SCDigest Editorial Staff

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The opportunity to do this is enhanced by the fact that both are beverage companies, meaning there may be commonality across MRO items. What Do You Say? Click Here to Send Us Your Comments Click Here to See Reader Feedback

Is an innovative procurement deal between Anheuser-Busch and PepsiCo likely to be repeated elsewhere?

The two beverage giants announced this week that they have signed an agreement by which they will jointly combine their purchasing efforts and volumes over many “indirect” categories of goods, meaning those not directly associated with manufacturing processes.

According to a press release, the list of potentially jointly procured items is broad, and includes many categories that might be expected, such as office supplier and maintenance, repair and operations (MRO) materials. Perhaps surprisingly, the deal may extend to other areas as well, such as computer hardware and logistics services.

Key to the deal, of course, is the perceived opportunity to increase leverage – that even these two giants have room to drive down supplier prices by combining their purchasing power.

“The agreement allows both companies to purchase goods and services more efficiently at competitive prices – effectively managing costs that can be reinvested back into areas that will grow their businesses,” a joint press release said. “A team consisting of procurement experts for each company will focus on common areas of spending and negotiate purchases on behalf of both companies.”

There have been “purchasing cooperatives” for decades, such as the Independent Grocers Association (IGA) and many others, which have generally served to generate some buying power for smaller businesses by grouping their spend and negotiating prices for the association.

Agreements like this new one between AB and PepsiCo that involve large companies are rare. As the companies note, the opportunity to do this is enhanced by the fact that both are beverage companies, meaning there may be commonality across MRO items, for example, that would not be true for companies in different industries.

Such a move would likely not be permissible between actual competitors, however, as it would violate existing anti-trust laws.

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Says SCDigest editor Dan Gilmore: “This is a very unusual and potentially groundbreaking agreement – if the two companies can really work to execute it successfully. The challenge will be in reconciling the specific suppliers and specifications each side has now – and there will be egos and other issues involved there.”

Gilmore added: “Some areas will be more challenging than others, and transportation services will be among them. Companies have a hard enough time consolidating their own transportation spend, let alone theirs plus some other company’s volumes.”

Adds Herb Shields, a consultant and educator who, in part, specializes in procurement: “Both these companies are big enough that I would assume they are already getting very competitive pricing for all non-inventory purchases. However, since in most of the categories they mention, there are likely to be some suppliers which currently do not have any Anheuser-Busch or PepsiCo business, those suppliers will really be aggressive,” he told SCDigest. “The joint press release makes the objective very clear – lower costs. I am sure they will get results in some categories.”

What is your reaction to the AB-PepsiCo agreement? Will we see more “Collaborative Purchasing?” Will it work, and what will be the keys to doing so? Let us know your thoughts at the Feedback button below.