RetailAnalysis
13 March 2017
EMD adds Australia and New Zealand with Woolworths

Europe-based buying alliance EMD has announced that it is expanding globally as Australia-based Woolworths, which operates in its home market and New Zealand, becomes a member. The announcement marks a new stage in buying alliance membership, taking them outside Europe for the first time, suggesting that there could be more such developments in future.

Woolworths to buy private label ranges through EMD

EMD has said that as a member Woolworths will ‘maximise [its] network to procure volume for its private label ranges’. The addition of Woolworths will add about €38 bn to EMD’s aggregated buying power, which stood at €178 bn at the end of 2016. EMD said that Woolworths’ membership will create ‘additional and interesting opportunities for procurement of goods overseas’ for its existing members, suggesting that the relationship will work all parties. For Woolworths it provides an opportunity to ‘optimise its European purchasing procedures’, initially solely in relation to private label products.

Commenting on becoming a member of EMD, Steve Greentree, director FoodCo for Woolworths, said: “We are delighted to partner with EMD. This collaboration will increase our access to great quality private label products that we are unable to source locally. Combined with our commitment to source Australian products first and foremost, this ensures our customers will have even more choice and convenience when shopping for own brand products at Woolworths.

Better buying to support margin development

Woolworths has enjoyed an upturn in performance in its 2017 financial year, announcing a 2.6% rise in total sales at its continuing operations at the end of H1 in February. However, with Schwarz-owned discount hypermarket chain Kaufland and Amazon both rumoured to be looking to enter the Australian market in 2017, maintaining that performance will become harder. It will also likely require further investment in prices, a process that Woolworths has already started, saying at the end of H1 average prices had fallen by 2.4%. Joining EMD will help Woolworths buy private label ranges more efficiently, which should help support margins.

Where will buying alliances go next?

The expansion of EMD globally will not go unnoticed by other buying alliances, who are likely to widen the list of retailers who could become members. It will also attract the attention of other retailers in Australia and in similar markets, like South Africa or potentially the US. Given the traditional focus of such alliances has been solely on Europe, the breaking of that barrier could see new alliances emerge.

For subscribers looking for an introduction to EMD, see our insight presentation here.

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