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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