Trade spend is an integral marketing activity that businesses heavily rely upon to drive sales outcomes with their customers in foodservice environments.

What are they?

Trade spend refers to the financial investment a supplier pays to a customer in order drive sales of their product. These can be broadly categorised as fixed and discretionary.

Fixed trade spend commonly refers to trading terms which is a set discount that is deducted from the price a supplier charges their customers for each product they on sell to the end user. Most suppliers will have a trading term relationship with their customers to secure purchasing loyalty.

Discretionary trade spend is short term in nature and comes in the form of an additional discount on certain products a supplier may want to increase sales for.

In foodservice and wholesale channels, case deals are very common between suppliers and distributors specifically for frozen and pantry products where over and above discounts on trading terms incentivise customers to bulk purchase often in return for participation in supplier reward programs and trade shows.  

Common reasons why trade spend is used

  • Increase market share in both volume and value
  • Shift slow-moving stock
  • Blocking strategy i.e. prevents customers from approaching a competitor supplier
  • Drive consumer trial of new products

Common examples of trade spend

Foodservice

  • Contracted term arrangements.
  • Exclusive case deals for buying groups.
  • Volume conversion incentives i.e., encouraging a customer to convert their business from a competitor.

What are the pros and cons of trade spend?

Pros

  • Great way to build commercial relationships.
  • Effective way to drive volume through paying a customer to discount their product to the end user.

Cons

  • Suppliers who heavily rely on constant promotion encourages end users to rarely purchase at full price.
  • Very complex activity to both track and manage in large FMCG organisations.

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