Blog: Dean BestLeading French grocers eye buying "alliance" - and suppliers aren't happy

Dean Best | 5 April 2018

Buying partnerships between France's food retailers have been a feature of the country's grocery landscape for a number of years but this week came news of a potentially significant new tie-up - and suppliers have expressed their consternation.

Casino, Auchan and Systeme-U - three of France's six largest food retailers - are to hold talks on a purchasing alliance.

A joint statement from Casino and Auchan said the two retailers would start discussions on a "strategic partnership" that would see the companies "jointly negotiate their purchases in France and abroad with their main multi-national food and non-food suppliers".

Systeme-U - with which Auchan teamed up on purchasing in 2014 - has been given the opportunity to join this new tie-up. Auchan said Systeme-U has confirmed its interest.

As Auchan already had its own deal with Systeme-U, so Casino had with a fourth French grocer Intermarche but that tie-up has ended. Casino refused to be drawn on why.

However, even after all this toing and froing, it is clear France's major grocers believe they need to co-operate on procurement.

Casino and Auchan stressed the new partnership would not cover "traditional fresh products from farming or fishing or French-brand products developed by SMEs or ISEs". (ISEs being "intermediate-sized enterprises).

They even insisted the tie-up could be to the benefit of French food manufacturers operating in the grocers' markets internationally, arguing it would "fuel the development of certain French suppliers in countries covered by both retailers".

Nevertheless, France's food-manufacturing trade body, ANIA, has hit out at the news.

"ANIA is very worried about the consequences of such an alliance for the entire industry," it said in a statement today.

The association called on France's competition watchdog to scrutinise the proposed agreement.

"These purchasing consolidation movements, in progress since the end of 2014, have greatly intenisifed the price war and are largely responsible for the destruction of value in the food industry," ANIA said.

"This alliance, if it succeeds, will allow the combined purchasing company to hold 32% of the market, with powers increased tenfold to maintain maximum pressure and negotiate lower prices with all their suppliers. This is a new level being crossed in the concentration of central purchasing among large retailers."

ANIA also questioned why the proposed tie-up between Casino, Auchan and Systeme-U was looking to treat food manufacturers differently.

Buying partnerships are also in place across European borders, of course. In February, it was reported Nestle had become embroiled in a pricing spat with members of the European retail buying group AgeCore, which it was said had led to some of the food giant's lines being delisted. 

Nestle CEO Mark Schneider told a Swiss publication in an article published last week the world's largest food maker remained in talks with the buying group.

Food manufacturers will be watching developments in France closely.


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