Who Has the Power?
By George Anderson
In an opinion piece in Grocery Headquarters, Gary Giblen, senior vice president and director of research at CL King & Associates, writes that the combination of consolidation
on the manufacturer front along with the growing strength of alternate shopping channels has weakened supermarkets bargaining position with suppliers.
According to Mr. Giblen, “The history–and profitability–of supermarketing is driven by the balance of power between retailers and consumer packaged goods manufacturers.”
There are a number of measures, writes Mr. Giblen, that demonstrate supermarkets are losing their edge in trade negotiations. One is the percentage of CPG marketing budgets that
go to trade spending versus direct to consumer (DTC) vehicles such as advertising and couponing. Mr. Giblin cites a recent presentation made by Valassis showing increased couponing
activity by manufacturers.
Another measure is the attractiveness of supermarkets as an investment. Aside from recent Yucaipa purchases (Pathmark and Wild Oats), there has been scant activity in grocery
channel acquisitions. Even when businesses become available for purchase, officially or otherwise, other chains haven’t been rushing in to make offers.
To swing the balance of power back to grocers, Mr. Giblen says, growth is in order. Whether through acquisition or by staking out a sustainable point-of-difference to grow organically,
supermarkets need to gain a bigger share of consumer expenditures if they want to more forcefully influence manufacturers. Or, as Mr. Giblen writes with tongue firmly planted
in cheek, “to more harmoniously work with those angelic brand partners.”
Moderator’s Comment: What is the current balance of power between “traditional” grocery retailers and their CPG trading partners? Do you agree with the
statement: “The history–and profitability–of supermarketing is driven by the balance of power between retailers and consumer packaged goods manufacturers.” –
George Anderson – Moderator