Since the last edition, we´ve incorporated some changes to make this newsletter even more relevant and useful for you, our audience: Starting with this issue, every newsletter will focus on one key topic relevant for METRO and our business, powered by an exclusive interview, an insightful story plus suitable facts and figures. This is complemented by corresponding MPULSE stories plus links to our latest news and press releases. This issue is focusing on food procurement at METRO, as food is not only the core category of our business, but food procurement is also an instrumental part of our sCore strategy.
Accordingly, please enjoy an interview with SVP Global Food Procurement Herve Streifer, an overview of our international trading offices and some interesting facts and figures about our key procurement items and categories.
Procurement share of common-sourcing categories
Our own brands are a strategic lever in our sCore wholesale strategyHerve Streifer, SVP, Global Food Procurement, METRO AG
Herve Streifer took charge of the METRO AG Global Food Procurement department in summer 2022, on the back of 30 years of experience leading food category and procurement activities in different countries from Europe, to Asia and North Africa. In his new role, Herve is now heading a diverse and experienced corporate team composed of 17 nationalities commanding an aggregation of about 830 years of working experience across the group.
As METRO is actively engaged in driving its sCore growth strategy, its food competence plays a crucial role in the wholesale transformation as food is predominantly the most important category for its principal customer groups across hospitality and small trader sectors. In this interview, Herve shares insights into how his team is empowering the strategy.
Directly from the source to the shelf – that is METRO’s basic idea when it comes to global food procurement. From salmon fillets from Norway and lemons from Italy to beef from the USA – a network of international trading offices (ITOs) is responsible for the procurement of the best products worldwide. Each location specialises in a specific category: Valencia is responsible for fruits and vegetables, Rotterdam for fresh and frozen meat, Concarneau for fresh fish and seafood.
All international trading offices rely on the strategy of common sourcing, i.e. they bundle the demand volume of the various METRO countries and buy directly from the origin. There are no middlemen. This leads to short supply chains, competitive prices and high availability of merchandise. Moreover, direct procurement enables unique and sustainably designed assortments distinguished by variety, freshness and quality.
Facts and Figures
What are our key common-sourced food assortments by volume, how big is our global own brand sales share and how do we progress to reduce food waste in our operations? We present you some interesting facts and figures of the activities around food sourcing at METRO.
"Our own brands are a strategic lever in our score wholesale strategy"
What are the priorities for Global Food Procurement to contribute to METRO’s wholesale growth strategy?
In global food procurement we naturally interact with suppliers. Particularly we run long-term cooperation agreements with key global FMCG brands. As a 1st priority, we kicked off extensive reviews to figure out how committed those suppliers are to supporting our wholesale growth strategy. For us, this means that we will shift the focus of our partnership more on wholesale, notably through offering business intelligence solutions, rather than in-store promotions which is very common in retail. For example, we are offering this year a new digital service that tracks local delivery and fulfillment rates of their the suppliers´ products in the respective METRO countries. It will enable us to further increase our wholesale focus and enhance goods availability that is very crucial for our customers. One good example is ‘Buy More Pay Less’ (BMPL), which is a wholesale-driven pricing initiative currently implemented in all METRO countries. This fully depends on the accurate delivery of sufficient volume of products from suppliers.
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.
What are the unique strengths of METRO in food sourcing?
METRO is present in more than 20 countries serving 17 million professional customers. With such international operation, we are able to consolidate our volumes on core articles and can guarantee access to sources, best products at the best terms and provide economies of scale by leveraging the power of the group. Moreover, for crop related products like vegetable oils, sugar or canned vegetables, the timing to buy and period to cover are essential. Accordingly, we are constantly monitoring the produced stocks, the weather, the yields, and the overall demand, which contribute to a technical analysis of future markets that drives the decision to buy short or long and to source at a better price.
Another evident proof point is our own brand lines that have been gaining more and more ground on the back of years’ of efforts. In particular, “METRO Chef” is increasingly recognized by customers thanks to the brand’s quality, assortment width and value for the hospitality professionals. “Fine Life” is the own brand designed for small traders, especially endorsed among the trader franchise shops. Given those specific USPs and the fact that our own brands are a strategic lever in our sCore wholesale strategy, I am confident our own brands will continue to grow going forward.
Overall, our joint efforts have so far demonstrated great results: the sales growth of the common sourcing products is twice as much as the overall sales, clearly proving the advantages of working together.
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.
International Trading Offices
Each location is specialized in a specific category:
- Valencia is responsible for fruits and vegetables
- Rotterdam for fresh and frozen meat
- Concarneau for fresh fish and seafood
Profile of 3 Offices
Facts and Figures
Annual sales highlights of common food sourcing
Sales share of common food sourcing
Own brands sales share
Own Brands is a key component of METRO’s wholesale growth strategy, with the ambition set for 35% sales share by 2030. In Q3 FY 21/22, own brands sales already accounted for 19% of total sales worldwide.
METRO Germany and METRO France have both registered 1 billion EUR sales of own brands in the latest financial year.
Food waste reduction
The results of the Food Waste Report illustrate that METRO is on track to achieve the target it has set itself – the wholesale company intends to halve the food waste at its own wholesale stores and warehouses by 2025 (5.66kg/m2) in comparison to baseline year 2018 (11.3 kg/m2), thereby making a significant contribution to the reduction of food waste.