ECR COULD SAVE EUROPE $27 BILLION AT RETAIL: STUDY

JAMES FALLON

GENEVA, Switzerland (FNS) -- European food retailers could cut operating costs by more than $27 billion and increase sales by up to 300% if they implemented all the elements of Efficient Consumer Response, according to a study by Coopers & Lybrand.

The study was released at the first ECR Europe conference here last month. The event drew 1,200 delegates from around the world, and was sponsored by CIES: the Food Business Forum; EuroCommerce; EAN International, and AIM: the European Brands Association.

Coopers & Lybrand was commissioned by the ECR Executive Board to examine the potential of ECR among European food retailers and manufacturers. The board includes representatives from Tesco and Safeway in the United Kingdom, Ahold and Albert Heijn in Netherlands, Rewe from Germany, Promodes in France, La Rinascente of Italy, Metro/Asko from Switzerland and ICA of Sweden.

Manufacturers represented include Coca-Cola, Unilever, Nestle, Mars, Procter & Gamble and Johnson & Johnson.

The study looked at five retailers and 10 manufacturers in seven European countries and covered 15 product categories equally split among dry goods, refrigerated products and health and beauty.

"In total money terms, we found Europe has more potential for cost savings through ECR than the United States," said Philip de la Chambre, senior partner in the European ECR Project at Coopers & Lybrand.

The potential European cost savings compare with an estimated retail savings of up to $19.3 billion in the United States and $1.1 billion in Australia, de la Chambre said.

The European savings represent 5.5% of the industry's total costs, which amount to about $491 billion. ECR offers European food retailers and manufacturers the potential to cut retail prices of their products by an average of 5.7%, he said.

Operating costs would drop 4.8% by fully implementing ECR, while inventory costs would decline 0.9%, according to the study. The estimated operating cost reductions, excluding inventory or other asset value considerations, for the 15 companies surveyed were 3% of consumer prices.

Expressing this operating cost reduction as a percentage of retail prices provides the 5.5% estimate of savings in total costs associated with ECR, he said.

The study found 90% of the savings would come through five ECR improvement concepts. The largest single opportunity for cost savings, representing about 28% of the total, would come from integrating the supply chain between retailers and manufacturers.

Other areas of savings, in order of potential, included product introductions, reliable operations, optimizing promotions and sychronizing production.

In terms of cutting costs through inventory reductions, on the other hand, Coopers & Lybrand found that European retailers already are far ahead of their American counterparts. The current inventory level in Europe averages 43 days, compared with 104 days in the United States. But the study's participants estimated they could cut their inventories by another 42%, or 18 days.

"With a logistics infrastructure that can operate with low inventory levels, such as is available in many European countries, ECR opens the opportunity to fully exploit these advanced logistics capabilities to dramatically reduce response time and nonproductive inventory," the study said.

In addition to examining the potential of ECR in Europe, Coopers & Lybrand looked at how many ECR initiatives the 15 companies surveyed had implemented.