‘Working Trade’ vs ‘Non-Working Trade’

Non-Working Trade

Essentially, by non-working trade, we refer to dollars that do not get to the consumer, do not drive targeted distribution, and do not drive repeat purchase.

Examples of Non-Working Trade

    • OI’s & the Resultant Forward Buying
    • Non-Targeted Slotting/Free Goods
    • Administrative Fees
    • Short Coded Buy Downs
    • Unauthorized Deductions That Need to be Repaid

Working Trade

Working Trade is targeted spending with retailers to drive growth, your brand franchise/equity, and represent dollars reflected at the consumer level.

How Can You Measure This?

While short-term results may be difficult to measure, retailer level case growth is a barometer. Longer-term consumption growth, reduced spending per case, and reduced slotting are key metrics. Also, spending can be evaluated and measured by ROI, ‘cost per incremental case’, and customer profitability longer term.

So When Do You Begin to Evaluate This?

It is important to note that these are not ‘big company’ approaches – companies under $10M address some or all of these areas.

On-Demand Webinar - Working Trade vs Non-Working TradeNatural-Specialty Trade Spending Webinar (On-Demand)

Would you like to learn more about ‘Working Trade’ vs. ‘Non-Working Trade’? We have developed an educational webinar for CPG manufacturers in the natural-specialty segment, and invite you to join us at your convenience for this on-demand webinar. 

Face It, DEDUCTIONS Are a Form of Payment

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Adesso-Deductions Are a Form of Payment
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Deductions come across as evil to many in the industry. They go by a lot of different names: chargebacks, MCBs, short pays and a host of others, but the common name for decades is simply Deductions

And believe it or not, these were originally driven by CPG manufacturers! 

You see, when trade spending was in its infancy 30+ years ago, manufacturers moved from ‘off invoice’ payments to ‘bill back’ payments. Hence, the retailers had to ‘bill back’ the manufacturer to get reimbursed for the dollars they used to discount the manufacturers’ products. Yes, that’s what the dollars were used for back then.

The manufacturers (who had a lot more clout in those days…) would debate whether the dollars were worth it or drove enough cases, which delayed reimbursing the retailer. In this day and age, the retailer was out the money!

As manufacturers became increasingly dependent on this extra volume and revenue, retailers became rather impatient and realized they had more leverage, and soon the balance shifted. It was a lot quicker to take the dollars spent last week or the week before off of the next invoice.

That addressed 2 issues:  

1. The retailer got their money faster.

2. The retailer also shifted the proof and incremental volume responsibility to the manufacturer.

And as soon as one retailer did this, everyone followed!

This is how, somewhere in the 1980’s, deductions became a form of payment for trade spending.

Therefore, if you are a food manufacturer entering this arena, be prepared to address this in a logical, effective manner. Because, in addition to all of the legitimate deductions, retailers and distributors will assume they are always accurate, and place the burden of proof on the manufacturer. Though some are more effective than others in assuring accuracy.

The reality is this is a clear form of payment in this industry. Profitability and effectiveness are therefore dependent on your ability to address this quickly, accurately, and thoroughly.

DID YOU KNOW that many manufacturers – large, small & emerging – now address deductions in 30 days or less? And they account for everything at the same level of granularity as any other item in their P&L!

Educational Group & Resources for Emerging Consumer Packaged Goods Companies

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We Invite You to Gain Access to Educational Resources,
and Join Peer & Industry Expert Collaboration

The Consumer Packaged Goods industry is complex, and often leaders and entrepreneurs find themselves struggling with challenges such as managing manufacturer chargebacks, understanding trade spending and expectations, maintaining a sustainable gross margin, and the relationships with retailers and distributors.

Below are two resources that will help you to begin to understand how to navigate the complexity:

1. Join a Discussion Group for Natural & Specialty CPGs:

For individuals looking to learn more about how to navigate the unique, complex CPG industry, where peers and industry experts share best practices to improve the collective trade promotion effectiveness.

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2. Sign Up to Receive the Upcoming White Paper:

Our white paper series focuses on topics that arm you with knowledge and recommendations you can implement for immediate process improvement.
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