Insights - Food Procurement

How is the sourcing structured between the corporate and countries?

That’s the very area where we set our 2nd priority: Strengthening our common sourcing, which is steered here by corporate for our own brand products in ultrafresh (meat, fish, fruits & vegetables), fresh/frozen and dry categories. Across METRO worldwide, 43 % of total own brand food procurement (excluding ultrafresh) is made through common sourcing. We are currently assessing the common sourcing portfolio performance to keep pace with the ongoing assortment optimization in countries. The objective is to pinpoint the key common sourcing categories and simplify the processes, so that more countries will participate in the joint procurement to enhance efficiency and value. We are also looking to diversify the producer portfolio in common sourcing to mitigate the risks of supply chain disruptions or ingredient scarcity, to ensure stable goods availability and proximity.

Do countries have a role to play in common sourcing?

Yes, they do, and our role is to support them. Our common sourcing community keeps regular exchanges to share local expertise as well as knowledge from corporate. The aim is to reach a common decision in terms of what products to source. Moreover, the high quality volume forecasting from countries is crucial for the common sourcing team to secure sufficient supplies from suppliers and to drive volume growth.

An important practice in common sourcing is that corporate awards a so-called ‘mandate’ to one selected country for the procurement of specific category for the entire group. For example, the Spanish and French wine buyers make the procurement of specific Spanish and French wines respectively for all METRO countries. In this way, we benefit from the strong expertise of the local sourcing specialists while leveraging the joint procurement volumes of the group. Our food sourcing community has responded positively to this approach and we plan to roll it out to other categories in ultra-fresh and dry as well.

Do partnerships with suppliers play a specific role for METRO?

The partnership we’d like to shape with suppliers is less transactional but more based on long-term mutual perspective and joint strategic development, in good times but also during challenging moments. For example, we made efforts to maintain strong relationships with suppliers amid the extraordinary circumstances of Covid. When the pandemic started, we closely communicated with suppliers to prevent them from overproduction and excess inventory. Once the lockdowns were lifted, we again provided updated forecast to them about our re-start steps and capacities. Today when we are still facing supply chain disruptions with product shortages, this solid partnership is paying off that we are among the first to be served and delivered. Such reciprocal partnership is crucial for both sides, particularly benefiting the countries.

With the current inflation and economic slowdown, is there a trend that our customers switch to cheaper or less sustainable products?

Hospitality customers will do their best to not compromise on quality and sustainability, but obviously they are looking at their total cost especially with energy prices rising. However, we have not been requested to downgrade our quality or sustainability standards so that prices are lowered. Our restaurant customers are typically concerned with consistent quality and taste of food ingredients for their customers. In this respect, our own brands offer a reliable solution for hospitality customers to balance out of the increasing costs of energy and labor.

What are the major challenges that you foresee for the near future in food procurement?

The two major challenges remain inflation and scarcity of products, and both will continue for the time being. Multiple factors are behind the inflation. For example, the rising energy costs will weigh more on producers. In addition, the impact of climate change on agricultural products. The drought across Europe over the past summer will have an impact on the food crops in the coming season, notably the harvest of tomatoes in Italy.

The scarcity of products, on the other hand, is impacted by the ongoing supply chain disruptions. The raw material shortages in the industry will have a bearing on food packaging. As one example, in Europe the production of glass bottles is not going to meet all demands this year. Consequently, there will not be enough glass bottles for wine. We are now even looking at the option of using PET plastic bottle as replacement for wine! At METRO we´ll keep constant communication with our suppliers and our customers for joint efforts to deal with the challenges and ease the impact with practical as well as sustainable solutions.