Monday 15 December 2014

Abolishing Trade Investment by suppliers - the impact on brands

News that Tesco is allegedly planning to dismantle the system of using Commercial Income, or Trade Investment, as a source of cash from suppliers raises a number of issues for NAMs and competing retailers.

What does it mean financially?

  • Supplier cannot afford additional investment (in fact the calculation shows why so many suppliers are struggling profit-wise)
  • Retailers are not going to surrender Trade Investment & Deductions as sources of income
  • Retailers may try to negotiate Trade Investment into Margin, thus removing the issue of how it is booked in the business
  • Trade Investment may be absorbed into retail running costs and price-cutting, with less available for in-store customer incentives
  • Eventually, additionally funding may be requested in order to 'create a bit of excitement' in-store....

Still ok with your trade agreements for 2015?
(Why not substitute your brand's % in the above calculation and see what it is costing you to be onshelf...?)

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