Food and consumer goods giants to launch e-market

Kraft, Procter & Gamble, Nabisco, Pepsi and 50 others plan to develop a multibillion-dollar online exchange open to virtually all companies across the industries' supply chains.

Kraft Foods, Procter & Gamble, Nabisco and Pepsi Bottling Group are among the 50 food and consumer goods giants that plan to develop a multibillion-dollar online exchange open to virtually all companies across the industries' supply chains.

The proposed electronic marketplace, announced by the Grocery Manufacturers of America (GMA), would represent the largest collaborative effort among food, beverage and consumer goods companies.

PricewaterhouseCoopers is GMA's electronic-business consulting partner on the project.

Initially, the mega-exchange would support catalogue purchasing, bidding and price quotes, online sourcing and auctions for raw materials, officials said.

Down the road, the plan is to also offer value-added services, including integrated logistics, shipping, and planning and demand management.

"The new initiative, conceived only 12 days ago, is moving at Internet speed. We are aiming to quickly and efficiently communicate on a global level," said C. Manly Molpus, president and CEO of Washington-based GMA.

The goal, Molpus said, is to create efficiencies on a global level by creating a standards-based marketplace that would be open to all supply-chain players and could connect to other online exchanges in the future.

Participants of the exchange expect to reach a definitive agreement on the terms, including name, ownership structure for the venture and provisions to protect the confidentiality of a company's information, sometime during the second quarter.

The $US460 billion consumer packaged goods industry now spends more than $US200 billion annually on goods and services to support supply-chain operations.

GMA is the world's largest association of food, beverage and consumer products companies, with a membership that generates more than $US450 billion in US sales annually.

The announcement comes two days after $US6 billion Cargill announced with Ariba a new online exchange for suppliers of ingredients and food processors. That exchange will compete with an earlier market entry, ECFood.com.

The most successful electronic market for the food industry will be the one that both retailers and manufacturers buy into, according to Steve Denault, a food industry analyst at US Bancorp Piper Jaffray in Minneapolis.

"If you look at the food chain in general, where the power resides is really with the retailers who tell the manufacturers and processors what to do, then the processors tell the suppliers," he said.

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