Parallel trading of promotional stock between retailers has become such a headache for suppliers of branded goods that it could now account for a staggering 1% of all grocery sales. At least, that’s the view of one of the top suppliers who sits on our reader panel of grocery manufacturers.
Based on the results of our latest reader panel survey, this is not a problem that affects many suppliers. But a sizeable minority of the suppliers we quizzed were seething at the fact that some customers were trading promotional stock between themselves.
They argue that such parallel trading means more products are sold into the trade at promotional prices, taking away an element of sales at full price. This in turn allows customers to hit over-rider targets without delivering any volume or sterling growth in real terms. It also skews volume efficiencies across different accounts.
And, somewhat ironically, while those buying the parallel traded stock may gain in the short term, they are helping fuel the growth of these bigger rivals.
One supplier, who says he has seen the problem grow steadily worse in the last nine months, said: “The result is that our profit is seriously eroded through skewed business mix issues.”
And he added: “If smaller retailers and wholesalers play these games they can’t really turn round and complain about unfavourable terms.”
The problem has definitely been getting worse in the last two years, said one top supplier.
“Parallel trading is damaging our business. It is having an impact financially. It results in fewer promotional pounds going directly to the consumer, hurting them in the long run.
“The big issue for food companies is having enough substantiated evidence to take to the trade. It is also worth noting that parallel trading leads to traceability problems in the event of product recalls.”
Another said: “We have taken steps, and we will take further steps, to fairly and correctly allocate the amount of promotional stock we sell to each customer.
“We must get to the position where customers have sufficient stock to run an exciting, short, sharp promotion but not provide excess stock that can be skimmed off and sold on.”
Of those questioned who had not been affected by the parallel trading between customers in this country, a number said the grey market imports from Europe were an issue for their businesses.
Julian Hunt