many European alliances started up in the late 1980s and the hype that surrounded their inception was surely comparable to the B2B hype of last year. In 1989, there were about 18 different buying alliances in Europe, but today only two boast large numbers of individual and independent members. Apart from EMD there's AMS (Associated Marketing Services), but of course that's dominated by its largest member, Royal Ahold. Most of the other ones belong to multiples - Agenor and CMI, for instance, which are owned by Interrnarche and Carrefour respectively."

Currently EMD accounts for 14.4 per cent of the European market. Are there still enough opportunities to reach the 20 per cent mark in this consolidating market?

PH: Yes. I won't mention specific names, but several large retailers that haven't yet joined a purchasing alliance are potential candidates. Also, EMD still doesn't have representation in certain countries, like the Netherlands, Denmark and Finland. Because Uniarme withdrew from EMD in 1998, we're also now without representation in Portugal, but we will regain a position there in the near future. The central European markets provide a potential for EMD to grow the business that it represents. Consolidation, of course, limits the numbers of companies that can join us, but on the other hand it also encourages those retailers that want to retain their independence to join EMD and enjoy its benefits. Delhaize and Esselunga could choose between AMS and EMD. For competitive reasons AMS proved to be a difficult option, because this alliance centres on Ahold. EMD, on the other hand, doesn't have a dominant member. Our need springs naturally from the needs of all our members.

Clearly there are big and small players within EMD. The top three members - Markant (Germany), Nisa (UK) and Leclerc (France) -account for 71 per cent of EMD's business, and the other 12 represent 29 per cent. Don't the small members run the risk of being dominated by the three large EMD members?

PH: These three members are themselves decentralised within their respective organisations and decision making structures. We look at the country level and the national market share of the members. Representatives of France and Germany, the big countries, have 21 per cent of the shares. The medium sized countries - Italy, Spain and the UK - each account for ten per cent of the shares and the small countries for four per cent each. This, however, is only to cover the budget and is not a criterion for decision making. Every member has one vote, and each vote carries equal weight. This prevents the smaller members from feeling dominated by the bigger retailers. Officially, we need a 51 per cent share of voices to reach a decision, but it's never come to that. We aim for general consensus and don't force members to live with a decision that they don't fully support. They are independent retailers and wholesalers, so they wouldn't like EMD to dictate what they can and can't do. EMD does not dictate - it co-ordinates our actions as a group of companies. So it's not compulsory for members to join certain purchasing projects, but we need a minimum of three countries to do so if we're to make it worthwhile.

Wal-Mart Germany is an EMD member via its membership of Markant Germany. How does EMD respond to having a subsidiary of the world's retail monolith as a member?

PH: We all know of Wal-Mart's commitment to being independent and self supporting. In the long term, its liaison with us may be broken off if Wal-Marts business in Germany reaches a certain level. And bear in mind that this liaison only concerns Wal-Mart's business there, which is only worth €2.8 bn in the lotal €82.6 bn German market. At the moment, Wal-Mart benefits primarily from its Markant membership, as well as from EMD. But it isn't that important. I guess in Bentonville they don't know we exist!

Can many retailers from a single country be members of EMD? Or does this provoke unwanted internal rivalry?

PH: In our regulations we stipulate that a member representing a market share of ten per cent or more in a specific country has the right to veto the membership of a competitor. We check out the potential for both conflicts and opportunities between member-retailers from the same country before and after they join. Our Italian members Selex and Esselunga prove that such a situation can work. Selex covers segments such as Cash & Carry outlets, wholesale and independent supermarkets, whereas Esselunga is focused on supermarkets and hypermarkets. Furthermore, each company is represented within different regions of Italy, so they both agreed to join together.

Many international retailers are organising E-procurement via Internet-based exchanges such as WWRE or GNX. Don't initiatives like these make a buying alliance like EMD redundant?

PH: On the contrary! WWRE and GNX only represent a new form of technology. But how all this will actually happen is not yet entirely clear. It's EMD's task to enable its members to increase efficiency, also in B2B E-commerce. We therefore help our members to deal with the technology that's needed if they're to communicate with exchanges like WWRE or GNX. To this end, we established EMD-net, which develops a B2B platform for the EMD member at shared cost. I don't see these exchanges as competitors. Via the EMD B2B platform we can invite and receive tenders to purchase volumes from these exchanges. The chance to network and exchange know-how are important services that we've been offering our members since EMD began. In this we differentiate ourselves from the exchanges.

What effect will the Euro have on EMD's future business?

PH: In recent years with the fixed exchange rates of the currencies in the Eurozone, we needed to compare buying prices in different countries. Because of all the currency differences we didn't dig deeper into the reasoning behind price differences and cost structures. Due to the transparency in consumer prices that the Euro will bring about, things are going to change. Consumers can compare prices and get used to them as they're expressed in that currency. Manufacturers will level their buying prices and cost structures. For both retailers and manufacturers with operations cross border, increasingly decision-making will happen on a multinational basis. All this speeds up the process of integration within the European Union.

Will EMD also grow business by buying more private label for its existing members? Or is attracting new members the main option for increasing the business that EMD represents?

PH: Private label is an important and growing business, but branded goods are, and will continue to be, the most important part of EMD's purchasing business. This also reflects the origins of those of our members that have traditionally focused on selling brands. Private label is also a much smaller business in southern Europe, where four of our members are based. As I've said, we are increasing our business by adding companies from different countries to our operations. In the short term the mature markets of western Europe offer most opportunities. Central and eastern Europe are still emerging markets in which it's difficult to operate, despite the increasing consumer spending power there. Jeronimo Martins may be planning to pull out of Poland, but the country looks promising over the longer term, as do countries like the Czech Republic and Hungary, where EMD is represented. Having 20 per cent of the European business is still a viable growth target for EMD, but when we'll reach it it's difficult to say. Perhaps it'll be in 2005 or in 2010 - so let's say right in the middle, by June 17, 2007!