Early this week, four major players -- Danone, Nestle, German food and chemical group Henkel, and German software group SAP -- earmarked $87 million to set up a new European online food exchange called CPGmarket.com. It aims to counter competition from U.S. rival Transora, which boasts 52 industry players (including powerhouse Procter & Gamble) and some $250 million in funding for a worldwide launch.

Online exchanges from industries ranging from aerospace to chemical and automotive are becoming so numerous that analysts caution a shakeout is certain. They warn that only one group in each sector will survive. To blame, they say, are the high cost of building exchanges and the difficulty in attracting users.

Already, exchanges set up by dot-com startups are suffering as they encounter competition from industry consortia. Late last week, Efdex, an Internet marketplace linking caterers, restaurants, hotels, and suppliers, shut down after spending $60 million over two years. The site never went live.

Expect still more players to enter the sector, however, as antitrust concerns over such industry consortia are cleared. This week, the U.S. Federal Trade Commission gave provisional clearance to Covisint, a B2B exchange for the automotive industry backed by Ford, General Motors, DaimlerChrysler, Nissan, and Renault.

HOME FIELD ADVANTAGE

CPGmarket.com, based in Geneva, claims it's not about to be squeezed out by its much larger rival, Transora. "There is room for a European marketplace in the food industry," says Stefan Burgstaller, an analyst at Schroder Salomon Smith Barney in London. In the steel business, there are still players, such as SteelScreen, that have done well concentrating on the European market even in the face of giants such as E-Steel, Mr. Burgstaller says.

While both CPGmarket.com and Transora say the market may be big enough for both of them, they are quick to point out their own advantages.

CPGmarket.com contends that as the home player in Europe, it has a natural advantage and an unmatched commitment to the region. "We have a good chance to be the leader in Europe, because we know the European companies, European countries, and European languages," says CEO Yves Barbieux. In contrast to CPGmarket.com's European footprint, Transora plans to launch in Europe and North America next month, going live in Latin America and Asia-Pacific late in the fourth quarter.

In defense, Transora chief strategy officer Rick Herbst says, "We're not just creating a good U.S. offering and deploying it in Europe." Still, analysts doubt that Transora will be able to become a potent competitor in the U.S. while succeeding in every region at the same time. "You cannot develop this effectively for the entire world at once," says Mr. Burgstaller. "At least, nobody has done it yet."

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