Consumer Product Giants Jump on B2B Bandwagon

The Grocery Manufacturers of America (GMA) has joined the business-to-business (B2B) scramble by announcing plans to create an online marketplace for its members. GMA members generate U.S. sales of $460 billion (US$) per year and employ 2.5 million people in 50 states.

The organization has already appointed an executive steering committee to manage the exploratory phase with executives from member firms Kraft Foods, Procter & Gamble, General Mills, Inc., Nestle USA, Bestfoods and Unilever.

It also named PricewaterhouseCoopers as the consulting firm that will help to develop the concept.

The committee said its goal is to reach a definitive agreement on the terms — including name, ownership structure for the venture, and provisions to protect the confidentiality of a company’s information — in the second quarter. Final terms will be subject to appropriate approvals.

A Glint in the Eye

Even though the marketplace is little more than a glint in the eye of the GMA and its leading members, it has sparked immediate interest from normally conservative executives.

“The scale, credibility and efficiencies this marketplace creates will result in an entirely new, open and transparent supply chain,” said Durk Jager, President and CEO of Procter & Gamble. “Throughout our history, we have learned time and again that the industry and, most importantly, the consumer wins when we all work together.”

Initially, the GMA says that the marketplace will bring “multiple buyers and sellers in to support catalog purchasing, bidding and price quotes, online sourcing and auctions of raw materials, packaging supplies and other goods and services essential for their operations.”

In addition to procurement functions, the marketplace may also provide such services as capacity planning, demand forecasting, production planning, supply chain transaction automation, financial services, payment and logistics.

Standards-Based Marketplace

At least one industry analyst agrees with GMA. According to Steve Denault, an analyst with Minneapolis, Minnesota-based Piper Jaffray, “The most successful electronic market for the food industry will be the one that both retailers and manufacturers buy into. If you look at the food chain in general, where the power resides is really with the retailers who tell the manufacturers and processors what to do, then the processors tell the suppliers.”

Perishables Industries Embrace E-Commerce

It would appear that there has suddenly been a movement to embrace online commerce in the food industries. Earlier this week, agribusiness giant Cargill, Inc. and Ariba, Inc. announced their own B2B exchange for food and beverage manufacturers and their suppliers.

That initiative, called Novopoint.com, is designed for buyers and sellers of food ingredients, packaging and related services such oil, sugar, colorings, packaging, chemicals and freight.