How Worried Should You Be About Retailer Alliances?

Up to 30% of consumer packaged goods (CPG) companies’ operating margins are put at risk in the US as these alliances expand their influence.

Kroger and Walgreens’ new retail procurement alliance (RPA) means that approximately one-third of total US grocery purchasing power is now concentrated under either the RPA or Walmart.

The acceleration of buying alliance activity in Europe over the past 10 years has put up to 45% of CPG operating margins at risk for those suppliers unprepared to respond. In the US, we predict that retailer alliances’ tougher negotiations, harmonized pricing and stricter new service agreements could threaten up to 30% of operating margins for suppliers that don’t take the threat seriously.