Fifty of the world's largest food, beverage and consumer product manufacturers plan to collaborate on an electronic marketplace that will allow them to purchase the estimated $200 billion of goods and services they use each year more cheaply and efficiently.
Some of the biggest consumer product names such as Kraft Foods, Procter & Gamble and Nestle USA are funding the venture with Grocery Manufacturers of America. The idea was conceived less than two weeks ago, shortly after the country's largest auto makers decided to form a similar marketplace for parts.
The business-to-business e-commerce network is meant to help food companies lower their costs for everything from cardboard boxes to janitorial services and help speed products to market, but it probably won't lower prices for consumers, at least not initially.
Indeed, some analysts painted the news as a kind of public relations attempt by old-line food companies, which have fallen out of favor with investors.
Details of the online marketplace are still being worked out. Initially, GMA officials say, it will probably focus on procurement of common items such as packaging, office and industrial supplies and services. But eventually, it could expand to encompass food ingredients, manufacturers' sales to wholesalers, order fulfillment and tracking and customer service.
Most important, according to one Procter & Gamble official, it will create a common set of standards for the food industry, from purchase orders to product codes. "Imagine if the banking industry didn't have a set of standards, how long it would take for a check to go through," P&G spokeswoman Gretchen Briscoe said. "[Consumer products companies] need a common way to speak to each other."
GMA announced the marketplace in an attempt to fend off business-to-business initiatives by "dot-com" companies, which analysts say would steal both their business and the commissions involved with these transactions. Under its plan, GMA will form a separate company, to be owned by the food companies that use the system. The marketplace should be launched in the next year, said Bill James, GMA senior vice president.
Other participants in the online marketplace include Unilever, Sara Lee, Morton Salt, Pillsbury, General Mills, Campbell Soup and Clorox.
Sales from business-to-business sites are expected to total more than $2.7 trillion by 2004, eclipsing the $184 billion in consumer sales projected for that year.