During the 1990s, consumer goods manufacturers had to contend with the growing consolidation of their retail customer base within each national market. As a result, they reorganized their sales forces around major customers rather than geographic regions and began to develop skills in key-account management and trade marketing to supplement their traditional focus on consumer marketing.

But now, at the start of the new millennium, these same manufacturers face a new challenge. Following a wave of cross-border mergers and acquisitions, an increasingly powerful group of international retailers has emerged (Exhibit 1). As opportunities in the domestic markets of retailers diminish and financial markets press retailers to grow, the pace of international consolidation is likely to accelerate.¹

Manufacturers must decide how to respond. Are these international retailers primarily a threat, likely to use their power to extract ever greater concessions from manufacturers? Or do manufacturers capable of working with new-breed retailers have an opportunity to increase global sales? If so, what new skills will manufacturers need to manage these customers successfully?

To explore such issues, McKinsey conducted a survey of 37 leading consumer goods companies and 8 international grocery and do-it-yourself retailers (see sidebar "About the survey.")....