Brand manufacturers again seek to stop any balancing of their market strength

Reacting to the multinational brand lobby group AIM’s call for an EU market investigation of retail alliances, EuroCommerce Director-General Christian Verschueren and Independent Retail Europe Director-General Else Groen have issued the following joint statement:

Europe’s retailers and wholesalers operate in a limited number of countries, and in a highly competitive market, with high fixed costs and low margins of 1-3%. Retail Alliances help create efficiencies and synergies in sourcing in the single market when dealing with powerful multinational brand suppliers who operate across the globe and enjoy margins some ten times higher than those of retailers. These suppliers are constantly presenting retailers with price increases bearing little connection to the product or the cost of producing it. Retail alliances also help mitigate the negative impact of territorial supply constraints imposed by large brand suppliers, which fragment the single market and lead to often significant and unjustified price differences across Europe. European retail alliances are all subject to clear governance principles to ensure compliance with EU and national regulation, including competition rules.

Last year in response to a call from the European Parliament, the Commission’s Joint Research Centre produced a report with very clear findings – that retail alliances can help competition by generating efficiencies and providing a countervailing force against large brand manufacturers, and thus lead to lower consumer prices. In November 2019, Commission Executive Vice-President Margrethe Vestager unequivocally recognised the pro-competitive effects of European retail and wholesale alliances: “Buying alliances between retailers have become a key component of grocery supply chains. They can bring lower prices to consumers for food and personal care brands that they purchase daily.”

Consumers have a wide set of competing options when they do their shopping. They will shop where price, convenience and availability of products makes most sense for them – be it online or offline. Retailers cannot thus be considered as ‘gatekeepers’ controlling access to the markets in which they operate: in a highly competitive market, a retailer who does not have a product on its shelf risks the customer simply going to a competitor. This is particularly true for the ‘must-have’ products supplied by increasingly concentrated multinational brand suppliers. They promote these products heavily, and increasingly sell their products direct to consumers in competition with retailers.