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ESM | Exclusive Interview MIGHTFly-BuyFly-Buy Elegant, contemporary offices in the World Trade Centre (WTC) in Amsterdam’s Schiphol Airport reflect the pan-European reach of AMS Sourcing, one of ’s leading buying alliances. It is here that the animated, charming and very capable Bert Swartsenburg heads up a team of 40 people whose primary business is sourcing and negotiating the prices of private-label products for some of Europe’s leading retailers. With ten shareholders (soon to be 11, when El Corte Inglés joins in January) and three members, AMS is involved with 11,000 stores across 31 countries. Editor Kevin Kelly was invited to visit the company’s headquarters, overlooking the runways of one of Europe’s busiest airports.

MS was of Albert Heijn’s XL established hypermarket-style 24 years format before being ago by promoted to managing retailers director for ’s lookingA to leverage the Dutch buying desk, buying capabilities of which led to three years the totality of their as VP for the group’s businesses. With its European sourcing. In shareholders’ combined July 2009, Ahold turnover of €127 agreed that billion, AMS is a very Swartsenburg should powerful organisation take control of the indeed. AMS operation, with An Ahold veteran, the full support of the Bert Swartsenburg spent other nine shareholders. 28 years with the Dutch The AMS managers retailer, and he is very are drawn from much built in the Ahold various parts of the mould. One of the most world, primarily from progressive retailers in its retailer Editor Kevin Kelly meets AMS MD Bert Swartsenburg at the Schipol Airport HQ the world, Ahold has a shareholders. big business in the US, as well as its native manager roles before being made project Swartsenburg says that although the costs . Swartsenburg started off as manager for the introduction of the AH in hiring expats tend to be higher than fresh manager in an Albert Heijn (AH) Bonus Card loyalty programme. Following employing people in Amsterdam, they store in Enkhuizen, rising through the a three-year regional manager stint, he was bring tremendous assets, such as language ranks, spending time in two category brought in to head up the implementation skills, an understanding of a wider

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ESM | Exclusive Interview

deal is handed over to the shareholders to take care of the ordering and payment of the products. Logistics and packaging also come under the remit of the individual shareholder. While some retailers want to be involved in every phase of the process and some not at all, their approval is secured at every stage. Occasionally, AMS joins forces with category managers of its shareholders in negotiations in their respective areas of specialist knowledge. For example, they invited Esselunga executives to join in talks on the price of tinned tomatoes and pasta, an area of expertise for the Italian retailer. Before joining the negotiations, however, a confidentiality and non-disclosure agreement is signed by the shareholders’ expert. “Our staff is knowledgeable, but we are not too proud to ask the shareholders to join us if they have special expertise,” Swartsenburg says. Above: Some of the very professional AMS buying team: Ivo Correia (), Having myself worked as the general Freya Mendia (), Remy Medina (France), Robbert van der Zalm (Dutch), Magnus manager of a buying group many years Bergendahl (), Magdalena Asthana (Poland) Petri Mikkela (), and ago, I am well aware of the advantages of May Jorem (Dutch). cooperation. In the case of canned tomatoes, when each of the delegates from marketplace, and, of course, intimate the class in commercial negotiations. Its the partners travels to Amsterdam, they knowledge of the shareholding companies. staff are tough negotiators, but they are may bring one or two potential suppliers, With consumers across Europe ditching also good ambassadors for the but when the ten shareholders disclose branded goods in favour of private label, organisation. their own suppliers, the pot is significantly it is no surprise that Swartsenburg feels Talking ESM through its operational larger. One golden rule is observed by that his company’s position in the structure, it is clear that after 24 years, Swartsenburg and his team: prices business model of its retailers is safe. “We AMS has its system down to a fine art. received by individual members from are becoming more important to these Through three main trading divisions – shared suppliers are not disclosed. The companies. Due to the recession, people food and beverages, fresh and frozen, and Brussels and Amsterdam offices of a are switching from branded to private- non-/near food – the buying alliance renowned international law firm assists label products, and our shareholders are focuses on “everything with a shelf life of AMS in ensuring compliance with expanding their private-label more than ten days”, as Swartsenburg competition legislation, as well as keeping assortments.” Negotiating the best puts it. After setting budgets for the year the company up to date with possible deal for the supply of private- ahead in September with shareholders, the developments in the area. label products, AMS leverages the buying AMS team gets down to business and While touring the offices, I cheekily joke weight of its current ten shareholders, sends out RFIs – requests for information that I am surprised not to hear any enabling them to get the keenest prices in – to members. In the meantime, samples squeals of pain as suppliers’ arms are this lucrative category. When I point out are brought for the shareholders to see in being twisted. A good-humoured man, that many of its shareholders have the boardroom in Schiphol. The business Swartsenburg laughs and points out that sophisticated buying operations of their analysts talk the shareholders through AMS is very much in the intelligence own, and query the value of joining the trends in the marketplace, raw material business. “Sourcing has become much alliance, Swartsenburg was quick to show developments, what went well and was more fact-based. It’s not about power the strengths that AMS brings to the table. unsuccessful in the previous year, the play. We know much more about raw “You always have a very impressive targets for the coming year, and the materials, about the markets. We share return on your investment on your suppliers to be invited to work with the the knowledge between the different membership [of AMS] because if you’re group in the next year. Selected suppliers shareholders – ten people together know not making a saving, then why would you receive quotation requests, which are much more than one person.” If an be with AMS? There are members who returned through an online tool. The next existing supplier approaches AMS for a had a multiple return on their fee in the phase of the process is the analysis of the price increase due to a rise in costs – for first year.” quotations based on the specifications of example, the bottle costs for shampoo – The AMS slogan is ‘Buying Together the individual shareholders outlined AMS will already know the breakdown of Better’, which, the company says, it beforehand. Suppliers are then invited to the constituting parts of a shampoo bottle achieves through connecting companies, negotiations and, after coming to an and know the trends in commodity prices, creating synergies and being the best in agreement, the contract is signed and the so the buyers will have a good idea if the

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price increase requested is justifiable. Euro Shopper banner, which accounts for a innovation, ahead of the A-brands.” Swartsenburg says that his team includes small part of group turnover. While some Having grown 20 per cent on average, business analysts who follow the commodity retailers, such as Booker, the UK wholesaler, year on year over the last four or five markets very closely so that the buyers are sell the brand as is, other retailers make use years, Swartsenburg and the team expect aware of any developments that are likely to of the economy product range while placing the same for 2013. The addition of El affect existing or future contracts. it under their own banner. “The economy Corte Inglés to the roster in January will AMS has a supplier portfolio of range assortment, whether it’s Euro Shopper also add to growth. Commenting on thousands, and Swartsenburg ensures me or the economy label of the shareholder, is trends for the coming year, Swartsenburg that the business operates as much in favour jointly sourced. Morrisons’ value olive oil highlighted sustainability as being “hot on of its suppliers as its retailers. “Buying goes in the same tender as Euro Shopper the agenda” for shareholders. “Everyone alliances are seen as tough negotiating olive oil,” Swartsenburg explains. The value wants to make sure that the planet is here monsters, which is not the case. Let there be of the negotiated budget range is reported to to enjoy for generations to come,” he says. no doubt that we get the best prices for our be €1.4 billion. Having started out sourcing only dry shareholders, but for a supplier, groceries, over time AMS has you can reach economies of moved into new categories and scales, you can expand your counts semi-fresh as a volumes, and you don’t pay any significant part of its business, fee to take part in our project. and further range extension in All of a sudden, a supplier has the category isn’t to be ruled access to 31 countries and 14 out. Suggestions for new leading European retailers.” products are made at the When representatives from quarterly advisory board the shareholders meet AMS’s meetings with the commercial buyers, it is clear to see just board members, and how large the volumes can Swartsenburg admits that they grow. For example, if one are exploring possible retailer has the potential to buy synergies with ICA, 5,000 cases per year of an own- Morrisons, Migros and El label dog food, the retailer Corte Inglés – big operations would expect to get a good that all have sourcing price, but when the meeting in Amsterdam infrastructures in the Far East. He adds, establishes that the potential for that order “We continue to move into non-food and through AMS is up to 50,000 cases, it is a “Our shareholders are fresh. Our shareholders who have much more attractive deal for the expanding their private-label hypermarkets also source from the Far contracting supplier, and justifies a lower assortments.” East. Our trade director, who has a price for the shareholder. Does the Bert Swartsenburg, MD, AMS Morrisons background, is in the Far East difference between 5,000 and 50,000 cases to discuss what we can do and see if we translate to a discount of 3, 4, 5, or more can create synergies there.” per cent? The AMS boss won’t tell, but this Despite its heavy involvement in own- I made an attempt in assessing the illustrates that sheer scale of volume is at the label, AMS runs an A-brand collaboration purchase value of AMS, taking into heart of what his company does. programme, which is a small but growing account the reported €1.4 billion value With 99 per cent of the AMS business part of the business. The programme of its economy labels, including Euro deriving from private label, the group has incorporates 50 brand manufacturers and Shopper, which represents 10 per cent of developed its own budget range under the aims to identify how to accelerate turnover. additional growth, on top of agreements My estimation is that AMS could, on SOME OF THE PRIVATE LABEL made at a local level by the shareholders behalf of its shareholders, purchase up to with the brand manufacturers. An extra €4 billion per year. While Swartsenburg RANGES AMS DEALS WITH European discount for these participating declined to make any comment on my Delhaize – Taste of Inspirations shareholders is negotiated, along with guess, I got the feeling that I might not be extra promotions and listings. “Sometimes, too far off. Système U – U Ecologique if we grow faster than the market, then it’s If I am correct, it represents a significant Albert Hejn – AH Excellent a volume-based incentive, and we are contribution to the shareholders because Système U – U Bio rewarded for that,” Swartsenburg says. Swartsenburg tells me that he runs a very Esselunga – Esselunga With the increasing prevalence of private tight operation – no business-class travel, Esselunga – Esselunga Bio label in the grocery retail market, the even on long trips. Morrisons – M Savers sector sees a lot of innovation from He prides himself on the professionalism product range to packaging and on-shelf of his multinational team, and if the Albert – Albert Quality presentation. Swartsenburg agrees, and company has a purchase value of my Albert – Albert Excellent mentions that he is particularly impressed lowered estimation of even €3.2 billion Albert – Albert Bio with the packaging for the own-label this year, a big percentage of this goes Migros – Sélection offering from Migros. “Sometimes I think back to the shareholder by way of price our shareholders are taking the lead in reduction.I

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