New sourcing strategy of Metro Cash & Carry strengthens small producers

4 March 2011

  • Wholesale operator phases out later income for certain products as from 2012
  • Better prices and better quality: direct sourcing from the producers
  • Better product choice and quality thanks to intensified cooperation with local and specialised producers

Starting from 2012, Metro Cash & Carry will strengthen small food producers with a realignment of its sourcing strategy and thereby increase product variety and product quality for the customers. To this effect, the wholesale operator will implement a series of measures relating to the procurement of so-called ultra-fresh produce, i.e. fruit, vegetables, fish and meat. These changes will intensify direct cooperation with smaller, local producers and thereby ensure more diverse assortments in the same way as better quality and prices. 

In essence, the Düsseldorf-based wholesale operator plans to phase out the socalled later income for ultra-fresh produce and at the same time establish central procurement locations for direct sourcing. With this move, the company is aligning its procurement strategy even more closely with the needs of its customers and

local producers. Especially small suppliers benefit from these measures: they win added security and planning reliability. At the same time, they gain more leewayfor new investments. The creation of new supply relationships with Metro Cash & Carry is also rendered easier for small producers – a move that will in turn increase assortment diversity for the customers, especially with regard to local products. 

As usual in this business, Metro Cash & Carry at the end of the year frequently calculates later income on the originally agreed purchase price of goods for its suppliers. This presupposes that, in the course of the year, the sales volumes have increased, food price variations have led to price reductions or the goods availability has changed, for example. Metro Cash & Carry is now phasing out this later income for products from the field of ultra-fresh produce and thereby relieving in particular small farmers, producers and suppliers. This group of products involves the largest number of small local businesses that supply directly to Metro Cash & Carry. For the suppliers this means that they no longer have to set up any provisions for special conditions agreed during the year or for price variances on the grounds of food price variations, for example – this gives them greater liquidity and planning security. 

At the same time, Metro Cash & Carry is introducing central procurement offices for certain fresh produce through which the company purchases its merchandise directly from the local producers and thereby reduces the number of intermediaries which will in turn curb the purchase prices and ultimately also prices for the customers. Also, the wholesale operator will get exactly the goods and quality grades that he needs. In a first step, a network of five central procurement locations will be established which will coordinate the purchase of certain product categories at a total of 13 locations worldwide – from South America to Oceania. Four of these procurement offices have already been established. Especially in the field of ultra-fresh produce the company mainly cooperates directly with local farmers and producers. 

With the changed procurement modalities, Metro Cash & Carry is also meeting demands from politicians in some countries to actively contribute to a stabilisation of price levels in the food sector and to support small and medium-sized enterprises. 

METRO GROUP is one of the largest and most international retailing companies. In 2010 the Group reached sales of around € 67 billion. The company has a headcount of some 290,000 employees and operates more than 2,100 stores in 33 countries. The Group’s performance is based on the strength of its sales brands which operate independently in their respective market segment: Metro/Makro Cash & Carry – the international leader in self-service wholesale, Real hypermarkets, Media Markt and Saturn – European market leader in consumer electronics retailing, and Galeria Kaufhof department stores.