The creation of the CPGmarket platform was announced last March. It has its headquarters in Vevey, Switzerland, home to Nestlé, the world’s largest food group. Nestlé, Danone and German chemicals giant Henkel hooked up with software provider SAP to set up an electronic marketplace meeting the e-procurement needs of the European consumer packaged goods market. As president Yves Barbieux told just-food.com, it was essential that a technology partner come on board at the start to facilitate fast evolution, and SAP, as the primary European heavyweight in the ERP sector, was the obvious choice. Others were swift to come on board: CPGmarket now boasts 27 members (see list below). The latest signing is US soft drinks giant Coca-Cola, which last week invested SFr8m in the e-marketplace. CPGmarket is also reviewing possible alliances in the packaging, coffee and chemicals sectors.
A little over six months after his appointment as president of consumer packaged goods e-marketplace CPGmarket.com, Yves Barbieux is just getting started. With 27 members and a number of successful pilot e-sourcing auctions behind him, Barbieux shared his experiences and vision with just-food.com.
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The business model comprises five core components: e-sourcing, e-requisitioning, e-supply chain, e-fulfilment and e-intelligence. CPGmarket is focusing on getting one component up to speed at a time. e-sourcing and e-requisitioning are already live, while the remaining three services are at pilot stage or still under construction. Barbieux stresses that he is determined to remain pragmatic and grow the business steadily. A wise move – the list of dot.coms that have foundered after trying to do too much, too soon, is long and growing fast.
Economies of cost and time
Members are optimistic that e-procurement will help them save money. Joanne Levien, Nestlé European eProcurement manager and responsible for coordinating and implementing CPGmarket within the Swiss multinational, says it is impossible to put a figure on the cost savings a company sourcing products via the e-marketplace could expect to realise. She’s in good company – startup costs are depressing initial savings and the e-procurement market is too young for any players to make long-term savings forecasts. However, the figure of 10% is widely quoted – not included enabling costs.
Another of the key benefits of e-procurement is less tangible – timescale. A reverse auction that Heinz carried out recently for its Bagel Bites advertising airtime using an e-marketplace was completed in 32 minutes – instead of the more normal one to two weeks. This scale of efficiency has been noted in many areas of e-procurement. Kraft Foods International recently piloted CPGmarket.com’s e-sourcing facility and held two half-hour auctions, with five additive contracts up for grabs. Speaking about the €1m auction, Kraft’s Byron Thomas, director of purchasing strategy and e-procurement, said “Senior purchasing managers who observed the auction live were positive about the system and the process.”
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By GlobalDataPreparing for e-procurement – information and integration
Growing the business of e-marketplaces is a question of education. It
takes time for suppliers in particular to understand the benefits an e-marketplace can bring – and to understand that it need not be a threat to their business, but offers them scope to reach a greater market. Likewise, purchasing members need to rethink their strategy and work out how a web-based purchasing system can be integrated into their current set-up.
Integration is a key issue. Members that have already integrated their information systems and invested in a seamless EDI infrastructure are relatively easy to integrate with CPGmarket – or any other e-marketplace. However, while the recent need for Y2K compliance and conversion to the euro prompted some European manufacturers to overhaul their IT landscapes, there are still many companies in the food industry with a tangle of non-integrated systems and applications. This will inevitably slow the take-up rate for e-marketplaces, as these companies gradually realise the potential benefit and catch up with their technology investment.
How far should e-sourcing go?
One decision that manufacturers need to make when looking at an e-procurement marketplace is how high a percentage of their supplies they want to source via that channel. The greater the percentage, the quicker they should see a return on the investment needed to enter the e-marketplace in the first place – but not all products lend themselves to the medium, and many suppliers will not be ready to use it either. The founding partners of CPGmarket pledged to commit at least 50% of their purchasing requirements to the e-marketplace they were creating. However, they are already envisaging raising this figure closer to 100%, Levien told just-food.com.
Staffing problems easing, breakeven pegged for 2002
Asked what was the greatest problem CPGmarket faced, Barbieux responded immediately that it was finding staff with the right skills and attitude. He noted, however, that this was becoming less of a problem as last year’s dot.com mania eased off and talented staff returned to the recruitment market. Hidden behind this return to the market are failed online ventures, but CPGmarket looks unlikely to join them, as costs have been running 30% below the business plan.
Nevertheless, the management has revised its original revenue projection based on real implementation experience. Breakeven is now forecast for 2002, with operating profits of €120m or 55% scheduled for 2003.
Denies Transora Megahub agreement
To support members’ interests in the US, Barbieux revealed that CPGmarket was in the final stages of selecting a US partner. Interestingly, Barbieux denied there was any truth in media reports that CPGmarket had already signed up to be the first customer of MegaHub, the joint interoperability venture started up by rival CPG exchange Transora and GlobalNetXchange (GNX), one of the two major retail e-marketplaces that have thus far emerged. In fact, CPGmarket.com has an option to build a messaging eHub between retailers and manufacturers with Transora and GNX, but that is as far as talks have gone – and Barbieux gave no indication that they were likely to progress in the immediate future.
Indeed, he stressed that Europe was large enough to have its own e-marketplace, adding that many European manufacturers were keen to work with an e-marketplace based in their own region rather than North America. This is partly because they think a marketplace created by Europeans will be better placed to handle the complexities of the market, for instance, a multitude of languages, commercial laws, fiscal systems and even VAT rates.
Transora is setting up a European subsidiary too, but antitrust concerns make it essential that the market is not dominated by one platform. The market is still in its infancy; identifying future rivals among the current players is normal, but it is likely that at least one further cluster will emerge to jostle for position with both CPGmarket and Transora.
CPGmarket members
| Bahlsen GmbH & Co. KG | Germany |
| Barilla | Italy |
| Fromageries Bel | France |
| Coca-Cola | USA |
| Danisco A/S | Denmark |
| Danone | France |
| Delta Holding SA | Greece |
| Euroalimenti | Italy |
| Ferrero International | Italy |
| Firmenich International | Switzerland |
| Fulda Holding Stabernack JR Partner GmbH | Germany |
| Henkel | Germany |
| Hero AG | Switzerland |
| Hewlett-Packard | USA |
| L’Oréal SA | France |
| Madrange Group | France |
| Mahou | Spain |
| Maserpack SRL | Italy |
| Mayr-Meinhof Packaging | Austria |
| Nestlé | Switzerland |
| Nutreco Holding | Netherlands |
| Pechiney | France |
| Pernod Ricard Group | France |
| SAPmarkets | Germany |
| Süzucker AG | Germany |
| Tipiak SA | France |
| Uniq plc | UK |
By Catherine Sleep, Managing Editor, just-food.com
