Building on comments from president and CEO, Vivek Sankaran, earlier this month, Albertsons has confirmed that it is evolving its buying structure to adopt a centralised approach.
Cost savings opportunity
Speaking during its Q4 results, Sankaran highlighted that the retailer had increased its $1bn productivity savings target to $1.5bn by 2022. This builds on the $500m savings delivered last year. The move towards a centralised buying model will play a key role in enabling the retailer to achieve this new target. While Albertsons’ strategy has been to deploy its offer locally through a series of banners, while optimising its scale for loyalty, private label and omnichannel initiatives, consolidating its buying functions is a significant cost savings opportunity.
Source: IGD Research
National category directors in control
Currently the retailer operates with 12 different buying points and supply chains across its various divisions. In a letter to suppliers, Sankaran outlined how the business will move to this new approach for centre store and a small number of fresh food categories. National category directors will be appointed to make “company-wide category decisions around assortment, space, and vendor negotiations, in order to support our ambition to grow our collective business.”
Pressuring cost of goods
This will be a major change for suppliers trading with Albertsons. While it will simplify negotiations and potentially reduce the resources required to manage the account, it will pressurise the cost of goods as Albertsons optimises its national scale. For some suppliers it may also change their geographic point of contact, requiring internal realignment. This approach mirrors a major change that Sobeys in Canada undertook in 2018-19. This led to the re-design of most centre store categories and the harmonisation of supplier price files, driving margin improvements for the retailer.
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