Many suppliers believe their levels of trade investment will increase in the coming 12 months, but they are split over whether the money they spend with retail customers is money well spent. That’s the conclusion of our latest reader panel survey of top supplier executives.
Experts say fmcg suppliers invest anywhere between 15% and 25% of sales revenue in this area. And 47% of our panel agreed their spending fell into this band - although some stressed it was towards the lower end. But 38% said they spent less than 15% and the remainder said their spending was higher than 25% of sales revenue.
Trade investment includes the cash invested in margin, the money spent rewarding efficiency or volumes growth, as
they were making in promotions and cutting retail prices.
“Instead of being used to improve quality, reward loyal consumers or attract new consumers, most spend is going towards the current in-fighting between the retailers,” said one top own label executive.
Another agreed the ‘in-fighting’ was causing headaches. “Asda is getting us to invest our promotional monies into retail prices. However, Tesco will not be more expensive than Asda and still wants fully funded promotions. The result is an unaffordable spiralling down of retail prices that in reality have to be funded by us or we will face delistings, reduction in space and no promotions.”
Others said that even when they felt their investment was not generating an adequate return, they feared the consequences of cutting back.
The subject was also raised in the Competition Commission’s Safeway report, which contained scathing comments from leading manufacturers on the supermarket code of conduct.
This has prompted speculation that the OFT will be forced to widen its current review of the code, in a move which could lead to regulation.
The OFT refused to comment, but admitted its report would now be delayed. “We hope to be able to complete it before the end of the year.”
Any change to the code would require a new reference to the Competition Commission.
n We plan to revist the issue of trade investment and are keen to have your views. E-mail: julian.hunt@william-reed.co.uk.
Julian Hunt
Experts say fmcg suppliers invest anywhere between 15% and 25% of sales revenue in this area. And 47% of our panel agreed their spending fell into this band - although some stressed it was towards the lower end. But 38% said they spent less than 15% and the remainder said their spending was higher than 25% of sales revenue.
Trade investment includes the cash invested in margin, the money spent rewarding efficiency or volumes growth, as
they were making in promotions and cutting retail prices.
“Instead of being used to improve quality, reward loyal consumers or attract new consumers, most spend is going towards the current in-fighting between the retailers,” said one top own label executive.
Another agreed the ‘in-fighting’ was causing headaches. “Asda is getting us to invest our promotional monies into retail prices. However, Tesco will not be more expensive than Asda and still wants fully funded promotions. The result is an unaffordable spiralling down of retail prices that in reality have to be funded by us or we will face delistings, reduction in space and no promotions.”
Others said that even when they felt their investment was not generating an adequate return, they feared the consequences of cutting back.
The subject was also raised in the Competition Commission’s Safeway report, which contained scathing comments from leading manufacturers on the supermarket code of conduct.
This has prompted speculation that the OFT will be forced to widen its current review of the code, in a move which could lead to regulation.
The OFT refused to comment, but admitted its report would now be delayed. “We hope to be able to complete it before the end of the year.”
Any change to the code would require a new reference to the Competition Commission.
Julian Hunt
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