Trade Relations: Who’s Got the Power

Discussion
Dec 12, 2002
George Anderson

By George Anderson


In an essay on Reveries.com, Chris Hoyt takes issue with the perception that retailers are the party calling all the shots in trade relations with CPG manufacturers.


Mr. Hoyt writes that industry consolidation, trade promotion spending trends and other apparent signs of retailer power do not match the reality of financial results that favor manufacturers. For example:


  • Household products manufacturers increased operating margins 47 percent and net profits 40 percent between 1990 and 2000.

  • Soft drink marketers saw operating profits grow 22 percent and net profits increase 29 percent. This improvement took place despite record dollars being spent on trade promotion by manufacturers.

Moderator’s Comment: Who holds the power in trade relations
– retailers or manufacturers?


The correct answer is both. The simple rule over the past
10 years or so is that the big continue to get bigger. Retailers and manufacturers
continue to gain clout as competition gets driven from the market.


The real fight remains ahead when Wal-Mart becomes more
directly competitive with its private label efforts while continuing to dictate
terms to suppliers. [George
Anderson – Moderator
]

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