ABCs of Distribution to Grocery
At Farm to Label, I presented a panel called "ABCs of Distribution to Grocery" with Brittany Sienia, Trade Analyst at Tillamook, Chris Tjersland, Partner Brands Development Manager at New Seasons and Ray VanWetten, Vice President-PNW Sales of Unified Grocers, Inc. We had a lively discussion on all aspects of the brand-distributor-grocery spectrum, including billbacks, free fills, price protections, promotional allowances, and how to track, negotiate, and leverage related grocery channel opportunities. We also reviewed some of the basics by presenting a glossary of terms that you might hear in this area. Ever wondered what an EDLP or MCB is? You aren’t alone! We hope this glossary will help you navigate the complex path to grocery distribution. Full credit (and thanks!) goes to Brittany Sienia for creating this handy glossary for our panel. Distribution to Grocery Glossary
Ad: This term references when a manufacturer pays to have their product displayed in retailer advertisement eitherin print or online.
Billback: This term is used to describe how a given promotion or discount is given. Billback means that manufacturer gets billed after the performance occurs (Example: Safeway bills for promotions when they ship from their warehouse to their stores for a given product).
Demo: This term describes any activity that happens in store in which a product is being offered as a sample to consumers in store to drive trial and purchase of your product (think Saturdays @ Costco!)
Display: This term describes any activity in which products are displayed away from normal spots on shelf, sometimes also called "Endcap".
EDLP's: This term is abbreviation for “Every Day Low Price” which refers to an agreed upon discount(s) that are ongoing in an effort to reduce the "every day" price of an item at retail shelf.
Free Fills: This term is in reference to "slotting"—the act of giving a free case of product per store to a retailer to promote new product line or new product placements. These are often in place of large lump sum slotting fees that can be charged by larger retailers. It’s a free case per store x number of stores that accept a given item. More commonly given through distributors that serve smaller stores.
Marketing Accruals or "Accruals": This term describes an agreed upon dollar amount that is “accrued” (set aside) on all volume sold that is then available for spending on various approved marketing activities or programs at a given retailer.
MCBs: This term is abbreviation for "Manufacturer Charge Backs" and simply refers to promotional allowances that are "charged" back to the manufacturer.
OI or Off Invoice: This term is used to describe how a given promotion or discount is given. OI means that the manufacturer gives the discounts off the invoice.
Price Protections: This term is used when a price increase is taken and a negotiation happens that delays when the retailer will take the given price increase. The time between when the price increase goes into effect and when the retailer takes price increase would be covered by a "price protection" allowance that often goes against the budgeted trade for that customer.
Promotional Allowances: This term describes any discount given to retailer to promote products, usually a discount per item, sometimes accompanied by one or more of the following: Ad, Display, Demo etc.
Scans or Scan Downs: This term is used to describe how a given promotion or discount is given. Scan or scan down implies the product discount is given as the product scans across the register. It also means that the manufacturer gets billed after the performance occurs with proof of performance and centers around the scan of product (Example: Kroger sends weekly bills for promotions).
Slotting: This term refers to fees that get paid to retailer in order to secure a spot on the shelf.
TPR: This term is abbreviation for "Temporary Price Reduction" and refers to any discount given at grocery store shelf to reduce the cost of products at shelf.
Meghan Moran advises clients on supply chain matters (including distribution, manufacturing, supply and reseller agreements), acts as general counsel and assists with mergers and acquisitions for clients in the food, beverage, agribusiness, and manufacturing industries. Meghan can be reached via email at MeghanMoran@dwt.com or directly at 503.778.5281.